5.3. Income statements
A subsection of Business Studies, 0450, through 5. Financial information and decisions
Listing 4 of 4 questions
Celtic Springs, a public limited company, is a water bottling business. Its shareholders have been unhappy with the performance of the business and are threatening to take action at the next Annual General Meeting (AGM). Table 1 shows an extract from the company’s latest Profit/Loss Account. Table 1: Celtic Springs Profit/Loss Account 2011 ($m) Sales revenue ? Cost of sales Gross profit ? Overheads/expenses Net profit The accounts of the business also show that the capital employed by Celtic Springs was $650m. Calculate gross profit and sales revenue in 2011. Gross profit: Sales revenue: Identify two functions of an Annual General Meeting. Function 1: Function 2: Identify and explain two ways Celtic Springs could reduce its cost of sales. Way 1: Explanation: Way 2: Explanation: Identify and explain three reasons why profit is important to a company such as Celtic Springs. Reason 1: Explanation: Reason 2: Explanation: Reason 3: Explanation: Do you think that the shareholders of Celtic Springs are right to be unhappy with the company’s performance? Justify your answer using the data provided.
0450_w12_qp_12
THEORY
2012
Paper 1, Variant 2
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D2G is a driving school. Mattan started D2G 3 years ago to teach people to drive a car. As the business has been successful Mattan plans to buy a new vehicle. He has been analysing D2G’s income statement. An extract is shown in Table 3.1. Mattan wants to understand the difference between profit and cash. He also wants to know how an increase in competition and changes in the business cycle might affect D2G. Table 3.1 Extract from D2G’s income statement for the year ending 31 December 2021 ($) Revenue Gross profit Profit for the year State two stages of the business cycle. Stage 1: Stage 2: Calculate D2G’s gross profit margin. Show your working. Outline, with reference to D2G, the difference between profit and cash. [ 1 19 Explain two ways D2G might respond to an increase in competition. Way 1: Explanation: Way 2: Explanation: Do you think leasing is the best source of finance for a small business to use for a new vehicle? Justify your answer. 1 19
0450_m22_qp_12
THEORY
2022
Paper 1, Variant 2
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Nigel owns a recruitment agency. If a company needs temporary workers, Nigel’s business will find them. Nigel rents an office in the centre of town. His business has a reputation for being very efficient. Nigel employs office workers who promote his business by continually updating the company website. Nigel is an entrepreneur who takes risks to make a profit. He believes that the economic future of his country depends on small businesses such as his. What is meant by the term ‘profit’? Identify two overhead costs that Nigel’s business would incur. Overhead cost 1: Overhead cost 2: Identify and explain two reasons why being efficient should help Nigel’s business to remain successful. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three advantages to Nigel’s business of using a website to promote its services. Advantage 1: Explanation: Advantage 2: Explanation: Advantage 3: Explanation: Do you think that Governments should help people start up small businesses by offering financial support? Justify your answer.
0450_w11_qp_13
THEORY
2011
Paper 1, Variant 3
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BFF makes a range of computer screens that it sells to other manufacturers. The Managing Director has been looking at BFF’s income statement. She is worried about the effects of an increase in the cost of materials. She said: ‘Changes in technology have improved our production methods. BFF needs to remain competitive as imports of computer screens are increasing.’ The Managing Director has to decide whether BFF should increase its prices. What is meant by ‘income statement’? Identify the effect of an increase in the cost of materials on each of the following: Cost of sales: Gross profit: Identify and explain two ways in which BFF’s managers could use information contained in the income statement. Way 1: Explanation: Way 2: Explanation: 1 14 Identify and explain two ways changes in technology used in production could help BFF to remain competitive. Way 1: Explanation: Way 2: Explanation: Do you think BFF should increase its prices? Justify your answer. [ 1 14
0450_w19_qp_11
THEORY
2019
Paper 1, Variant 1
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Questions Discovered
4