Veronique is bored with her work in a large factory. As a creative person, she would like to leave and start up a flower shop. Veronique has asked about micro-finance and prepared a cash flow forecast. An extract is shown in Table 3.1. Veronique has also carried out some market research and found out that the demand for flowers is likely to be high during festivals. She thinks she has the right characteristics to be a successful entrepreneur. Table 3.1 Extract from the cash flow forecast for Veronique’s flower shop for the first 3 months ($) Month 3 Month 2 Month 1 Cash in Cash out (200) (1000) Net cash flow (1200) (1000) Opening balance (400) (1200) (1000) Closing balance Define ‘micro-finance’. Veronique now thinks that the cash inflow in month 3 will be $1500. Calculate the: New net cash flow in month 3: New closing balance in month 3: State four reasons why a business might have cash flow problems. Reason 1: Reason 2: Reason 3: Reason 4: 1 3 Explain one method of primary market research and one method of secondary market research Veronique could have used. Method of primary market research: Explanation: Method of secondary market research: : Explanation: Do you think being creative is the most important characteristic of being a successful entrepreneur? Justify your answer. [ 1 3

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THEORY

2020

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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

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THEORY

2016

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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

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THEORY

2017

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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.

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THEORY

2012

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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

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THEORY

2022

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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.

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THEORY

2012

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VCG manufactures high-quality briefcases and travel bags. VCG has 50 skilled production workers in its factory. VCG is planning to expand by building a second factory. Different locations are being considered. The Managing Director is reviewing VCG’s financial statements. An extract is shown in Table 3.1. Both internal and external stakeholder groups of VCG are interested in this information. Table 3.1 Extract from VCG’s 2021 financial statements ($) Revenue Current assets Current liabilities Shareholders’ equity Define ‘shareholders’ equity’. Identify two financial statements a public limited company is legally required to publish each year. Financial statement 1: Financial statement 2: State whether each of the following are classified as a current asset or a current liability. Overdraft: Trade receivables: Trade payables: Cash in bank: 1 1 Explain one way each of the following stakeholder groups might use VCG’s accounts: Shareholders: Explanation: Suppliers: Explanation: Do you think access to labour is the most important factor for a manufacturing business to consider when deciding where to locate a new factory? Justify your answer. [ 1 1

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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.

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THEORY

2010

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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 3 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 3

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THEORY

2019

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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

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