Business Studies Multiple Choice Question – 1 January 2019

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

The Stafford Crisp Company Ltd is a regional potato crisp manufacturer based in Staffordshire. It packages its crisps in tubs. Rivals such as Walkers and Golden Wonder use packets. The Stafford Company’s first large order came when its sales team won a contract to supply 25 Tesco supermarkets across Staffordshire.

Identify one method the Stafford Crisp Company could use to improve its cash flow.

Select ONE answer:

  1. Allow Tesco’s to pay later
  2. Pay potato farmers earlier
  3. Purchase new machinery
  4. Reduce its stocks of potatoes

 

Show the workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple choice question is suitable for Business Studies KS4 & KS3 classes

The answer is 4:

  1. Allow Tesco’s to pay later – incorrect because this means The Stafford Crisp Company will be lengthening its debtors’ period. This will cause cash flow to deteriorate.
  2. Pay potato farmers earlier – incorrect because this means the Stafford Crisp Company will be shortening its creditors’ period. This will cause cash flow to deteriorate.
  3. Purchase new machinery – incorrect because this involves significant capital outlay, which will increase cash outflows. This will cause cash flow to deteriorate.
  4. Reduce its stocks of potatoes – correct because this would release cash tied up in stock, which would improve cash flow.

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.