Photo AI
Liz and Les have set themselves the objective of managing Bluebells' finances more effectively - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2
Question 2
Liz and Les have set themselves the objective of managing Bluebells' finances more effectively. They are considering whether to focus more on improving cash flow or ... show full transcript
Worked Solution & Example Answer:Liz and Les have set themselves the objective of managing Bluebells' finances more effectively - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2
Step 1
Evaluate the option of improving cash flow
Answer
Improving cash flow is crucial for a seasonal business like Bluebells, which relies heavily on the summer months for revenue generation. Given that Bluebells has limited operating months (March to November), it needs to ensure that cash is available for daily expenses year-round.
To achieve this, Liz and Les should consider retaining a portion of their profits during peak months to bridge the gap during the off-peak season. Furthermore, effective financial planning could help in budgeting for expenses, ensuring that they have sufficient liquidity to meet their obligations, even during lower occupancy months.
Step 2
Evaluate the option of increasing profit
Answer
Increasing profit is also a key goal for Bluebells, especially considering the competitive market. Higher profits could further fuel the reinvestment into the business, which could enhance the guest experience and attract more customers.
Strategies to increase profit may include optimizing pricing strategies, enhancing marketing efforts through a well-designed website, and improving service quality. Moreover, investing in operational efficiency, such as upgrading facilities, can lower variable costs and improve overall profitability.
Step 3
Recommendation
Answer
While both improving cash flow and increasing profit are important, Liz and Les should prioritize improving cash flow. Given the nature of seasonal business and the volatility of occupancy rates, having a stable cash flow is essential for survival and day-to-day operations. Once a stable cash flow is established, they can focus on strategies to increase profit without jeopardizing the financial health of Bluebells.