Adele started a dance school five years ago. Every year Adele pays herself a salary and makes $1000 profit. The school offers a range of dance and exercise classes for children. It is a sole trader business. Adele believes using the right pricing method is important. Adele wants to expand the business by opening a second dance school. Based on her business plan, she forecasts that this will cost $8000. Adele cannot decide whether a bank loan is the best source of finance for this expansion. Identify two features of a sole trader. Feature 1: Feature 2: Identify two of the main sections of a business plan. Section 1: Section 2: Identify and explain two reasons why using the right pricing method is important for Adele’s business. Reason 1: Explanation: Reason 2: Explanation: 1 1 Identify and explain two location factors that Adele should consider when deciding on a second school. Factor 1: Explanation: Factor 2: Explanation: Do you think that a bank loan is the best source of finance for Adele to use to expand the business? Justify your answer. [ 1 1

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THEORY

2018

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CPF is a clothing retailer. It is a private limited company. It has 4 shops and 30 employees. The Finance Director is concerned about the amount of current assets because working capital is important. The amount of retained profit is also low. CPF’s directors are planning to expand the business by opening a new shop. A suitable source of long-term finance will need to be identified. The plan to expand will affect many of CPF’s stakeholder groups. Define ‘retained profit’. Define ‘current assets’. Outline two possible reasons why working capital is important for CPF. Reason 1: Reason 2: [ 1 3 Explain one way each of the following stakeholder groups might be affected by CPF’s plans to expand its business. Employees: Explanation: Suppliers: Explanation: Do you think it is better for a private limited company to use debt (e.g. a loan) or equity (issuing more shares) as a source of long-term finance? Justify your answer. 1 3

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THEORY

2023

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Table 1 shows the Balance Sheet for company D at the end of 2010 and 2011. Table 1: Company D Balance Sheet [$m] Fixed Assets Current Assets Current Liabilities Net Assets Long-term Liabilities Shareholders’ Funds Capital Employed The accounts also showed that the net profit of company D was $80m in 2010 and $120m in 2011. What is meant by ‘capital employed’? Calculate company D’s current ratio in 2011. The directors are planning further expansion of the company. Identify and explain two benefits to company D of raising finance by selling more shares. Benefit 1: Explanation: Benefit 2: Explanation: Identify and explain a reason why the following stakeholders would be interested in using company D’s accounts. Creditors’ reason: Explanation: Employees’ reason: Explanation: Shareholders’ reason: Explanation: Do you think the performance of company D in 2011 has improved? Justify your conclusion using the data provided.

7115_w12_qp_11

THEORY

2012

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Paolo wants to start up a business making cakes. He plans to sell all of his products to a wholesaler. Paolo knows the packaging for his products will be important. He has prepared some financial and sales data. An extract from this data is shown in Table 1.1. Paolo is considering using crowdfunding as a source of finance. He knows the business will also need working capital. Table 1.1 Extract from Paolo’s financial and sales data $6 Average price per cake $4 Average cost per cake Forecast average number of cake sales per day Define ‘working capital’. Calculate the average revenue per day. Show your working. Working: Final answer: Outline two reasons why packaging will be important for Paolo’s business. Reason 1: Reason 2: 1 2 Explain one advantage and one disadvantage to Paolo’s business of using crowdfunding as a source of finance. Advantage: Explanation: Disadvantage: Explanation: Do you think selling to a wholesaler is the best channel of distribution for a start-up business to use? Justify your answer. [ 1 2

7115_w23_qp_12

THEORY

2023

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Avtar owns a car repair business which operates in the private sector. It is a small business with 2 full-time employees. Avtar wants to find out the best way for a business to increase added value. Avtar’s business needs finance for many reasons. Avtar wants to know how an economic recession might affect his business. Identify two features of a private sector business. Feature 1: Feature 2: Identify two reasons why a business might remain small. Reason 1: Reason 2: Outline one reason why Avtar might need each of the following types of finance: Short-term finance: Long-term finance: Explain two ways an economic recession might affect Avtar’s business. Way 1: Explanation: Way 2: Explanation: Explain two ways a business can increase added value. Which is likely to be the best way for a business to use? Justify your answer.

7115_w24_qp_12

THEORY

2024

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Trucker is a public limited company that makes products such as tractors and construction vehicles. Table 1 gives selected information from its Balance Sheet for the last two years. Table 1: Trucker’s Balance Sheet as at 30 June $m Fixed Assets Current Assets Current Liabilities Net Assets Financed by: Long term Liabilities Shareholders’ Funds Capital Employed What is meant by the term ‘shareholders’ funds’? Identify two examples of Trucker’s current assets. Example 1: Example 2: Identify and explain two reasons why a business might have creditors. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three possible reasons why Trucker’s net assets increased in 2010. Reason 1: Explanation: Reason 2: Explanation: Reason 3: Explanation: Can the success of Trucker’s business be assessed just by analysing its Balance Sheet? Justify your answer.

7115_s11_qp_11

THEORY

2011

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Telefax is a business that manufactures a range of electronic products. Table 1 shows selected information from its latest Balance Sheet. Table 1: Balance Sheet Telefax as at 30 June $m Fixed Assets Current Assets Current Liabilities Net Assets Financed by: Long term Liabilities Shareholders’ Funds Capital Employed What is meant by the term ‘fixed assets’? Identify two examples of Telefax’s current liabilities. Example 1: Example 2: Identify and explain two reasons why most businesses have debtors. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three reasons why Telefax’s bank manager might want to see the accounts of the business. Reason 1: Explanation: Reason 2: Explanation: Reason 3: Explanation: Do you think that the financial position of Telefax has improved in 2010? Justify your answer.

7115_s11_qp_12

THEORY

2011

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IDT manufactures clothes for the mass market. It is a multinational company with factories in 4 countries. IDT has short-term and long-term financial needs. The Finance Director is analysing IDT’s statement of financial position. An extract is shown in Table 3.1. He has been asked to calculate working capital and to explain how an increase in non-current liabilities might affect IDT. Table 3.1 Extract from IDT’s statement of financial position ($ million) Current assets Current liabilities Non-current liabilities Define ‘mass market’. Calculate IDT’s working capital in 2023. Working: Final answer: Outline one reason why IDT might need the following types of finance: Short-term finance: Long-term finance: 1 2 Explain two ways an increase in non-current liabilities might affect IDT. Way 1: Explanation: Way 2: Explanation: Explain two advantages to a business of being a multinational company. Which advantage do you think is likely to be the most important? Justify your answer. [ 1 2

7115_s24_qp_11

THEORY

2024

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Kara’s business makes wax candles. She sells them to retailers at low prices. She gives retailers 60 days to pay. Kara has to pay her suppliers when raw materials are delivered. Kara used crowd-funding to set up her business. The bank would not give Kara a loan as she did not have a business plan. Last year revenue was $50000. Demand is increasing but Kara is not yet able to benefit from economies of scale. She said: ‘Cash-flow is a problem. All cash inflows are used to buy inventory.’ Define ‘crowd-funding’. State two economies of scale. Economy of scale 1 Economy of scale 2 Outline two reasons why a bank might want Kara to produce a business plan before agreeing to give a loan. Reason 1: Reason 2: 1 4 Explain two factors Kara should consider when deciding whether to increase prices. Factor 1: Explanation: Factor 2: Explanation: Do you think delaying payments to suppliers is the best way for a small business to improve its cash-flow? Justify your answer. [ 1 4

7115_s20_qp_11

THEORY

2020

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AB is a large business providing services in country Z. Fig. 1 shows the market distribution of its sales in 2009. Table 2 shows a summary of its financial data in the same year. Fig. 1: Market Distribution of Sales (2009) Table 2: Financial Data (2009) Sales turnover $750m Net Profit $150m Net profit margin 20% Return on capital employed 15% domestic sales export sales What is meant by a return on capital employed ? Calculate the value of domestic sales in 2009. AB has borrowed a lot of money from banks in order to expand. Identify and explain two disadvantages to a company of owing a lot of money to banks. Disadvantage 1: Explanation: Disadvantage 2: Explanation: Country Z is in recession. Identify and explain three ways in which a recession might affect AB. Way 1: Explanation: Way 2: Explanation: Way 3: Explanation: The Government of country Z is to take control of AB. Do you think that this will be in the best interests of the stakeholders in AB? Justify your answer.

7115_s10_qp_11

THEORY

2010

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