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Question 9 Nikov Rocky Plc has 4,700 on their bank account on Monday. During the day, they buy 700 scientific calculators for their inventory for
Question 9
Nikov Rocky Plc has 4,700 on their bank account on Monday. During the day, they buy 700 scientific calculators for their inventory for cash. Each unit costs 6.50. During the day they sell 300 scientific calculators at 13 each. 60% of their customers pay cash and the remaining 40% get 2 weeks of credit. On the same day, the business pays 210 for a water bill for the last month, and it receives 510 from a trade receivable.
Use the above information to answer the following:
a) How much cash does Nikov Rocky Plc have at the end of Monday? How much profit have they made during the day? You MUST show your workings.
(2 marks)
b) Use the information from the scenario of Question 9 and your own examples to explain why cash may differ from profit generated for the period. Also, discuss whether a profitable business may run out of cash.
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