Josh owns an office cleaning business. He has a number of large and small business customers. Josh employs 6 full-time cleaners who are all given off-the-job training. Josh believes that using the latest cleaning equipment increases added value. He said: 'Customers are happy with the service. I am always sending text (SMS) messages to workers about additional work.' Josh has been looking at his balance sheet. He cannot decide if a bank loan is the best source of finance to use for new equipment. The new equipment will cost 60000. Table 1: Extract from Josh's balance sheet as at 30 April 2017 (000) Current assets 120 Trade receivables 90 Cash X Current liabilities Y Net current assets 70

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] Clear understanding: amount of money owed by customers for (goods bought on credit terms)
2. [1] Some understanding: money owed
3. [1] X=30
4. [1] Y=50
5. [1] Quick to send [k] which helps as always busy [app]
6. [1] Can send at any time [k] so can finish cleaning before having to respond [app]
7. [1] Can be sent simultaneously [k] to all 6 employees [app]
8. [1] Can be read when receiver has time [k]
9. [1] Able to refer back to it later [k] so can check details of the cleaning job [app]
10. [1] Only contain limited information OR might not understand [k] so cleaners may not have all details [app]
11. [1] Might not receive the message OR no power on the phone OR may not have a signal [k] leading to poor service [app]
12. [1] Other workers not affected [k] so able to do more cleaning jobs [app] to keep up with demand [an]
13. [1] Worker has access to skilled trainers [k] so know what needs to do to provide a quality service [app] helping maintain reputation [an]
14. [1] Workers do not learn bad habits [k]
15. [1] Workers focus 100% on training [k]
16. [1] Expensive OR high cost [k] which increases costs for the business [an] to train all 6 workers [app]
17. [1] Not necessarily tailored to individual company [k] so might not cover the equipment Josh uses [app]
18. [1] Workers are training rather than cleaning [k + app] and so less output is produced [an]
19. [1] Increased liabilities OR must be repaid [k] by $60 000 [app]
20. [1] Loan would give him time to repay [k]
21. [1] Has cash available [k] of $30 000 [app] so he would not need to borrow the full amount [an]
22. [1] Doesn't have enough cash available [k] to pay the $60 000 [app]
23. [1] Cost of repayments OR interest [k]
24. [1] Leasing is a method Josh can use [k] so the latest equipment is always available [app]
25. [1] Banks may not be willing to lend the money [k]