Business Finance Revision Worksheet
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Business Finance Revision Worksheet
📊 WALT: Analyse Financial Performance Using Ratios
Success Criteria: Calculate and interpret profitability and liquidity ratios
ABC Ltd has the following financial information for 2023:
- Revenue: £450,000
- Cost of Sales: £270,000
- Current Assets: £85,000
- Current Liabilities: £65,000
a) Gross Profit Margin: ________________%
b) Current Ratio: ________________
XYZ Manufacturing is considering two investment options:
Option A: Initial cost £120,000, Annual cash inflows: Year 1: £40,000, Year 2: £50,000, Year 3: £60,000
Option B: Initial cost £100,000, Annual cash inflows: Year 1: £45,000, Year 2: £45,000, Year 3: £35,000
a) Calculate the payback period for both options.
b) Calculate the Average Rate of Return (ARR) for Option A.
c) Which option would you recommend and why?
💰 WALT: Evaluate Sources of Finance and Cash Flow Management
Success Criteria: Assess appropriate financing methods and interpret cash flow forecasts
TechStart Ltd is a new technology company that needs £250,000 to launch their product. The owners currently have £50,000 of their own money to invest.
Study the cash flow forecast below for TechStart Ltd's first six months:
| Jan | Feb | Mar | Apr | May | Jun | |
|---|---|---|---|---|---|---|
| Cash Inflows | £15,000 | £25,000 | £35,000 | £45,000 | £55,000 | £65,000 |
| Cash Outflows | £40,000 | £35,000 | £30,000 | £35,000 | £40,000 | £45,000 |
| Net Cash Flow | -£25,000 | -£10,000 | £5,000 | £10,000 | £15,000 | £20,000 |
| Opening Balance | £30,000 | £5,000 | -£5,000 | £0 | £10,000 | £25,000 |
| Closing Balance | £5,000 | -£5,000 | £0 | £10,000 | £25,000 | £45,000 |
a) Identify TWO potential problems shown in this cash flow forecast. (2 marks)
b) Evaluate THREE different sources of finance that TechStart Ltd could use to raise the remaining £200,000 needed. Consider the advantages and disadvantages of each. (9 marks)
c) Recommend ONE method of improving the cash flow situation in February and justify your choice. (1 mark)
🎯 Extension Activity for Advanced Learners
A business has a Net Present Value (NPV) of -£15,000 when using a discount rate of 10%. The same investment has an NPV of £8,000 when using a discount rate of 6%.
Explain what this information tells you about the investment and calculate the approximate Internal Rate of Return (IRR).
Dyslexia-Friendly Tip: Use the formula method or visual aids to help structure your financial calculations. Break down complex problems into smaller steps.
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