Paper 1 · Sources of Finance
A business finds that much of its cash is tied up in slow-moving stock. The most suitable action to improve its working capital is to
Atighten stock control so less cash sits in the storeroom
Bbuy a larger delivery vehicle for the sales department
Cextend longer credit terms to every one of its customers
Dincrease the owner's drawings from the business account
Explanation: Working capital is current assets less current liabilities, and stock is the least liquid current asset. Ordering smaller quantities more often, or clearing slow lines, releases cash without new borrowing. Longer credit to customers and higher drawings both take cash out, and a new vehicle converts cash into a fixed asset.
Derived from ZIMSEC Business Enterprise Skills Paper 1, Specimen Paper (edition A), Q3