3.3.1, 3.3.4, 3.3.53.3.1a) Working capital refers to the money available for the daily running of a business. It shows the available funds for business to pay for costs and expenditure. So the Le Royal Meridiens hotels from many parts of the world need to pay for electricity, raw materials, food & water supplies, wages, etc.b) Working capital cycle means the interval between cash payments for costs of production and cash receipts from customers. It has 3 components: Cash, Production costs, and Sales. So, Le Royal Meridien needs better cash flow management because even during the construction of the new hotel, it still needs to pay for daily expenses. If the company doesnt take this action, it will encounter cash flow problems; increase its current liabilities, which will make Le Royal Meridiens business harder to be profitable, which is why this company needs better cash flow management. 3.3.4a)August ($)September ($)October ($)November ($)

Opening balance:5000200011001400

Receipts (inflows):40006000800012000

TOTAL RECEIPTS:90008000910013400

PAYMENTS (OUTFLOWS)

Variable costs:2000240032004800

Advertising:1000500500500

Staffing:4000400040004000

Others:

TOTAL PAYMENTS:7000690077009300

Net Cash Flow:(3000)(900)3002700

Closing bank balance:2000110014004100

b) As we look at the cash flow forecast for Charlotte Davis Boutique, we see that the opening balances are all positive, indicating a good sign for the business. However, the net cash flow in August and September are negative, which will put the business in a critical state. Then as you look at the net cash flow on October and November, they are positive. So after the result of the net cash flow in August, Charlotte Davies possibly used overdrafts, since overdrafts are useful during times of negative cash flow, but she has to pay interest when returning. So in conclusion, Charlotte Davies Boutiques cash flow is stable.

3.3.5a) Profitable firms experience cash flow problems, by overtrading. Overtrading occurs when a business attempts to expand too quickly without sufficient resources to do so, thus the company takes more orders than they can handle. Expansion consumes a lot of cash, therefore reducing working capital or the business, giving the business cash flow problems now and/or in the future. b)April ($)May ($)June ($)

Opening balance100020000

Inflows10000 ($5000 from March, $5000 from April)9000 ($5000 from April, $4000 from May)10000 ($4000 from May, $6000 from June)

Total receipts110001100010000

Direct costs300050004000

Indirect costs600060006000

Total costs90001100010000

Closing balance200000

c) From the results, we see that Marj Ducie needs to deal with her liquidity problems. To improve her cash flows, one of the options called Cash Payments Only, is to require customers to pay by cash so that it can remove delays in receiving cash from credit sales, but the problem is that customers commonly prefer credit terms, thus do not bring a lot of cash, so if Marj Ducie chooses the cash-payments-only option customers receive deteriorating trade credit, would stop going to that particular firm, again, affecting the firms profitability. Another option is Improved Marketing Planning, which can help a business to meet the needs and wants of customers, helping to improve its cash inflows, she might lose her customers, affecting the firms profitability. Another option is Tighter Credit Control, meaning Ducies Dance Studios Ltd can limit trade credit to their customers or reduce credit period, thus receive cash sooner and improve cash flow and working capital, however the drawback is if customers do not accept it, they might switch to Ducies Dance Studios rivals.So from the options being thought of, there are many options for Marj Ducie to increase her cash flow, but there are drawbacks on the examined options. I would recommend improving marketing planning first, then progress to improve her business.