Melo Market sells imported cooking ingredients online. It must pay £9,000 to a supplier this week, but it will not receive £12,000 owed by customers for another month. Melo Market expects this timing problem to occur only once.
Option 1: Use a bank overdraft with interest charged only on the amount borrowed
Option 2: Ask the supplier for 30 days of trade credit with no interest charge
Justify which one of these two options Melo Market should choose.
38 exam-style questions on Edexcel GCSE Business 1.3 Putting a business idea into practice, covering 1.3.1a Financial aims and objectives, 1.3.1b Non-financial aims and objectives, 1.3.1c Why aims and objectives differ, 1.3.2a Revenue, costs and profit calculations, 1.3.2b Break even and margin of safety, 1.3.2c Interpretation of break even diagrams, 1.3.3a The importance of cash to a business, 1.3.3b The difference between cash and profit, 1.3.3c Cash-flow forecasts: inflows and outflows, 1.3.3d Cash-flow forecasts: net cash flow and balances, 1.3.4a Short-term sources of finance, and 1.3.4b Long-term sources of finance. Each one has a worked solution and a mark scheme showing where the marks go.