CLW makes wood furniture, including chairs and tables. Demand has risen quickly over the past 3 years and the business needs to increase the scale of production at its factory. The factory is located near the city centre in an area of low unemployment. The Finance Director has produced a business plan, including a balance sheet. The Finance Director is pleased with CLW’s liquidity. Table 1: Extract of financial information Non-current assets ($m) Current assets: Inventory ($m) Trade receivables ($m) 24 0 Cash ($m) Total current assets ($m) Current Liabilities ($m) Current ratio 1.25:1 ? Acid test ratio 0.875:1 ? What is meant by a ‘business plan’? What is meant by a ‘balance sheet’? Identify and explain two possible benefits for CLW of holding high inventory levels. Benefit 1: Explanation: Benefit 2: Explanation: Identify and explain two factors (other than finance) that CLW’s management need to consider when increasing the scale of production. Factor 1: Explanation: Factor 2: Explanation: Do you think the Finance Director is right to be pleased with the liquidity of CLW in 2014? Justify your answer using the data in Table 1 and appropriate ratios.

7115_w15_qp_12

THEORY

2015

Paper 1, Variant 2

View

Dowson is a large business which owns a number of shops. It sells a range of electrical goods such as computers and televisions. The Finance Director has been looking at some recent financial data, as shown in Table 1. He is pleased with Dowson's liquidity but knows he must reduce its high level of debt including an overdraft of $6m. He said: 'The economy is in recession. Many small retailers have failed. Size is an advantage!’ Table 1: Extract of financial data for Dowson $300m $280m Revenue $180m $175m Profit 1.5:1 1.2:1 Current ratio 0.5:1 0.8:1 Acid test ratio 10% 10% Return on capital employed What is meant by ‘Return on capital employed’? What is meant by a ‘recession’? Identify and explain two ways in which the size of the business may benefit Dowson. Way 1: Explanation: Way 2: Explanation: 1 2 Identify and explain two problems for Dowson of having a high level of debt. Problem 1: Explanation: Problem 2: Explanation: Do you think the Finance Director is right to be pleased with the liquidity of the business? Justify your answer using the ratio results in Table 1. [ 1 2

7115_w16_qp_11

THEORY

2016

Paper 1, Variant 1

View

HTB is a public limited company. It manufactures a range of computers. HTB spends a lot of money on advertising as it is in a competitive market. The management believes that the product is the most important element in their marketing mix. To meet increasing demand HTB is looking to expand their business. It plans to raise extra capital by issuing more shares. The Finance Director has been looking at the data in Table 1. Table 1: Selected financial data from HTB ($m) Sales Net Profit Long Term Liabilities Capital Employed What is meant by ‘public limited company’? Calculate the Return on Capital Employed for 2012. Identify and explain two reasons why shareholders might be interested in the accounts of HTB. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three factors that HTB should consider before issuing more shares. Factor 1: Explanation: Factor 2: Explanation: Factor 3: Explanation: Do you think that the product is the most important element of the marketing mix for HTB? Justify your answer.

7115_s12_qp_12

THEORY

2012

Paper 1, Variant 2

View

IBH is a family-owned private limited company. It makes a range of shoes for children, using batch production. It is a competitive market. Like many businesses, IBH needs finance for a number of reasons. The Finance Director has been looking at some financial data. An extract is shown in Table 1. Some of the directors would like to expand into the women’s shoe market and want to know whether IBH’s performance is improving. Table 1: Extract from financial data for IBH ($000) Revenue Gross profit Profit Non-current liabilities What is meant by ‘non-current liabilities’? Identify two reasons why a business might need finance. Reason 1: Reason 2: 1 1 Identify and explain two possible advantages to IBH of being a private limited company. Advantage 1: Explanation: Advantage 2: Explanation: Identify and explain two advantages to IBH of using batch production. Advantage 1: Explanation: Advantage 2: Explanation: [ 1 1 Do you think IBH’s performance has improved in 2017? Justify your answer using profit margins. 1 1

7115_s18_qp_11

THEORY

2018

Paper 1, Variant 1

View

GTB is a business which operates in the tertiary sector. It owns 5 cafés selling food and drinks. The business uses social media as its method of promotion. The Finance Manager, Moeen, is analysing GTB’s financial statements. An extract is shown in Table 2.1. He is considering ways to improve GTB’s profit margin. Moeen knows there are other users that are interested in the accounts of a business. Table 2.1 Extract from GTB’s financial statements 2023 $600000 Revenue $150000 Profit $750000 Capital employed 25% Profit margin Define ‘tertiary sector’. Calculate GTB’s Return on Capital Employed (ROCE). Show your working. Working: Final answer: Outline two ways GTB could improve its profit margin. Way 1: Way 2: 1 1 Explain two advantages to GTB of using social media as its method of promotion. Advantage 1: Explanation: Advantage 2: Explanation: Do you think banks are the main external users of the accounts of a business? Justify your answer. [ 1 1

7115_s24_qp_12

THEORY

2024

Paper 1, Variant 2

View

Manfred is the Finance Director for a large public limited company called BTX. He sets the financial budgets for all the departments. Manfred is worried about the falling sales of BTX. He was looking at the data in Table 1. Table 1: Selected Financial Data from BTX ($000’s) Sales 1 200 11 00 Net Profit Capital employed 1 000 1 500 Current Ratio 1.2 0.7 What is meant by a financial budget? Calculate the net profit margin for BTX in 2009. Explain what the current ratio tells Manfred about BTX’s financial position. BTX wants to raise new funds in 2010 to help finance its growth plans. Identify and explain three ways it could do this. 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_11

THEORY

2010

Paper 1, Variant 1

View

Aurelie is a sole trader. She started her small hotel 1 year ago using government support. Aurelie knew it would be important to build good customer relationships. Aurelie wants to analyse her financial statements using ratio analysis. An extract is shown in Table 3.1. She is worried about how the Government’s plan to introduce a new tourist tax of $1 per tourist per night might affect her business. Table 3.1 Extract of Aurelie’s Income statement for 2020 ($) Revenue Cost of sales X Gross profit Expenses Y Profit Identify two ways a government can support new business start-ups. Way 1: Way 2: Calculate X and Y. X: Y: State four financial ratios a business can use. Financial ratio 1: Financial ratio 2: Financial ratio 3: Financial ratio 4: [ 1 2 Explain two ways that the introduction of a new tourist tax might affect Aurelie’s business. Way 1: Explanation: Way 2: Explanation: Do you think offering good customer service is the best way for a small business to build customer relationships? Justify your answer. 1 2

7115_w21_qp_12

THEORY

2021

Paper 1, Variant 2

View

PJA make fashion clothing for 16-25 year olds. Many of its competitors are multinational companies. PJA produce new products every 3 weeks. All PJA’s products are made in a local factory because of import quotas. The Managing Director is reviewing PJA’s financial statements using ratio analysis. An extract is shown in Table 2.1. Table 2.1 Extract from PJA’s financial statements for 2020 Revenue ($m) Gross profit ($m) Profit ($m) 1.5 Current ratio 8% Return on Capital Employed (ROCE) Define ‘import quota’. Calculate PJA’s gross profit margin. Show your working. Outline one benefit and one limitation to PJA of developing new products. Benefit: Limitation: 1 3 Explain two ways PJA’s managers can use ratio analysis. Way 1: Explanation: Way 2: Explanation: Do you think multinational companies always benefit the countries they operate in? Justify your answer. [ 1 3

7115_s21_qp_11

THEORY

2021

Paper 1, Variant 1

View

CPK operates 5 sports clubs. Each club offers a range of activities including gym and yoga classes. CPK uses job enrichment to keep its 60 employees well-motivated. Having the right marketing mix is important to CPK’s success. The Finance Director is analysing CPK’s financial statements. An extract is shown in Table 3.1. He wants to know how an increase in taxation might affect CPK’s business. Table 3.1 Extract from CPK’s financial statements 1.3 1.6 Current ratio 10% 12% Profit margin $2m $2m Non-current assets Define ‘non-current assets’. State two elements of the marketing mix. Element 1: Element 2: Outline two ways CPK might be affected by an increase in taxation. Way 1: Way 2: 1 3 Explain one possible effect on CPK of the change in each of the following ratios as shown in Table 3.1: Change in current ratio: Explanation of effect on CPK: Change in profit margin: Explanation of effect on CPK: Do you think job enrichment is a better way for a business to motivate its employees than profit sharing? Justify your answer. [ 1 3

7115_w22_qp_11

THEORY

2022

Paper 1, Variant 1

View

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

Paper 1, Variant 1

View

---