Identify ONE method the Staffordshire Crisp Company could use to improve its cash flow.
Select ONE answer:
- Allow Tesco supermarkets to pay later
- Pay potato farmers earlier
- Purchase new machinery
- Reduce its stocks of potatoes
Show the workings to arrive at your answer, and explain and justify your reasons:
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This multiple choice question is suitable for Business Studies KS4 & KS3 classes
The answer is 4
- Allow Tesco supermarkets to pay later – incorrect because this means The Staffordshire Crisp Company will be lengthening its debtors’ period. This will cause cash flow to deteriorate.
- Pay potato farmers earlier – incorrect because this means the Staffordshire Crisp Company will be shortening its creditors’ period. This will cause cash flow to deteriorate.
- Purchase new machinery – incorrect because this involves significant capital outlay, which will increase cash outflows. This will cause cash flow to deteriorate.
- Reduce its stocks of potatoes – correct because this would release cash tied up in stock, which would improve cash flow.
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