Task
Part 1
Wild Frontier Builders Ltd (“WFBâ€) is a property maintenance business serving the buy-to let market. It offers plumbing, electrical, roofing, and general repairs, together with some small building work. Clients can pay by the job or take out a maintenance contract with guaranteed response times that covers a range of minor repairs.
WFB has around 20 staff, most of whom are independent contractors. The company is managed by Neil Geezer, the son of the founder. Neil owns 25% of the shares in the company, while the remaining 75% is split between Neil's three sisters, Kim, Courtney and Chloe.
Part 2
EyeWatering Inc is a large video game design company producing a range of best selling products for major console games. Although the business is doing well, the management feel that they are close to the limit of expansion with their current funding structure. They have two projects under consideration but both will require a significant investment in new systems and staff.
Assessment Criteria
This assignment requires you to demonstrate your knowledge and understanding of a) the management of cash and b) the capital budgeting process.
Your discussion for part 1 of the assignment should distinguish the difference between cash and profit. Your answer must identify and explain why the accounts of a business can report a profit but a shortage of cash, and discuss the consequences to a business of being short of cash. The general causes of cash flow problems should be analysed using real world examples to illustrate your points and, specifically the case study presented to you. Methods for dealing with cash flow problems and managing cash for the business described should be proposed and evaluated.
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