3.1 Introduction to finance questions for IB Business Management

Kahu Surf School

[1] Tama Kahu is a sole trader who runs Kahu Surf School (KSS) on the beach at Raglan, on the west coast of New Zealand. Tama, a former national surfing champion, opened KSS in 2019 using NZ$35 000 of his personal savings. He spent most of this on 20 surfboards, 30 wetsuits and a trailer to carry the boards. Lessons are sold online and most customers are tourists from Auckland and Hamilton.

[2] KSS is seasonal. From November to March it runs up to six lessons a day, and Tama employs two instructors. Each summer month KSS pays about NZ$7 200 in instructors’ wages, NZ$350 for its beach-use permit from the local council, NZ$420 for public liability insurance and about NZ$300 for surf wax, board repairs and fuel. From May to August revenue falls by more than 70 %, but the insurance and permit still have to be paid.

[3] Tama wants to grow KSS. Many tourists without cars have told him that Raglan is difficult to reach, so he plans to offer “surf day trips” that include transport from Hamilton. For this he needs a 12-seat minibus costing NZ$48 000. He also expects to need extra cash for advertising and wages during the first season of day trips, before the new service becomes known.

[4] Tama has two options for obtaining the minibus. His bank has offered a five-year loan of NZ$48 000 at 9 % interest a year, with repayments of about NZ$1 000 a month. The bank would require Tama’s house as collateral. Alternatively, a vehicle company would lease him a new minibus for NZ$1 150 a month for four years, including servicing and insurance. At the end of the lease the minibus would be returned. Tama’s partner, Mere, is worried about putting their house at risk, but Tama says that after five years “we would at least own something”.

Danforth Strength Club is a gym in Toronto, Canada. In January 2026 it paid CAD 180 000 in cash for new strength and cardio equipment. The owners expect the equipment to attract new members and to last for at least eight years. Table 1 shows the gym’s quarterly cash flow forecast for 2026.

Table 1: Danforth Strength Club quarterly cash flow forecast, 2026 (CAD 000)

Élodie Moreau runs Boulangerie Moreau, a bakery in Lyon, France. This year she bought a new deck oven for €18 000, which she expects to use for ten years. Every month she spends about €2 300 on flour, butter and electricity, and €4 100 on her two assistants’ wages.

Distinguish between capital expenditure and revenue expenditure for Boulangerie Moreau.

Daan de Vries plans to open Nomad Pedals, a bicycle repair business in Utrecht, the Netherlands. He will rent a small workshop and also run a van that repairs bicycles at customers’ homes and offices. His estimated start-up costs are shown in Table 1. Daan has savings of €12 000 and his parents have agreed to lend him €5 000.

Table 1: Nomad Pedals’ estimated start-up costs

Sakura Cleaning Services is a family business in Osaka, Japan, that cleans offices at night. Each month it spends money on detergents, fuel for its two vans and wages for its 14 cleaners.

Define the term revenue expenditure.

Nyota Dental Clinic (Nyota) is a private limited company with two dentists and five dental nurses in Nairobi, Kenya. In 2025 it modernized its treatment room and replaced its old film X-ray equipment with a digital X-ray machine. Table 1 shows all of Nyota’s spending in 2025.

Table 1: Nyota’s spending for the year ended 31 December 2025 (KES)