case study

1. InThinking Business Management
HL Paper 2 Section A
https://www.thinkib.net/businessmanagement
© Gema Quintanilla
Mark scheme
(a) State two methods of below the line promotion. [2]
Possible below the line promotional methods include:
• Direct mail and email marketing
• Event sponsorship
• Menus and promotional flyers
• Newsletters to registered customers
• Sales promotions and discounts
• Trade shows (trade fairs)
• Word-of-mouth advertising
Award [1] for each appropriate method of below the line promotion identified.
(b) Prepare a cash flow forecast for MC for the next four months. [6]
Cash flow forecast for MC for the next four months
All figures in $ January February March April
Opening balance 200 (350) (850) (1,150)
Cash inflows
Cash sales revenues 4,000 3,800 4,600 5,000
Tax refund 150
Total cash inflows 4,000 3,950 4,600 5,000
Cash outflows
Cost of sales 2,000 1,900 2,300 2,500
Food truck rent 8,00 800 800 800
Packaging 100 100 100 100
Marco’s salary 900 900 900 900
Internet and electricity costs 200 200 200 200
Promotional costs 350 350 400 400
Fuel costs 200 200 200 200
Total cash outflows 4,550 4,450 4,900 5,100
Net cash flow (550) (500) (300) (100)
Closing balance (350) (850) (1,150) (1,250)
Allow own figure rule (OFR) where appropriate.

2. InThinking Business Management
HL Paper 2 Section A
https://www.thinkib.net/businessmanagement
© Gema Quintanilla
Award [1]:
• the candidate has limited understanding of cash flow forecast.
• the forecast is largely inaccurate, incomplete, or illegible.
Award [2–3]:
• the candidate constructs the cash flow forecast, but it is not in the format
accepted or it is untidy.
• the forecast contains three or more errors: errors can be: numbers,
placement problems, mathematical errors, terminology errors or omissions.
Award [4–5]:
• the cash flow forecast is constructed correctly and in a generally accepted
format.
• there is one error for [5] or two errors for [4].
Award [6]:
• the cash flow forecast is constructed accurately and neatly in a generally
accepted format and does not have errors.
• there is an appropriate title included.
(c) Comment on MC’s cash flow position. [2]
Comments could include reference to any of the following:
• The net cash flow is negative for all four months, so this can be a huge concern for the
bank manager, which contributes to the escalating negative value for the closing
balance.
• MC’s cash inflows are expected to improve during the four months (by 25%), whilst the
cash outflows increase at a slower rate (12.09%), which improves MC’s net cash flow
figure for each of the months.
• Marco’s promotional costs are high ($1,500 in total), so he should perhaps consider
streamlining the choice of below the line (BTL) promotional methods and/or use
alternative methods such as social media marketing (SMM). Being a sole trader, using
appropriate BTL promotional methods is vital in helping to reduce cash outflows.
• Taking out a bank loan to finance the new oven will incur interest charges to be paid
monthly, so this contributes to MC’s cash flow problems.
• He could perhaps consider taking a temporary, but considerable, pay cut (the closing
balance is -$1,250 in April). Reducing his own salary to around $587 or $587 per month
should help to get the closing balance to zero in April.
• Accept any other comment that is appropriately and accurately written in the context
of the case study.
Award [1] for recognition that MC’s net cash flow position is negative for the four
months, cash inflows are increasing, and/or cash outflows are increasing.
Award an additional [1] for a comment related to specific entries in the cash flow forecast,
either inflows or outflows, such as sales revenue or the costs of promotion, fuel, electricity,
and Marco’s salary.