Unit 5 - M1 & D1
FOR NOTES AND GUIDLINE PURPOSES ONLY, COPYING THE
WHOLE DOCUMENT WILL BE COPYWRITE.
USE SENSIBLE.
Problems of Peter Watson’s cashflow
For Peter Watson firstly, in some of the months the sales balance is higher and in
some it is low probably due to seasonal fluctuations or slow sales at the start of his
business for instance Sales figures for March and July which is £15,750.00 and for
August which is £10,710.00 are low whereas for October (£22,050.00), November
(£25,200.00) and December (£30,000.00) the sales figures are high. This will result
in the business having reduced income. However having unstable and fluctuating
sales figures for Peter Watson resulted in the business having negative closing
balance therefore an overdraft occurred starting from July.
The business also had no enough income which resulted in Peter Watson borrowing
money from the bank in March. This made Peter Watson having to increase the
payments. Also this will gave an end result whereby his business having to pay
interest on loan of £12.50 and repaying capital of £25.00 from April till December
which increased the expenses. The cause of the business borrowing capital from the
banks was probably due to poor business model or ineffective management. Also not
having capital, will result in the business not being able perform business activities.
Another problem that Peter Watson faced is overtrading whereby he wanted his
business to expand quick, putting pressure on short-term finance for instance he
purchased a new motor vehicle in March for £4,500.00. This caused the business to
1
FOR NOTES AND GUIDLINE PURPOSES ONLY, COPYING THE
WHOLE DOCUMENT WILL BE COPYWRITE.
USE SENSIBLE.
Problems of Peter Watson’s cashflow
For Peter Watson firstly, in some of the months the sales balance is higher and in
some it is low probably due to seasonal fluctuations or slow sales at the start of his
business for instance Sales figures for March and July which is £15,750.00 and for
August which is £10,710.00 are low whereas for October (£22,050.00), November
(£25,200.00) and December (£30,000.00) the sales figures are high. This will result
in the business having reduced income. However having unstable and fluctuating
sales figures for Peter Watson resulted in the business having negative closing
balance therefore an overdraft occurred starting from July.
The business also had no enough income which resulted in Peter Watson borrowing
money from the bank in March. This made Peter Watson having to increase the
payments. Also this will gave an end result whereby his business having to pay
interest on loan of £12.50 and repaying capital of £25.00 from April till December
which increased the expenses. The cause of the business borrowing capital from the
banks was probably due to poor business model or ineffective management. Also not
having capital, will result in the business not being able perform business activities.
Another problem that Peter Watson faced is overtrading whereby he wanted his
business to expand quick, putting pressure on short-term finance for instance he
purchased a new motor vehicle in March for £4,500.00. This caused the business to
1
