Rapid Call is a private limited company. It manufactures a range of cell phones. The demand for these is increasing. Its products have several special features that are not available from other phone manufacturers. It sells its products directly to retail shops. Rapid Call uses competitive pricing for all products. The Finance Director has been looking at the accounts. A summary is shown in Table 2. In 2011 the gross profit margin was 40%. Table 2: Profit/Loss Account for Rapid Call for year ending 30 April 2012 ($000s) Sales Cost of Sales Gross Profit Overheads Net Profit What is meant by ‘private limited company’? Calculate the gross profit margin for the year ending 30 April 2012. Identify and explain two ways in which Rapid Call’s Finance Director could use the information in Table 2. Way 1: Explanation: Way 2: Explanation: The Marketing Director is thinking about changing the channel of distribution. Identify and explain three factors that Rapid Call should consider when choosing a suitable channel of distribution. Factor 1: Explanation: Factor 2: Explanation: Factor 3: Explanation: How important is increased competition in influencing the marketing strategy of Rapid Call? Justify your answer.

7115_s12_qp_11

THEORY

2012

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Luxury Destinations owns three hotels in country X. The business spends a lot of money on staff training. The Finance Director is pleased with the financial position of the business. ‘However, the appreciation of our country’s currency and the Government’s plan to increase taxes might cause problems to our business in the future’ he said. Table 1: Luxury Destinations financial information ($000s) Gross profit Net profit Fixed assets Current assets Current liabilities What is meant by ‘appreciation of our country’s currency’? Calculate the current ratio in 2012. Identify and explain two problems that an increase in taxes could cause for Luxury Destinations. Problem 1: Explanation: Problem 2: Explanation: Identify and explain three benefits for Luxury Destinations of training its employees. Benefit 1: Explanation: Benefit 2: Explanation: Benefit 3: Explanation: Do you think the Finance Director is right to be pleased with the financial position of the business? Justify your answer.

7115_s13_qp_11

THEORY

2013

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Belshire Books owns a number of shops. The Finance manager is worried about the financial position of the company. An extract of the accounts is shown in Table 1. Belshire Books is facing increased competition from online booksellers selling through the Internet. Table 1: Extract from Belshire Books accounts ($000s) Net profit Current assets Current liabilities Capital Employed What is meant by ‘net profit’? Calculate the current ratio in 2012. Identify and explain two ways in which Belshire Books could improve profitability. Way 1: Way 2: Identify and explain two problems that competition from online (Internet) booksellers could cause for Belshire Books. Problem 1: Explanation: Problem 2: Explanation: Do you think that the Finance manager is right to be worried about the financial position of the business? Justify your answer.

7115_s13_qp_12

THEORY

2013

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AHG is an established business as it has been operating for a long time. It sells garden products including plants and flowers. AHG uses competitive pricing. The business has 4 managers and 30 other employees. All AHG’s managers use delegation. The Finance Manager is analysing AHG’s statement of financial position as she is interested in its liquidity. An extract is shown in Table 1.1. Table 1.1 Extract from AHG’s statement of financial position at 30 March 2022 ($000) Non-current assets Current assets Current liabilities Define ‘current liabilities’. Identify two examples of non-current assets. Example 1: Example 2: Outline two possible reasons why liquidity is important to AHG. Reason 1: Reason 2: 1 1 Explain two advantages to AHG of its managers using delegation. Advantage 1: Explanation: Advantage 2: Explanation: Do you think competitive pricing is the best method for an established business to use? Justify your answer. [ 1 1

7115_s22_qp_12

THEORY

2022

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Manfred is the Finance Director of a large public limited company BTX. After looking at the data in Table 1, Manfred was worried that BTX might be facing problems. Table 1: Selected Financial Data for BTX ($’000s) Sales Net profit Capital employed Dividends The current ratio was 1.2 in 2008 and 1.5 in 2009. What is meant by ‘dividends’? Calculate the return on capital employed (ROCE) in 2009. Explain how ROCE can be used to assess the performance of a company. Identify and explain three ways by which the company can improve its net profits. Way 1: Explanation: Way 2: Explanation: Way 3: Explanation: Do you think that the management of BTX should be worried about the performance of the company in 2009? Justify your answer.

7115_w10_qp_12

THEORY

2010

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Elton is a sole trader. He sells specialist clothing and equipment for sports, including baseball and hockey. It is a niche market. Elton started his business 5 years ago and it has remained small. A wide range of inventory is important. Elton has been looking at the financial performance of his business. The profit margin for 2018 was 35%. An extract of the accounts is shown in Table 3.1. Table 3.1 Revenue and cost information for Elton’s business for 2018 and 2019 ($) Revenue ($) Y Cost of sales ($) Gross profit ($) Expenses ($) X Profit ($) Define ‘sole trader’. Calculate X and Y. X: Y: State four factors that can influence the amount of inventory a business might hold. Factor 1: Factor 2: Factor 3: Factor 4: 1 4 Explain one advantage and one disadvantage to Elton of operating in a niche market. Advantage: Explanation: Disadvantage: Explanation: Do you think Elton should be pleased with the financial performance of his business? Justify your answer using appropriate ratios. [ 1 4

7115_w20_qp_11

THEORY

2020

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Kemala makes high-quality beauty products. Demand for her best-selling hand cream is price inelastic. She advertises her products in specialist beauty magazines. Kemala is analysing her income statement. An extract is shown in Table 2.1. She said: ‘When I started my business, I did not understand why cash is important’. Table 2.1 Extract from Kemala’s income statement 2021 ($000) Revenue Gross profit Profit for the year Define ‘revenue’. Calculate Kemala’s profit margin. Show your working. Outline two reasons why cash is important for Kemala’s business. Reason 1: Reason 2: 1 2 Explain two possible reasons why demand for Kemala’s best-selling product is price inelastic. Reason 1: Explanation: Reason 2: Explanation: Do you think advertising in specialist magazines is the best way for a business to promote high-quality products? Justify your answer. [ 1 2

7115_w22_qp_12

THEORY

2022

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ACP manufactures computers. Being ethical is important to ACP. The business employs 3000 workers in its factory. ACP imports 65% of its raw materials. As internal users of accounts, the directors plan to analyse ACP’s financial performance using profitability ratios. The Finance Director thinks making a profit is more important for a business than managing its cash flow. Identify two external users of accounts. User 1: User 2: Identify two profitability ratios. Ratio 1: Ratio 2: Outline two possible reasons why ACP imports its raw materials. Reason 1: Reason 2: [ 1 1 Explain one benefit and one limitation to ACP of being ethical. Benefit: Explanation: Limitation: Explanation: Do you think making a profit is more important for a business than managing its cash flow? Justify your answer. 1 1

7115_w23_qp_11

THEORY

2023

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JTA is a public limited company. It sells holidays in a mass market. The business has 44 shops and 200 employees. The Finance Director is considering ways a business can increase its profit. She has been asked to analyse JTA’s financial performance using ratio analysis. An extract from JTA’s financial statements is shown in Table 3.1. Table 3.1 Extract from JTA’s financial statements for 2023 ($ million) Revenue Profit Capital employed Define ‘capital employed’. Calculate JTA’s return on capital employed (ROCE). Show your working. Working: Final answer: Outline two benefits to JTA of selling in a mass market. Benefit 1: Benefit 2: Explain one advantage and one disadvantage of JTA being a public limited company. Advantage: Explanation: Disadvantage: Explanation: Do you think increasing prices is the best way for a business to increase its profit? Justify your answer.

7115_w24_qp_11

THEORY

2024

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LWM makes car tyres in 15 different sizes using batch production. Last year LWM sold 60 million tyres including 40 million tyres of its best-selling size. The Finance Director has been looking at some financial data as shown in Table 1. She said: ‘Liquidity is important. I need to do some ratio analysis to measure business performance. In the previous year our Return on Capital Employed was 33%.’ The directors are worried about increased competition but they cannot decide on the best way for LWM to respond. Table 1: Extract of financial data for 2016 ($m) Revenue Profit Non-current liabilities Capital employed What is meant by ‘liquidity’? Identify two reasons why a director might want to measure business performance. Reason 1: Reason 2: Calculate the Return on Capital Employed (ROCE) for 2016. Explain what this result shows about LWM’s performance. 1 4 Identify and explain one advantage and one disadvantage to LWM of using batch production. Advantage: Explanation: Disadvantage: Explanation: Explain two ways in which LWM might respond to increased competition. Recommend which way LWM should choose. Justify your answer. [ 1 4

7115_s17_qp_12

THEORY

2017

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