Q6. Read case study and answer the following questions. (10 marks) 1. Double Deckers Private Limited was set up by three bus drivers who have taken over a rural bus service from the local government. They planned to monitor carefully the cash flow of the business since smallest businesses experience cash flow difficulties in their first year. The drivers are hoping to be able to purchase a new bus later in the year using internal funds. Relevant data for the cash flow is provided as follows: Double Deckers Private Limited forecast that income for the first six months of 2006 will be as follows: $ . . January 1200 February 1200 March 1200 April 1200 May 2200 On 1st January 2006 Double Deckers Private Limited had a cash balance of $500. Rent for the premises amounts to $500, and is payable only in January and April, A quarterly electricity bill of $150 is to be paid in February and May Double Deckers Private Limited intend to employ part time labour in May, at a cost of $500 The bus drivers withdraw a total of $700 per month for expenses from January to May Fuel costs are expected to be $200 per month Questions: a. Construct a cash flow forecast for Double Deckers Private Limited for January to May 2006 (3x2=6) b. Describe two uses of cash flow forecast for small businesses like Double deckars? (2x1=2) C. Explain two cause of cash flow problem which will be faced by small business like double deckars? (2x1=2) Profitability ratios Gross profit margin= gross profit -x100 sales revenue Net profit margin net profit before interest and tax sales revenue x 100 Return on capital employed (ROCE) - net profit before interest and tax x100 capital employed where capital employed =loan capital (or long-term liabilities) + share capital+retained profit Current ratio = current assets current liabilities current assets-stock Acid test (quick) ratio =- current liabilities