Cambridge A Level Business (for first examination in 2016) 9609 — 2024 Oct/Nov Paper 4 · Variant 3

1 Evaluate the impact of FB’s finance and accounting strategy on its performance between 2016 and 2022. [20]

Mark scheme: Question Answer Marks 1 Evaluate the impact of FB’s finance and accounting strategy on its performance between 2016 and 2022. 20 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 3 7–8 marks 6–7 marks Developed analysis of Effective evaluation the overall strategy that A developed judgement/conclusion identifies connections is made in the business context between causes, impacts that draws together developed and/or consequences. evaluative comments which balance some key arguments in the business context. 2 2–3 marks 2 marks 4–6 marks 3–5 marks Developed Developed Developed analysis of Developed evaluation knowledge of application of individual strategic • A developed relevant key relevant point(s) element(s) that identifies judgement/conclusion is term(s) and/or to the business connections between made. factor(s) is used context. causes, impacts and/or • Developed evaluative to answer the consequences. comments which balance question. some key arguments. 1 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 1 1 mark 1 mark 1–3 marks 1–2 marks Limited Limited Limited analysis that Limited evaluation knowledge of application of identifies connections • A judgement/conclusion is relevant key relevant point(s) between causes, impacts made with limited supporting term(s) and/or to the business and/or consequences. comment/evidence. factor(s) is used context. • An attempt is made to balance to answer the the arguments. question. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable response. No creditable response. response. response. Indicative content Responses may include: AO1 Knowledge and understanding No other AO2, AO3 or AO4 marks can be awarded without AO1 Knowledge , and (max 3 marks) can be awarded for any relevant business knowledge about Accounting and Finance Strategy: 1 • Accounting and Finance strategy • Company accounts • Ratios • Impact of ratios on growth decisions • Impact of ratios on debt/equity decisions • Impact of ratios on other business strategies • Definition or understanding of concepts of appendix 3 • Understanding of long-term borrowing – example, debts, liability • Understanding of what dividends are – reward for investment to shareholders Any other understanding of finance and accounting concepts. AO2 Application Indicated by as 1 mark (max 2 s), Application must support an assessment objective to be in context • Exclusive high priced products • High costs – losses in 2010’s only now starting to improve • Inventory holding is high • One shareholder – Stefan – who receives dividends every year – $5m • Commitment to use reserves/equity over borrowing • Current ratio seems to be driven by inventory levels • Confidence in reserves to buffer the changes in demand/global economy and the exchange rate with Swiss Franc • Any information from appendix 3 to support point made • No long-term borrowing • High dividends Any point from the case that supports the candidates point 1 AO3 Analysis Analysis of the impact of the HR strategy on a business ( and and ) including: Limited analysis – candidate shows one link in the chain of analysis. (max 3) Developed analysis of individual strategic element – candidate shows two or more links in the chain of analysis. Developed analysis of overall strategy – candidate shows a counter answer to the chain of analysis (2–sided answer) or a multi – strand • Only one shareholder who is also the CEO. This makes it much easier to control level of dividends paid/retained earnings for the business • Demand and reputation is strong for 2019 bounce back to high $59m sales leading to available cash to spend on expansion • No long-term borrowing means less debts and less interest costs increasing profits however this would also mean no available money to fund expansion which may lead to less products and revenue. • FB has a weak cash position and continues to use it for the expansion, reducing reliance on lenders but could lead to over trading or bankruptcy • Current ratio was strong and is now below 1 in the approach to 160th anniversary but is this driven by inventory as acid test is low by comparison. • Low current ratio means inability for FB to pay off short term liabilities may lead to FB being illiquid and close down. • Cash holdings are buffering external shocks on the company and the exchange rate but for how long? AO4 Evaluation L1 limited supporting evidence – answering the question with a brief explanation L2 developed supporting evidence – Reason is developed further L3 developed supporting evidence with context – Level 1 and 2 is answered in context. Evaluation will largely depend on the points raised in the analysis. 1 • Accounting and Finance strategy has been successful given survival over the last 7 years/162 years • Having one shareholder who is also the CEO has made this finance strategy easier to manage as no shareholder/stakeholder conflict but is threatening the future of the business. • The strategy shows a positive impact as there were no reliance on long-term loans leading to lower gearing ratio expenses • This depends upon external factors such as fiscal policies such as increasing tax and its effect on the accounting and finance position of FB • Business has been able to maintain its strategy of no long-term borrowing which in part comes from its reputation and selling prices that keep sales high, but how long will that last? • Purchase and development of workshop, using reserves, shows confidence in the business and its products but should they be looking for investment to grow or is it important to remain independent for its reputation? • How long can this remain viable in a global economy and constant influences. • The strategy can also have a negative impact if the lack of long-term borrowing depletes the cash and limits production • The nature of the product and reputation of the business is allowing the current strategy to work. If anything should change in these two areas the business may not survive unless you bring in external finance and change the way in which the business is run. This is a possibility once Stefan retires and priorities change with a non-shareholding CEO Accept all valid responses.

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