5.5. Analysis of accounts
A subsection of Business Studies, 7115, through 5. Financial information and decisions
Listing 10 of 26 questions
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
Paper 1, Variant 1
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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 $m Fixed Assets Current Assets Current Liabilities Net Assets Financed by: Long term Liabilities Shareholders’ Funds Capital Employed What is meant by the term ‘fixed assets’? Identify two examples of Telefax’s current liabilities. Example 1: Example 2: Identify and explain two reasons why most businesses have debtors. Reason 1: Explanation: Reason 2: Explanation: Identify and explain three reasons why Telefax’s bank manager might want to see the accounts of the business. Reason 1: Explanation: Reason 2: Explanation: Reason 3: Explanation: Do you think that the financial position of Telefax has improved in 2010? Justify your answer.
7115_s11_qp_12
THEORY
2011
Paper 1, Variant 2
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Table 1 shows the Balance Sheet for company D at the end of 2010 and 2011. Table 1: Company D Balance Sheet [$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 $120m in 2011. What is meant by ‘capital employed’? Calculate company D’s current ratio in 2011. The directors are planning further expansion of the company. Identify and explain two benefits to company D of raising finance by selling more shares. Benefit 1: Explanation: Benefit 2: Explanation: Identify and explain a reason why the following stakeholders would be interested in using company D’s accounts. Creditors’ reason: Explanation: Employees’ reason: Explanation: Shareholders’ reason: Explanation: Do you think the performance of company D in 2011 has improved? Justify your conclusion using the data provided.
7115_w12_qp_11
THEORY
2012
Paper 1, Variant 1
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Alex and Raul are business partners. They started a bicycle repair business with their own savings as the bank would not give them a loan. Raul does most of the repair work, while Alex manages the accounts. Alex is surprised that the business has made a small profit in the first year. ‘We can use this profit to expand. I don’t know why people think we would benefit from having a business plan. Much of the demand for our repair business comes from our friends who own bicycles.’ Table 2: Extract from balance sheet as at 31 March 2016 ($) Non-current assets Current assets Current liabilities Non-current liabilities What is meant by ‘non-current liabilities’? Calculate the working capital. Identify and explain two possible reasons why working capital is important to Alex and Raul’s business. Reason 1: Explanation: Reason 2: Explanation: 1 1 Identify and explain two benefits to Alex of having a business partner. Benefit 1: Explanation: Benefit 2: Explanation: Do you think Alex and Raul need a business plan for the business to be successful in the future? Justify your answer. [ 1 1
7115_s16_qp_12
THEORY
2016
Paper 1, Variant 2
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Yanis owns a busy restaurant in the city centre. He employs 4 skilled chefs and 6 workers to serve in the restaurant. All employees are on part-time contracts. The chefs are paid a high hourly wage rate, but receive no bonuses. Yanis is worried that too many chefs leave. He is thinking of other ways in which he could motivate the chefs. Yanis wants to open another restaurant but is worried about problems linked to growth. He has prepared a balance sheet as part of his business plan. An extract is shown in Table 2. The current ratio was 1.2:1 in 2016. Table 2: Extract from balance sheet as at 30 September 2017 ($000) Non-current assets Current assets Current liabilities Non-current liabilities Identify two main parts (other than finance) of a business plan. Part 1: Part 2: What is meant by ‘non-current assets’? Calculate the current ratio as at 30 September 2017. Explain what the two current ratio results show about Yanis’s business. 1 3 Identify two possible problems for Yanis if he expands his business. Explain what he might do to overcome each problem. Problem 1: Explanation of how to overcome the problem: Problem 2: Explanation of how to overcome the problem: Do you think Yanis should change the way he motivates his chefs? Justify your answer. [ 1 3
7115_w17_qp_12
THEORY
2017
Paper 1, Variant 2
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HRO manufactures children’s toys. It is a private limited company. The main objective of HRO’s shareholders is to increase profit. This might conflict with the objectives of other stakeholder groups, including its 30 suppliers. HRO’s Managing Director knows that market research can help when making marketing decisions. The Finance Director is preparing HRO’s statement of financial position. An extract is shown in Table 3.1. Table 3.1 Extract from HRO’s statement of financial position at 30 June 2024 ($000s) Non-current assets Current assets Current liabilities Non-current liabilities Define ‘non-current assets’. Calculate HRO’s current ratio. Show your working. Working: Final answer: State whether each of the following would be classified as a current asset or as a current liability. Trade receivables: Trade payables: Overdraft: Inventory: Explain one way the objective of HRO’s shareholders to increase profit might conflict with the objectives of each of the following stakeholder groups: Customers: Explanation: Suppliers: Explanation: Do you think the advantages to a business of using primary market research are greater than the disadvantages? Justify your answer.
7115_w24_qp_12
THEORY
2024
Paper 1, Variant 2
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Questions Discovered
26