Harbour Hive (HH) is a private limited company that produces premium honey-based snacks for supermarkets and tourist gift shops. HH promotes its products as locally sourced and environmentally responsible. Demand increased after HH won a regional business award, but the finance manager is concerned about profitability.

Selected information for HH is shown below.

• Sales revenue increased by 18% last year, mainly because HH offered discounts to large supermarkets.
• Gross profit margin fell from 42% to 34%.
• Profit margin fell from 13% to 5%.
• Direct costs increased because glass jars and local honey became more expensive.
• HH opened a new visitor centre, increasing rent, staff and promotional expenses.
• One manager wants to increase prices and focus on high-margin gift packs.
• Another manager wants to keep supermarket discounts and reduce costs by using cheaper imported ingredients.

PurePaws Meals (PP) manufactures premium chilled pet food sold through independent retailers. PP has built its brand on high-quality natural ingredients. In 2025, imported meat and packaging costs increased sharply. The operations director proposes switching to cheaper suppliers and reducing quality-control expenses. The marketing director proposes increasing average prices by $8\%$ while keeping the existing suppliers. PP’s finance manager has provided selected financial information for 2024 and 2025. All figures are in $000s unless otherwise stated.

Harbour Ride (HR) operates a seasonal bicycle and scooter rental business in a coastal city. Demand is strong in summer, but during winter HR holds large inventories of spare parts and unsold branded merchandise. HR also uses an overdraft to pay rent and wages before the tourist season begins. The finance director proposes selling slow-moving inventory at a discount and using the cash to reduce the overdraft. The marketing manager argues that discounted sales will damage HR’s image and reduce profitability. HR’s accountant has prepared selected financial information for 2024 and 2025. All figures are in $000s unless otherwise stated.

TrailNest (TN) is a family-owned retailer selling outdoor clothing and camping equipment through three stores and an online shop. TN's sales are highly seasonal. A warmer winter left TN with large inventories of coats and sleeping bags. At the same time, several schools that bought camping equipment on credit have taken longer than expected to pay.

TN's current ratio is 1.9:1, but its acid test ratio is 0.8:1. The bank has warned TN that its overdraft is close to its agreed limit. TN's suppliers are now asking for payment within 30 days rather than 60 days.

The operations manager proposes a clearance sale to convert inventory into cash quickly. The finance manager proposes tightening credit terms for schools and replacing part of the overdraft with a three-year loan. The marketing manager is worried that heavy discounts will damage TN's premium image and reduce profit margins.

Quantix Instruments (QI) manufactures precision testing equipment for universities and engineering firms. QI has recently invested in automated machinery funded partly by retained profit and partly by long-term borrowing. The machinery has reduced direct labour costs, but customers are taking longer to pay and QI has increased inventory to avoid production delays. The board is considering selling an underused warehouse and using the proceeds to reduce short-term liabilities. The operations director is concerned that this may limit future growth. Selected financial information for 2024 and 2025 has been prepared. All figures are in $000s unless otherwise stated.

RePlast Pathways (RP)

Read the resources and answer the questions that follow.

Resource 1 — Background of the social enterprise

RePlast Pathways (RP) is a social enterprise that collects plastic waste from coastal communities and manufactures low-cost paving tiles for schools and public walkways. RP employs and trains young people who have been unemployed for more than one year. Its mission is: “to create safer paths, cleaner beaches and skilled jobs”. RP sells to local councils, charities and construction firms. Any surplus is reinvested into training and beach clean-up programmes.

RP’s USP is durable paving tiles made from recycled plastic at a price below concrete alternatives. However, the production process requires regular maintenance and skilled supervisors. RP’s directors are concerned that rapid growth could weaken both profitability and liquidity.

Resource 2 – Selected financial information for RP for the year ending 31 December 2025, all figures in USD 000

Resource 3 — Proposed contract

A national home-improvement retailer has offered RP a two-year contract to sell RP’s paving tiles in 40 stores. The contract could increase sales revenue by 35% in the first year. However, RP would need to hold higher inventories of recycled plastic and finished tiles. The retailer would require RP to allow it 60 days to pay for deliveries, meaning RP would receive payment 60 days after delivery.

Resource 4 — Social-media statistic

A recent campaign showing RP’s trainees cleaning beaches received 1.8 million views and 74 000 positive reactions in one week. Many comments asked whether RP’s products could be bought by households.

Resource 5 — Quotation from RP’s operations manager

“If we scale up too quickly, we may accept low-margin orders and run short of cash. If we scale up too slowly, we will turn away young people who need training and employment.”

ThreadForward (TF)

Read the resources and answer the questions that follow.

Resource 1 — Background of the social enterprise

ThreadForward (TF) is a social enterprise that collects surplus fabric from clothing manufacturers and trains refugees to produce upcycled school uniforms and workwear. TF sells online to parents and through long-term contracts with schools and community organizations. It also provides free sewing qualifications and language support to trainees.

TF has grown quickly because schools want affordable uniforms with a strong ethical story. However, school contracts require reliable delivery before the start of the academic year. TF often buys extra fabric and stores finished uniforms to avoid stockouts.

Resource 2 — Selected financial information for TF, all figures in USD 000

Resource 3 — Proposal from TF’s finance manager

The finance manager proposes offering schools a $4\%$ discount if invoices are paid within 10 days. At present, many schools pay near the end of TF’s 60-day credit period. The finance manager believes the discount would improve liquidity before the busiest production period.

Resource 4 — Social-media statistic

TF has 210 000 followers across two social-media platforms. Posts about refugee trainees completing qualifications receive high engagement, but posts advertising school uniforms have much lower conversion into sales.

Resource 5 — Quotation from a school purchasing manager

“We support TF’s mission, but we cannot pay a premium price. Uniforms must be affordable for parents and delivered on time.”

AsterRide (AR) manufactures electric scooters for city commuters. AR expanded rapidly after a successful product launch. It invested heavily in a larger factory and specialist machinery, funded by retained profit and long-term borrowing. However, demand has grown more slowly than expected because several competitors have entered the market.

Selected information for AR is shown below.

• Return on capital employed fell from $15\%$ to $8\%$ after the factory expansion.
• Profit margin fell from $10\%$ to $6\%$ because advertising and repair costs increased.
• Gross profit margin remains stable at $38\%$.
• Current ratio is $0.95:1$ and acid test ratio is $0.62:1$.
• Retailers are taking longer to pay AR, while battery suppliers require faster payment.
• The operations director wants to sell unused machinery and delay further investment to improve ROCE.
• The sales director wants to offer retailers longer credit terms to increase sales revenue.
• The finance director wants AR to focus first on improving liquidity, even if this slows growth.

CareCycle Mobility (CCM)

Read the resources and answer the questions that follow.

Resource 1 — Background of the social enterprise

CareCycle Mobility (CCM) refurbishes donated wheelchairs and mobility scooters, then rents or sells them at low prices to low-income patients and rural clinics. CCM also trains people with disabilities as repair technicians. Its mission is: “mobility, dignity and work for all”.

CCM has received several large equipment donations from hospitals. Some donated wheelchairs are repaired quickly, but many require specialist parts and remain in storage for months. CCM has also purchased two vans and workshop equipment using long-term finance. The board is concerned that CCM appears financially safe in the short term but is not using its capital efficiently.

Resource 2 – Selected financial information for CCM for the year ending 31 March 2026, all figures in USD 000

Resource 3 — Operational information

CCM’s storage facility is almost full. Managers estimate that 40% of inventory consists of wheelchairs that need expensive parts or are unlikely to be rented within the next year. A hospital group has offered CCM a repair-service contract that would use CCM’s technicians more consistently but would require giving priority to hospital repairs for 12 months.

Resource 4 — Social-media statistic

A video of a trainee technician repairing a child’s wheelchair received 950 000 views. Donations increased for two weeks, but regular rental enquiries did not increase significantly.

Resource 5 — Quotation from a trustee

“Our current ratio looks comfortable, but I worry that too much of our money and space is tied up in equipment that is not helping patients or trainees.”