5. Finance and accounting (AS Level)
A section of Business Studies, 9609
Listing 10 of 99 questions
Priya’s Bookshop (PB) Priya lives in town R which is situated in beautiful countryside with nice walks nearby. Many tourists visit town R. The town’s council would like town R to become branded as a ‘booktown’, a town with many bookshops selling new and used books. The council announced a new financial scheme offering grants to attract entrepreneurs willing to open a bookshop. Priya applied for a grant to start up Priya’s Bookshop (PB). Part of her grant application included a cash flow forecast, shown in Table 1.1. Table 1.1: Cash flow forecast, first three months of trading ($000) Month 1 Month 2 Month 3 Cash in: Owner’s capital Grant Revenue Cash out: Initial set up costs Utilities (power, water etc) Employee costs Purchases Marketing Opening balance –1 Closing balance –1 X Priya’s grant application was successful and she opened PB well aware of the need for both cash and profit. Priya now wants to raise awareness of PB in town R. Priya did some market research and decided to use market segmentation. This will help her to decide on the promotional methods she could use for her bookshop. See Table 1.2. Table 1.2: Age and gender of residents in town R Age group Percentage of residents in age group Percentage of age group who are female 0–15 19% 50% 16–64 63% 55% 65+ 18% 60% Define the term ‘market segmentation’ (line 25). Explain the difference between cash and profit (line 23). Refer to Table 1.1. Calculate PB’s forecast closing balance in month 3 (. Analyse two benefits to Priya of producing a cash flow forecast. Explain two entrepreneurial qualities that Priya has shown. Recommend suitable promotional methods that Priya could use to raise awareness of PB in town R. Justify your recommendation.
9609_s22_qp_21
THEORY
2022
Paper 2, Variant 1
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Fire Fly Ebooks (FFE) FFE is a manufacturer of electronic book readers (e-readers). The product is used to read electronic books which are sold by other businesses. FFE’s product is a simple and inexpensive e-reader with a retail price of between $20 and $30. FFE sells each e-reader to retailers for $10. There are many competitors in the market and FFE has calculated the price elasticity of demand to be very elastic. There are similar products on the market and FFE must try to maintain a Unique Selling Point (USP) for its product. In the past the USP has been its low price; but, as more brands become available, extra features have become more important. These features include: built-in lights, speakers for audio books and voice control to change page. FFE does not currently offer any extra features in its product. FFE has received an order from a new retailer. This order is to be delivered in Month 2. The retailer wants two months to pay in Month 4, so that it has chance to sell the e-readers before paying FFE. This might cause FFE cash flow problems. FFE has produced a cash flow forecast which includes the new order. Table 2: Cash flow forecast for FFE Month 1 ($) Month 2 ($) Month 3 ($) Month 4 ($) Cash inflows: Cash sales 10 000 10 000 10 000 10 000 Trade receivables 2 000 2 000 2 000 15 000 Total cash in 12 000 12 000 12 000 25 000 Cash outflows: Factory rent 2 000 2 000 2 000 2 000 Cost of sales 8 000 16 000 8 000 8 000 Insurance* 12 000 Electricity** 3 000 3 000 Total cash out 25 000 18 000 10 000 13 000 Opening balance 10 000 (3 000) (9 000) (7 000) Closing balance (3 000) (9 000) (7 000) Z *Insurance is paid once a year **Electricity is paid once a quarter (every three months) Define the term ‘brand’ (line 8). Briefly explain the term ‘price elasticity of demand’ (lines 5–6). Refer to Table 2. Calculate the value of Z. Explain two advantages to FFE of accepting the order from the new retailer. Analyse the importance of two elements of the marketing mix to FFE. Discuss how FFE could improve its forecast cash flow.
9609_w16_qp_22
THEORY
2016
Paper 2, Variant 2
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Tin Mines (TM) TM is a private limited company in the primary sector. Tin is found underground and is extracted by mining. TM operates seven mines in country C. There are several job roles at each mine including skilled engineers, managers and miners. TM has recently discovered a new source of tin in a remote area of country C. TM has permission to develop a tin mine but will have to construct transport links. It will need new buildings such as offices, warehouses and employee housing. The Human Resources Director is developing a workforce plan to recruit miners and managers for the new mine. TM’s Financial Director has produced a cash flow forecast for the new mine for the next five years. This is shown in Table 2.1. Table 2.1: Cash flow forecast for the new mine ($m) Year Opening balance X –80 –95 –85 Sales Y Development costs Operating costs Closing balance –80 –95 –85 The remote area of country C where the new tin mine will be located has a high level of unemployment and average incomes are low. TM intends to recruit employees from the local area and buy resources from local suppliers, if they are available. The market for tin is likely to be affected by increased demand for electric vehicles. The batteries in electric vehicles contain tin. The government of country C believes that the tin mine will be of great benefit to both the local community and national economy. However, tin mining can result in pollution of local water supplies. Define the term ‘primary sector’ (line 1). Explain the term ‘market’ (line 19). Using the information in Table 2.1, calculate the value of the: opening balance (for 2022. sales (Y) for 2026. Explain one use of the cash flow forecast for TM. Analyse two methods of recruitment that TM’s Human Resources Director can use to recruit employees for the new mine. Evaluate possible conflicts between the aims of two of TM’s stakeholders.
9609_w21_qp_21
THEORY
2021
Paper 2, Variant 1
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Car Wash (CW) CW is a national chain of car wash businesses. Each car wash is a franchise of CW and is owned and managed by an entrepreneur who is local to the area where the car wash is based. As well as washing cars, each CW franchise offers customers the opportunity to have the interiors of their cars cleaned for an additional payment. Every entrepreneur who wants to set up a CW franchise must present a plan to CW for the business, including market research information. An entrepreneur called Palesh has recently submitted a proposal for a new franchise in a town that does not currently have a CW car wash. Palesh selected a sample of people on the main street in the town to carry out his market research. He asked them about how often they would use the car wash service and how much they would be willing to pay. Based on his market research, Palesh has forecast the cash flow for the first two months of trading (see Table 1). Palesh will have an opening balance of $10 000 at the start of Month 1. Table 1: Cash flow forecast Month 1 ($) Month 2 ($) Cash inflow 20 000 20 000 Cash outflow 25 000 10 000 CW car washes are labour intensive businesses. Employees work outside and they often get very wet from the water used. Each car is washed by two employees, one for the wheels and one for the rest of the car. A third employee is responsible for cleaning the interior of the car if this is required by the customer. Palesh plans to employ 12 employees to work in shifts at the car wash. The opening hours will be 06:00 until 22:00, seven days a week. Palesh is aware that he will need to keep costs low, so he will pay each employee a low hourly wage. However, he is also aware that this may lead to human resource problems. Define the term ‘franchise’ (line 1). Briefly explain the term ‘entrepreneur’ (line 2). Refer to Table 1 and any other relevant information. Calculate the forecast closing balance at the end of Month 2. Explain one benefit for Palesh of producing a cash flow forecast. Analyse one advantage and one disadvantage to Palesh of how he carried out his market research. Recommend how Palesh could motivate his employees.
9609_w17_qp_21
THEORY
2017
Paper 2, Variant 1
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Questions Discovered
99