1.

Luxury Cushions

Elizabeth owns a small business, Luxury Cushions (LC), making and selling quality cushions. She sells these to retail shops and direct to the public over the internet. When she first started, Elizabeth used social media to get herself well known. Her business really became successful when she sent some cushions to celebrities and they posted them on their Instagram accounts. Elizabeth regularly communicates to her 10000 Instagram followers when she has new designs to sell.

In 2019 LC earned £150000 in revenue and had a gross profit of £118000 and a net profit of £56800. Elizabeth has provided the following financial information:

Table 1 — Financial data for LC

Cushions made and sold in one month	Fixed costs each month	Average Selling price	Cost of each cushion filling	Cost of each cushion cover	Wage paid per cushion made
250	£7440	£50	£3	£6	£10

Elizabeth has the opportunity to expand her business by taking over a competitor and moving into larger premises. One of her customers suggested that she could use crowdfunding to raise the £30000 she needs. However, Elizabeth thinks that she might be better using a bank loan. Even though she would need to pay interest on the loan, her stable cash flow forecast shows she should be able to afford it.