Photo AI
Ricardo Costumes and Props (RCP) Alessia and Natalia own Ricardo Costumes and Props (RCP) - OCR - GCSE Business - Question 17 - 2021 - Paper 1
Question 17
Ricardo Costumes and Props (RCP) Alessia and Natalia own Ricardo Costumes and Props (RCP). The business operates as a partnership. RCP makes a range of costumes and... show full transcript
Worked Solution & Example Answer:Ricardo Costumes and Props (RCP) Alessia and Natalia own Ricardo Costumes and Props (RCP) - OCR - GCSE Business - Question 17 - 2021 - Paper 1
Step 1
State one reason why cash is important to a business.
Answer
Cash is essential for a business as it ensures liquidity, allowing the company to meet its short-term obligations and operational expenses. Without sufficient cash flow, a business may struggle to pay its suppliers and employees, potentially leading to insolvency.
Step 2
Explain one use of a cash flow forecast in a business.
Answer
A cash flow forecast helps a business plan its finances by predicting future cash inflows and outflows over a specific period. This tool enables businesses to identify potential financing needs, manage their budgets effectively, and avoid cash shortages that could disrupt operations.
Step 3
Step 4
Calculate RCP’s net profit for 2020.
Answer
To calculate the net profit:
Gross Profit = Revenue - Cost of Sales = £2,000,000 - £500,000 = £1,500,000
Net Profit = Gross Profit - Total Expenses = £1,500,000 - (£1,300,000 + £100,000 + £500,000) Net Profit = £1,500,000 - £1,900,000 = -£400,000
Answer: £-400,000
Step 5
Analyse one way Alessia and Natalia could use the data shown in Table 1 to improve their net profit margin.
Answer
Alessia and Natalia could analyze the cost of sales, which is relatively low compared to their revenue. If they identify opportunities to reduce costs further, such as negotiating better rates with suppliers or optimizing production processes to minimize waste, they could enhance their net profit margin. Increasing efficiencies could help maximize profits.
Step 6
Analyse one advantage to RCP of selling its old machines to finance the purchase of the new machinery.
Answer
One advantage of selling old machines is the immediate influx of cash that can be used to invest in new machinery, which may increase production efficiency and reduce operational costs in the long term. This could lead to improved profitability and allow RCP to remain competitive in a growing market.
Step 7
Analyse one disadvantage to RCP of selling its old machines to finance the purchase of the new machinery.
Answer
One disadvantage is that selling old machines could limit RCP's production capacity in the short term. If the new machinery takes time to acquire or is not yet operational, RCP may face delays in fulfilling orders, which can harm customer relationships and potentially lead to lost sales.