LACAS

Grade 10 Revision Worksheet

Topic: Finances
Q1. Si and Ramon are friends. They want to set up a photography business. They would take
pictures at weddings, birthdays and other special events. The business will be a partnership.
Ramon has produced a business plan which shows they need $8000 for a shop and $4000 for
equipment. They plan to spend $500 on promotion, but cannot agree on the best method to
use.
(a) What is meant by working capital?
……………………………………………………………………………………………………………………………………………....
…………………………………………………………………………………………………………………………………………………...
[2]
(b) If the business is facing a cash flow problem, how the business can solve this problem in
short term?
Method 1:
……………………………………………………………………………………………………………………………………………………
…………………………………………………………………………………………………………………………………………………...
Method 2:
……………………………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………………………………...[4]
(c) Identify and explain two possible sources of finance that they could use to obtain the
equipment.
Source
1: ......................................................................................................................................................
....
Explanation:.....................................................................................................................................
…………...............................................................................................................................................
..........................................................................................................................................................
Source
2: ......................................................................................................................................................
....
Explanation:......................................................................................................................................
..........................................................................................................................................................
......................................................................................................................................................
[4Q2. Anyshade manufactures a range of paints. It uses flow production. The Finance manager
has produced a cash flow forecast as the business wants to arrange an overdraft with its bank.
The Finance manager believes that reducing prices is the best way to increase sales revenue.
Anyshade’s paints are well known for quality.

Table 1: Cash flow forecast ($000’s) July August September

July August September
Opening Balance (9000) 6000 Y
Cash inflows:
Cash sales 90,000 30,000 50,000
Cash from Debtors 50,000 80,000 70,000
Total Cash inflows 140,000 110,000 120,000
Cash outflows:
Fixed Costs 70,000 70,000 70,000
Wages 20,000 18,000 19,000
Raw Materials 35,000 30,000 30,000
Total cash outflows 125,000 118,000 119,000
Net cash flow X (8000) 1000
Closing balance 6,000 (2000) (1000)
Note: numbers in brackets are negative.
(a) What is meant by an
‘overdraft’? ......................................................................................................................................
.................... .....................................................................................................................................
.................[2]
(b) Calculate the following.
July net cash flow (X): ......................................................................................................................
..........................................................................................................................................................
September opening balance (Y): ......................................................................................................
......................................................................................................................................................
[2]
(c) Identify and explain two advantages to shareholders of using financial statements of the
business.
Advantage
1: ............................................................................................................................. ........................
...........................................................................................................................
Explanation: .............................................................................................................................. ......
.............................................................................................................................................
Advantage
2: ............................................................................................................................. ........................
...........................................................................................................................
Explanation: .............................................................................................................................. ......
.........................................................................................................................................[4]
(d) Identify and explain two possible reasons why Anyshade has cash flow problems.
Reason
1: ................................................................................................................................. ....................
...............................................................................................................................
Explanation: .............................................................................................................................. ......
............................................................................................................................................. ............
....................................................................................................................................... ..................
.................................................................................................................................
Reason
2: ................................................................................................................................. ....................
...............................................................................................................................
Explanation: .............................................................................................................................. ......
............................................................................................................................................. ............
....................................................................................................................................... ..................
.............................................................................................................................[6]
(e) Anyshade’s Finance manager believes that reducing prices is the best way to increase sales
revenue. Do you agree? Justify your
answer. ............................................................................................................................................
....... ..................................................................................................................................................
. ................................................................................................................................................... ....
............................................................................................................................................... ..........
......................................................................................................................................... ................
................................................................................................................................... ......................
............................................................................................................................. ............................
....................................................................................................................... ..................................
................................................................................................................. ........................................
........................................................................................................... ..............................................
..................................................................................................... ....................................................
...........................................................................................[6]