Forecasting and managing cash flows — Paper 2 — A Level Business (for first examination in 2016) 9609 topical questions

Question 1

Car Wash (CW) CW is a national chain of car wash businesses. Each car wash is a franchise of CW and is owned and managed by an entrepreneur…

Accepted Answer

2(a)(i) Define the term ‘franchise’. (line 1) 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition will contain: What the franchisee gains (i.e. use of name/logo/trading system/operations system etc«) What the franchisor gains (i.e. royalties/license fee/percentage of profits/sales etc...) Exemplar Marks Rationale A business that pays a licence fee/royalties to use the logo and 2 Correct definition trading systems of an existing business Partial definition but A business that uses the logo and 1 no sense of a trading systems of another business payment/licensing A business that uses the name of 1 Partial definition another business 2(a)(ii) Briefly explain the term ‘entrepreneur’ (line 2). 3 Award one mark for each point of explanation: Example of a quality, i.e. qualities required by an C entrepreneur; innovation, self-motivation, creativity, 1 mark multi- skilled, leadership, confidence. Makes the decisions/runs/manages/leads a business B 1 mark venture/owns/starts a business A Takes the risk 1 mark Content Someone who takes the financial risk of starting and managing a new venture. Qualities may include innovation, self-motivation, multi-skilled, leadership, confidence, risk taking. . Exemplar Marks Rationale An entrepreneur takes the risk of starting a business and makes the 3 All three elements decisions, An entrepreneur should be confident Someone who makes decisions about the factors of production, takes risks 3 All three elements and comes up with creative ideas. Someone who takes the financial risk of starting and managing a new 2 A and B only venture. Someone who takes the risks in a 1 A only business Running a business 1 B only 2(b)(i) Refer to Table 1 and any other relevant information. Calculate the 3 forecast closing balance at the end of Month 2. Marks Rationale 3 Correct answer (with or without working or $) Correct calculation of net cashflow for both months (can be 2 one calculation or two) Formula or one correct calculation of net cashflow; i.e. cash 1 inflow-cash outflow (can be month 1 or month 2) 0 No creditable content Formula: Opening balance + net cash flow (Cash inflow – cash outflow) Calculations: Opening balance $10 000 Cash inflow $40 000 Cash outflow $35 000 Closing balance $15 000 (3 marks for correct answer) Common incorrect answers Answer Marks Rationale M1 $20 000 – $25 000 = –$5000 (1) M2 $20 000 – $10 000 = $10 000 Missed off opening 2 (1) balance Answer = $5000 No idea where the $5000 (no working) 0 figure came from so no marks Some understanding with opening balance 10 000 + 20 000 – 10 000 1 but cash inflow and = 20 000 outflow for month 2 only No opening balance 20 000 – 10 000 and cash inflow and 1 = 10 000 outflow for month 2 only 10 000 0 No working Correct formula 1 Correct formula 2(b)(ii) Explain one benefit for Palesh of producing a cash flow forecast. 4 Level Knowledge and Application Marks 2b Explanation of one benefit of cash flow 3 (APPAPP) forecasting used in context Identification of one benefit of cash flow 2a (APP) 2 forecasting in context Identification of one benefit of cash flow 1a (K) 1 forecasting 0 No creditable content 0 Correct use of an incorrect answer to 1bi should be fully rewarded (own figure rule – OFR) Content Answers could include: • Palesh can show the cash flow forecast to CW to help get the franchise • One of the major causes of new business failure is poor cash flow. A cash flow forecast will help Palesh to foresee any potential problems such as not having enough cash to pay wages • Allows Palesh to see when he may need extra finance • May help Palesh to get external finance if required Note: a positive cashflow does not mean profit will be made – do not reward this confusion in an answer. 2(c) Analyse one advantage and one disadvantage to Palesh of how he 8 carried out his market research. Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) Good analysis of one (or more) advantage(s) AND one (or more) 4 disadvantage(s) of market research Shows techniques in understanding of context 2 market research 3–4 Good analysis of one techniques in (or more) context advantage(s) OR one (or more) 3 disadvantage(s) of market research techniques in context Limited analysis of one (or more) advantage(s) AND one (or more) 2 disadvantage(s) of market research Shows knowledge techniques of market 1 1–2 research Limited analysis of techniques one (or more) advantage(s) OR one (or more) 1 disadvantage(s) of market research techniques Limited analysis in context: Marks limited to 4+2=6 Answers could include: Advantages • Quick – reduces costs to Palesh • This is primary research which can be more up-to-date than secondary • Cheaper than other methods that may require more preparation time • Focused on the local area where Palesh is planning to set up his business 2(c) Disadvantages • Choose random – surely Palesh is only interested in people who have cars • On high street – is this the best place to sample people who might want to use a car wash? • Limited questions – e.g. could have asked what time of day might use the car wash 2(d) Recommend how Palesh could motivate his employees. 11 Knowledge and Analysis and Evaluation Application Marks Marks (7 marks) (4 marks) A justified recommendation for for Palesh based on the given argument(s) of one or 7 more motivation methods in context A developed recommendation for Palesh based on the given 6 argument(s) of one or more motivation methods in context An evaluative statement/ recommendation based on the given argument(s) of 5 one or more motivation methods in context Argument (two-sided) based on one or more motivation 4 Shows knowledge of methods in context motivation methods 3–4 Argument (one-sided) based in context on one or more motivation 3 methods in context Shows knowledge of Limited analysis of one or motivation/motivation 1–2 1–2 more motivation methods methods No creditable content 2(d) Content: Answers could include: • Payment methods are unlikely to be in context as Palesh has already stated he must pay a low wage. Commission/bonus or piece rate could be viable options as both of these keep costs linked to revenue. Alternatively, fringe benefits (such as free car washing) could be an option. • Job rotation – there may be some way of moving employees around the different jobs to stop them becoming demotivated • Job enlargement – there may be some additional responsibilities (such as a supervisor role) that Palesh could utilise • Job enrichment – unlikely to be much scope, but it may be possible to allow employees to decide on certain aspects of their role • Team working • Quality circles • Target setting – This may work as a motivational tool as long as there are enough cars to maintain the targets (could be linked to bonus or profit sharing scheme) • Delegation • Empowerment • Participation – Allowing workers to participate in decisions about the business may be a useful form of motivation, especially in a new business 2(d) An example of how an answer could develop and how it should be annotated. ANAN K APP AN EVAL (one sided) If Palesh uses a However, not all workers are method such as motivated by the same methods allowing so Palesh might need to use CW is labour workers to Less absenteeism more than one non-financial intensive so participate in would mean higher method of motivation. (EVAL – it is important decision making productivity and statement) that Palesh they will feel they would be able finds ways to part of the to wash more cars. As car washing can be boring motivate business and (ANAN) some workers might be Motivation staff. (APP) work harder to motivated by more interesting methods make it a work such as extra are used to success. (AN) responsibilities maybe as inspire staff supervisors or by changing roles to work during a shift so not always harder. (K) being the person who cleans ANAN (two-sided) inside cars (EVAL – developed) Motivation Working conditionsmethods However, if Palesh was to ask mean thatcould be The best some to take on extra This will mean employees workfinancial methods responsibilities he might have to that they are outside and theyand non- would be offer higher pay and this might less likely to will get wet whichfinancial. non-financial not be possible as it would raise take could make them(K) as Palesh costs so Palesh might have to unnecessary feel miserable and wants to consider less costly motivation days off work. more likely to take keep costs methods such as team working (AN) days off or leave low. (APP) where the team can decide how the job which could they will complete the necessary result in a bad tasks. This would fit in with reputation for CW. Palesh’s cost concerns. (EVAL – (ANAN) justified)

Question 2

Paul’s Clothes (PC) PC is a sole trader business that is owned and managed by Paul. Paul financed the business using a mortgage on his home…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘unique selling point’ (line 6). 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 A correct definition should cover the following aspects. • Differentiates • Features • A unique selling point is something that makes a product stand out from its competitors, such as a phone with a new feature that no other phones have. • It is a feature that none of the other businesses have and means the product can be sold for a higher price. 1(a)(ii) Briefly explain the term ‘business objective’ (line 5). 3 Award one mark for each point of explanation: Rationale Marks Example or some other way of showing good C 1 understanding A feature of business objectives, e.g. specific, measurable, achievable, realistic, time-based, based on B market research, resourced, short-term, long-term, can 1 change over time/in response to factors, set by management, SMART etc. Something a business is trying to achieve, direction, A 1 aim, target, goal etc. Note: A, B and C marks are independent of each other Exemplar: This is a specific target that a business aims to achieve. Examples include survival, profit and entering new markets. 1(b)(i) Refer to Table 1. Calculate the value of X. 2 Rationale Marks Correct calculation of the value of X (no $ or 000s required) 2 with or without correct working Correct formula or correct calculation of cash out (with 1 working) No creditable content 0 Formula: Opening Balance + cash in-cash out = closing balance Cash out = $5000 (allow 5) -1 + X – 5 = closing balance of 1 -1 + 7 – 5 = closing balance of 1 X = 7 Answer = 7 ($7000) Common answers Answer Rationale Marks 7 (no working) Correct answer 2 2 + 2 + 1 = 5 Correct calculation of cash out 1 Without working there is no way to know 5 (no working) 0 where this figure came from 1(b)(ii) Explain two methods that PC could use to improve its cash flow. 4 Level Knowledge and Application Marks Explanation of two methods of improving 2 (APP+APP) 4 cash flow in context Explanation of one method of improving 2 (APP) 3 cash flow in context Identification of two methods of improving 1b (K+K) 2 cash flow Identification of one method of improving 1a (K) 1 cash flow 0 No creditable content 0 Cash flow could be improved by: • Decreasing cash out (without decreasing cash in) • Increasing cash in (without increasing cash out) Context and content is likely to come from: Method Context • Declining in forecast Revenue • Focus on market segment suitable for country with rising unemployment New computerised • $10 000 – could use a different source of inventory system finance (i.e. not cash) • Reduce number of workers in one/both stores • Reduce wages (seems to be happening in Employee costs month 6 anyway – can this be done earlier) • Unemployment in country is rising, so may be able to reduce wages. • Revenue is forecast to fall significantly but Purchases purchases do not fall by same proportion – can these be reduced? • Will reduction in the marketing budget mean sales reduce further? Marketing • High spending on marketing budget (50% of revenue in Month 6) – is this necessary? Sources of finance • To cover short term issue in Month 5 1(c) Analyse one advantage and one disadvantage to PC of purchasing the 8 computerised inventory management system. Knowledge Level and Marks Analysis Marks application Good analysis of one advantage and one 4 disadvantage of purchasing 4 Shows an inventory management understanding system in context 2 of inventory Good analysis of one management in advantage or one context 3 disadvantage of purchasing 3 an inventory management system in context Limited analysis of one advantage and one 2 disadvantage of purchasing 2 an inventory management Shows system knowledge of 1 inventory Limited analysis of one management advantage or one 1 disadvantage of purchasing 1 an inventory management system 0 No creditable content Inventory management is the control of stock – this could be raw materials, work in progress of finished products. Contextual analysis likely to come from: Advantages: • PC is in fashion business so being able to respond to customer need important e.g., not running out of sizes or style of clothes • Will allow PC to identify sales patterns quickly and respond to demand, boost revenue and cash in, possibly improve cash flow Disadvantages: • Economy slowing down so making sure not over ordering is important so not left with clothes/footwear that does not sell • Initial outlay expensive and economy slowing down, is this the best time to be investing in a stock control system? • Training for Paul on using the new system – will he have time as a sole trader running two shops? Can he afford it? 1(d) Evaluate Paul’s decision to set up PC as a sole trader. 11 Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based on 7 argument(s) in context Developed evaluation based 6 on argument(s) in context An evaluative statement based on argument(s) in 5 context Shows understanding Argument about Paul’s of setting up as a sole 3–4 decision to set up PC as a 3–4 trader in context sole trader Shows knowledge of Limited analysis of being a 1–2 1–2 being a sole trader sole trader No creditable content 0 Note: A candidate may evaluate the decision in terms of setting up as a sole trader or in terms of not setting up as another legal structure (or both). • Paul gets to make his own decisions –he has been through survival and now focusing on maximising profits/sales. Gets to decide what he wants to do with the business e.g., opened up the second shop, investing in the new stock control system • Paul keeps the profits to himself and he has been pleased with the level of profit made. Rewards for his investment/entrepreneurial skills. • Unlimited liability = higher risk especially if economy slowing down and considering Paul’s market, cash flow slowing down and so if the business fails Paul is liable. • Unlimited liability – heightened risk as Paul financed PC with mortgage on his home • Loss of income for Paul as revenue expected to slow for at least the next 6 months. This will affect his livelihood and his standard of living. • More susceptible to competition/changes in the economy.

Question 3

Clifford’s Supermarkets (CS) CS owns 28 supermarkets which sell food and non-food products. Each CS supermarket has a large product portfol…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘cash flow’ (line 10). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content The transfer/movement of money in and out of the business Exemplar Rationale Mark The transfer/movement of money in All areas covered 2 and out of the business The transfer/receiving of money in of Only one direction covered – 1 the business defining cash inflow The transfer/spending of money Only one direction covered – 1 within/out of a business defining cash outflow The movement of money/cash within No reference to direction (in 1 a business and out) The money made from selling goods No creditable content 0 1(a)(ii) Briefly explain the term ‘product portfolio’ (line 2). 3 Award one mark for each point of explanation: Knowledge Marks Example or some other way of showing good C 1 understanding B Sold by a business 1 A Range/catalogue of products/services 1 Content A product portfolio is the range of goods and services offered by a business. The portfolio of products that business sells can be analysed using the product life cycle. Exemplar Rationale Marks The range of goods and services sold by a business which can be used to All three elements met 3 analyse the best-selling products The variety of products the company No C mark 2 has to offer for the people The amount of different products a Amount is an oblique 2 business sells reference to range What the company uses to keep track Bod, inferring ‘sold’ by a 1 of all of its products business The data of a product including price, No creditable content 0 opinion, etc. 1(b)(i) Using Table 1 and any other relevant data, calculate the price elasticity of demand 4 for bottled water when the price was reduced. Rationale Marks Correct answer with or without correct working (minus sign not 4 required) Correct calculation of % change in QD AND % change in P 3 Formula AND calculation of both actual changes OR correct 2 calculation of % change in QD OR % change in P Formulae OR correct calculation of both actual changes 1 No creditable content 0 Content % changeinQD Formula: % changeinP 40000 − 20000 20000 = × 100 20000 20000 QD = = 100% $0.63 − 20000 $0.27 = × 100 $0.90 $0.90 P = = –30% 100% −30% = –3.33 Answer = –3.33 Common incorrect answers Answer Rationale Marks Correct final answer, no working (–)3.33 4 needed Correct answer, ignore minus, no 3 4 recurring needed 100 and 30 and wrong % change P over % change QD (wrong 3 final answer (0.3) way round) Formula and 0.27 and Formula and correct calculation of both 2 20 000 actual figures Correct calculation of both actual 0.27 and 20 000 1 figures 0.9 – 0.63 = 0.27 Calculation of only 1 actual figure 0 1(b)(ii) Explain how your answer to 1(b)(i) could be used by CS. 2 Level Knowledge and Application Marks 2 (APP) Explanation of a use of the answer to 1(b)(i) in context 2 1 (K) Identification of a use of PED 1 0 No creditable content 0 Note: Correct use of an incorrect answer to 1(b)(i) should be fully rewarded (own figure rule – OFR) Content • PED is elastic so VC should gain more revenue from the sales discount • VC should use more sales discount promotions because it shows an elastic response ARA and OFR Answer How it might be used The sales discount brought in less revenue but increased 0 to (–)1 – Inelastic sales The sales discount has not changed revenue but increased (–)1 – Unit elasticity sales The sakes discount brought in more revenue and increased (–)1 plus (elastic) sales 1(c) Using Table 2 and any other data, recommend which supermarket CS should close. 11 Justify your recommendation. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified recommendation based on a developed argument on the 7 closure of both supermarkets A developed recommendation based on a developed argument 6 on the closure of both supermarkets Shows understanding of A basic recommendation/ the factors affecting judgement based on a developed 4 5 closure of supermarket A argument on the closure of both and supermarket B supermarkets Shows understanding of Developed argument based on the the factors affecting 3 closure of supermarket A and 4 closure of supermarket A supermarket B or supermarket B Shows knowledge of two Developed argument based on the or more reasons for 2 closure of supermarket A or 3 business closure supermarket B Limited analysis of supermarket A 2 Shows knowledge of one and supermarket B reason for business 1 Limited analysis of supermarket A closure 1 or supermarket B No creditable content 0 1(c) Content: 11 Supermarket A Pro Con • Higher Revenue • Higher rent • Higher Population – bigger • Higher unemployment – lower customer base level of average income? • Higher unemployment – lower • Making a loss employment odds? • Less established so easier to • Trend is that profit is increasing – close? will this continue? • Has it been given enough time to establish? Supermarket B Pro Con • Lower rent • Lower revenue • Lower unemployment – higher • Lower population – smaller level of average income? customer base • Making a profit • Lower unemployment – higher • More established – brand level of average income? recognition in the area • Trend is that profit is decreasing – will this continue? • Been open longer – is it possible to ‘turn it around’. An example of how an answer could develop and how it should be annotated. K APP AN ANAN EVAL However the larger CS should choose local population SM A (Basic Supermarket This could means there might recommendation) A’s rent is lead to worse be more long term $150 000 cash flow in potential to increase because it has higher than Supermarket revenue and more potential to Supermarket A balance out cash increase revenue B (APP) (AN – LHS) Low rent flow in the future in the longer term is an (DEV – LHS) (Developed important recommendation) Supermarket The lower indicator A’s rent of local (K) however it $400 000 is population Which means that it depends on $150 000 means that is never likely to be whether SM B’s higher than there is less as profitable as profit continue to Supermarket chance of Supermarket A fall B’s rent of increasing (DEV – RHS) (Justified $250 000 revenue recommendation) (APP APP) (AN – RHS) 1(d) Analyse how the closure of the supermarket that you have recommended in your 8 answer to 1(c) could affect two stakeholders of SC. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding of Developed analysis of the effect of the closure the closure of the 2b 4 4 on two stakeholders of supermarket on two CS stakeholders of CS Developed analysis of Shows understanding of the effect of the closure 2a the effect of the closure 3 3 of the supermarket on on one stakeholder of CS one stakeholder of CS Shows knowledge of and gives one or more Limited analysis of the 1b stakeholder examples 2 effect of closure on two 2 OR two examples of stakeholders stakeholders Shows knowledge of Limited analysis of the stakeholders (definition) 1a 1 effect of closure on one 1 OR one example of a stakeholder stakeholder 0 No creditable content 0 Content Customers – May have to go to another supermarket, or travel further to use CS Employees – those made redundant in the closed supermarket may be unemployed and have lower incomes, or may be transferred to another supermarket. Those who are not made redundant (in other supermarket) may be more motivated (if they feel lucky to be still working) less motivated (if they worry they are next). Owners – may have less profit as there are high redundancy costs. May eventually have higher profits as the business is more efficient. Managers – may lose their job or be transferred to another supermarket Banks/lenders – may worry about the future of CS and not lend for any future ventures Local community – increased unemployment in area of closed supermarket, lower average income, less choice of supermarket Government – increased unemployment, lower income tax revenue. ARA 1(d) 8 Examples of Examples of application/ Examples of possible analysis stakeholders context Customers Local customers will have May choose an alternative supermarket to travel further to get to a → which leads to increased travel time supermarket Employees Because of high May struggle to find another job → unemployment in the area Lead to a lower quality of life → affect the ability to look after their family/pay rent → lead to less emphasis on children’s education Local Supermarkets employ a lot Less tax paid → lowers the overall government/ of staff amount available for community projects council → increases taxes or reduction in services → affects the community negatively Suppliers Of bottled water Reduction in demand → increase in wastage → reduction in employees needed → increased unemployment in the local area Stating ‘employees of supermarket A’ is not enough for app – has to be linked to e.g. high levels of unemployment, etc.

Question 4

Wood’s Logs (WL) WL was set up by Robert Wood 50 years ago. It is a private limited company with all of the shares owned by the Wood family…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘break even’ (line 24). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Break-even can be defined in a number of ways: • expenditure (costs) and income (revenue) are equal • the level of sales/units where there is no profit or loss • TR = TC Exemplar Marks Rationale When a business makes enough 2 Both elements covered sales/revenue/income to cover all the costs. TC = TR 2 Both elements covered Cost of sales is equal to sales 1 No understanding of total costs revenue. (CoS only covers direct costs) The business makes no profit or loss 1 No understanding of the level of sales/units The point at which a business stops No understanding of the level of making a loss and can start to make a sales/units profit Where the business has made 0 Tautological, no understanding enough sales to have broken even. 1(a)(ii) Explain the term ‘industrial markets’ (line 5). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good understanding 1 B Understanding that it is not the end user, i.e. used to produce, not to 1 end user etc. – anything to do with manufacturing and production A Understanding of business to business 1 Content When a business sells to another business, in contrast to selling to the end user. Industrial markets usually supply components for use in the production of products and services. ARA Exemplar Marks Rationale An industrial market is when a 3 A clear understanding of all three business sells components to another elements business who then sells it to another business or the end user When a business sells to another 2 An understanding of B2B and not an business who is not the end user end user but no C mark Selling business to business 1 Point A only When you sell to someone who is not 1 Point B only the end user 1(b)(i) Refer to Table 1. Calculate the new closing balance for Month 3 if the inventory 3 storage costs for each month increase by 20%. Rationale Marks Correct answer with or without correct working or $ or 000s 3 Attempt at calculating Month 3 closing balance using correct figures 2 Formula or correct calculation of Inventory storage for any one month 1 No creditable content 0 Content Month 1 Month 2 Month 3 ($000s) ($000s) ($000s) Cash Inflows Revenue 250 300 100 Total cash in 250 300 100 Cash Outflows Labour 150 150 150 Inventory storage 12 6 60 Expenses 5 5 5 Total cash out 167 161 215 Opening balance 20 103 242 Closing balance 103 242 127 Closing balance = Opening balance + Cash in – Cash out 1(b)(i) Correct answer: $127 000 (accept 127 as the ‘000 is in the column header) Exemplar Mark Rationale 127 (127,000) 3 Does not require the ‘000 of the $ sign 50 × 20% = 60; cash out for mth 2 Calculated one month, closing 3 = 215 closing balance = 124 balance is incorrect as other two months ignored 12 Or 6 OR 60 (with working) 1 Calculated at least one correct new inventory Closing balance = opening 1 Correct formula balance + cash in – cash 1(b)(ii) Explain one benefit for WL of holding inventory 3 Level Knowledge and Application Marks 2b (APP APP) Explanation of a benefit of holding inventory in context 3 2a (APP) Identification of a benefit of holding inventory in context 2 1 (K) Identification of one benefit of holding inventory 1 0 No creditable content 0 Content • To meet changing demand – seasonal demand • To meet unexpected demand – primary business, trees take time to grow – unexpected demand can only be met by holding stock • Respond to customer needs – Industrial market – importance of customer service, repeat customers etc. • To be able to maintain a steady level of production ARA Identification of a benefit Identification of a benefit in Explanation of a benefit (1 mark) context (2 marks) in context (3 marks) To meet changing demand As demand is seasonal So there is always stock ready for sale To meet unexpected As it takes time to cut down So potential sales/revenue demand trees/for them to grow /profit are not lost To have a steady rate of As it is a labour intensive To ensure their 100 production business employees have constant work 1(c) Analyse two factors which may have affected the location of WL. 8 Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding of 4 Good analysis of two (or 4 two (or more) factors which more) factors which may may have affected location have affected location of of WL WL 2a Shows understanding of 3 Good analysis of one factor 3 one factor which may have which may have affected affected location of WL location of WL 1b Shows knowledge of two 2 Limited analysis of two (or 2 (or more) factors which may more) location factors affect location 1a Shows knowledge of one 1 Limited analysis of one 1 factor which may affect location factor location No creditable content 0 Content • Geographic – Likely to need a relatively rural area to grow trees and process them. However, cannot be too rural as there is a need for a workforce (labour intensive). • Demographic – WL is a labour intensive business – will need to be close enough to a populated area to provide the workforce. Alternatively, may need to offer accommodation. • Legal – There are likely to be legal restrictions on how many and what type of trees can be felled. May have needed to locate in a country where the laws are more relaxed. • Political – Environmental concerns/leanings of the political party in charge (e.g. Green party) • Resources – Need to be near trees/raw materials for production • Infrastructure – Need to be near a road and rail network for deliveries. • Marketing – there may be types of wood/areas where certain trees grow which have a higher value than others. 1(c) ARA Example of a Examples of Examples of possible analysis factor (K) application/context (APP) (AN + DEV) Location/ As they need to be on/ near So they can have easy access resources woodland (AN) to reduce overheads (DEV) Infrastructure Need t be close to rail/road To ensure easy access for network deliveries (AN) to reduce delivery costs (DEV) Demographic As WL is a labour intensive Need to have a populated area business to provide workforce (AN) to meet staffing levels (DEV) 1(d) Recommend which of Mintzberg’s management roles is likely to be the most 11 important for the new Managing Director of WL. Justify your recommendation. Knowledge and Application Marks Analysis and Evaluation Marks (4 marks) (7 marks) Justified recommendation based 7 on argument in context Developed recommendation 6 based on argument in context An evaluative 5 statement/recommendation based on argument in context Shows understanding of two or 4 Two or more arguments based 4 more uses of Mintzberg’s on the importance of management role(s) in context Mintzsberg’s management role(s) in context Shows understanding of one 3 One argument based on the 3 use of Mintzberg’s management importance of Mintzsberg’s role(s) in context management role(s) in context Shows knowledge of Mintzbergs 2 Limited analysis of two or more 2 management theory AND one of Mintzberg’s management management role OR two role(s) management roles Shows knowledge of Mintzbergs 1 Limited analysis of Mintzberg’s 1 management theory OR one management theory/ one management role management role No creditable content 0 1(d) Content • Interpersonal – is related to anything a manager does which relates to relationships with staff (use examples from below) • Informational – is related to providing information • Decisional – is related to making decisions • Figurehead – Robert has been the MD for 50 years and is well liked as the figurehead. New MD will have to replace him but may be unknown. • Leader/to lead – Over 100 employees – labour intensive – important to lead well to maintain/improve efficiency • Liaison/ to liaise – Workforce is demotivated, new MD will need to liaise with them • Monitor/to monitor/receiver – Demand and profit is falling – therefore the need to monitor this to avoid any more loss is important. • Disseminator/to disseminate – Over 100 workers – need to get information to them quickly and efficiently, especially with poor motivation • Spokesperson – May need to represent the company to governments, environmentalist and the workforce • Entrepreneur – demand/profits have been falling – need to diversify, find an environmental solution. Need to take risks and bring business back into profit. • Disturbance Handler/to handle disturbances – demotivated work force, may start industrial action. Seasonal business – a poor winter may disturb both supply and demand. • Resource Allocator/to allocate resources – Inventory management I important – storage costs – also trees cannot be easily replaced, or replaced I the short term – need to efficiently manage resources. • Negotiator/to negotiate – May need to negotiate with customers (businesses) as well as the demotivated workforce. ARA An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL The new MD Robert was a A good To improve The entrepreneur role needs to be a good figurehead the morale of is the most important figurehead figurehead will have the the as without new ideas because he trust and demotivated the business will not was well loyalty of the workforce have enough demand liked for over workforce 50 years And this is the most immediate concern for Entrepreneur to diversify Which will To increase WL as demand is find new profits/ falling ways to revenue However this depends boost upon the MD being demand able to have some interpersonal skills

Question 5

Too Tasty (TT) TT is a brand of vegetable chips (crisps) owned by a large public limited company. The vegetables are thinly sliced, cooked,…

Accepted Answer

2(a)(i) Define the term ‘cash flow’ (line 21). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content The movement of money (1) in and out of a business (1). Exemplar Mark Rationale The transfer/movement of money in and 2 All areas covered out of the business The receiving of money in to the 1 Only one direction business covered – defining cash inflow The spending of money within/out of a 1 Only one direction business covered – defining cash outflow The movement of money/cash within a 1 No reference to business direction (in and out) A businesses flow of cash 0 Tautological 2(a)(ii) Explain the term ‘brand’ (line 1). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding B An explanation that it distinguishes from competition 1 (unique) A An explanation of name/logo/design/feature etc. 1 Content A brand is a name, term, design, symbol, or other feature that distinguishes an organisation or product from its rivals in the eyes of the customer. Brands are used in business, marketing, and advertising. ARA Exemplar Mark Rationale A brand is the name (A) or logo that 3 All three aspects differentiates a product or service (B) from the competitors, like McDonalds golden arches (C) A brand, like Coke (C), helps a business 3 All three aspects distinguish itself (B) from competitors because people know to look out for the logo (A) A unique (B) feature (A) that is used to 3 All three aspects advertise a product (C) A logo (A) that makes a business unique 2 A and B marks (C) Something about a business that makes 2 Do not reward TT as it stand out (B) such as a name (A) like an example since Too Tasty we tell them it is a brand in the data (ie REP) A brand is a big business like Pepsi (C) 1 C mark as it is an example 2(b)(i) Refer to Table 2.1. Calculate the effect of a price increase to $1.10 on 3 the level of sales of the carrot variety of chips. Rationale Marks Correct answer with or without correct working or m 3 Correct calculation of percentage change in QD (–15%) 2 Formula* or correct calculation of percentage change in P (10%) 1 No creditable content 0 *Formula can be implied from the use of numbers Content % change in QD = PED % change in P % change in QD = − 1.5 10% So % change in QD = –15% So, change in QD = 2.55m units (a decrease of 0.45m units) – allow either 2(b)(i) OFR* Answer Mark Rationale –0.45 3 A correct answer Decrease of 0.45 (the change in QD)– working not required 2.55 3 Also a correct answer (the total QD after the price change) – working not required 0.45 2 Calculation correct but not identified the decrease. Allow, even without working (Change of) 15% 2 Correctly calculated –15% the percentage change, but not the change in level of sales. Allow, even without working $0.10 1 Correctly calculated × 100 = 10% the change in price $1 *OFR means the use of the own figure rule – this aims to reward a candidate for the stages of a calculation that are correct, even if an earlier stage or figure used is incorrect. An early mistake, for example, would create all following calculations to have wrong answers, but these are still rewardable (if correct when using a candidate’s own figures) Therefore the candidate cannot gain marks for the stage that was incorrect, but can gain all the subsequent marks 2(b)(ii) Explain one way in which the price elasticity of demand figures may be 3 useful to TT. Level Knowledge and Application Marks 2b (APP) Explanation of one use of PED figures in context 3 2a (K+K) Explanation of one use of PED figures 2 1a (K) Identification of one use of PED figures 1 0 No creditable content 0 Content Uses: • To predict the effect of price changes • To predict changes in revenue/profit • To decide how to change/set a price • To understand the effects of a sale/promotional pricing Context may include: • Should not increase the price of carrot or potato varieties – will lose revenue –could decrease (both PED elastic) • Should increase the price of beetroot and parsnip varieties – will gain revenue – should not decrease (both PED inelastic) ARA and OFR* Example of how responses should be marked Identification of a Explanation of a Explanation of a use (1 mark) disadvantage (2 disadvantage in marks) context (3 marks) To see what might If TT raises price and it For example the happen when prices is inelastic then they beetroot crisps are change (K) will gain more revenue inelastic (APP) (K) PED can inform TT An answer of more As seen with the carrot about the best price to than 1 means that they crisps (APP) set for their products should not increase (K) the price, but should decrease it (K) The carrot crisps are elastic, so the figures suggest they should not increase the price or they may lose revenue (APP) 2(b)(ii) *OFR in this case is if a candidate has used an incorrect answer from 2(b)(i) – if their explanation is correct using their own figures then ALL marks can be rewarded in this question. 2(c) Analyse one method of primary market research and one source of 8 secondary market research which the Marketing Director could use to help develop a new variety of vegetable chip. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Developed analysis of 4 of one method of one method of primary and one primary and one source of secondary source of secondary market research in market research in context context 2a Shows understanding 3 Developed analysis of 3 of one method of one method of primary or one source primary or one source of secondary market of secondary market research in context research in context 1b Shows knowledge of 2 Limited analysis of 2 one method of one method of primary and one primary and one source of secondary source of secondary market research market research 1a Shows knowledge of 1 Limited analysis of 1 one method of one method of primary or one primary or one sources of secondary sources of secondary market research market research 0 No creditable content Note: Annotate marks for primary market research in the left -hand margin and secondary market research in the right-hand margin. 2(c) Content Primary methods: • Survey- could survey current customers about new varieties they might like • Questionnaires – Could ask about new possible varieties • Focus groups – ask a group to try the new varieties and give feedback on them • Observation – could observe what potential customers are buying from retailers – new varieties/flavours etc. • Testing – could hand out free samples for feedback Secondary sources: • Printed – trade magazines, research done by competitors • Paid for – from market research agencies, census etc. • Internet – demographics, new products in other markets etc. ARA A chain of analysis could come from an analysis of the benefits and costs of a method or source (See below). Example of a Examples of application/ Examples of possible method of context (APP) analysis (AN + DEV) primary market research (K) Questionnaire Asking parents about what Which could give TT varieties of chip their useful information about children like most. the new product so they can gain high sales (AN). However questionnaires are expensive to ask enough people to make them representative so this could increase TT’s costs (DEV) Example of a Examples of Examples of possible source of application/context analysis (AN + DEV) secondary (APP) market research (K) The internet To see what flavours of This would be a cheap vegetable chips TT’s way of finding out competition are selling secondary data which lowers the cost of the research (AN) however it will not tell TT about flavours which are in development so the research may be a waste of time (DEV) 2(c) Or a chain of analysis could come from the development of a benefit or a cost to TT (See below) Example of a Examples of application/ Examples of possible method of context (APP) analysis (AN + DEV) primary market research (K) Questionnaire Asking parents about what Which could give TT varieties of chip their useful information about children like most. the new product so they can gain high sales (AN) and make a bigger profit (DEV) Example of a Examples of Examples of possible source of application/context analysis (AN + DEV) secondary (APP) market research (K) The internet To see what flavours of This would be a cheap vegetable chips TT’s way of finding out competition are selling secondary data which lowers the cost of the research (AN) and therefore it is more likely that TT will be able to maintain their high profit margin (DEV) 2(d) Evaluate concerns that the factory manager might have about the joint 11 venture between TT and the supermarket group. Knowledge and Marks Analysis and Evaluation Marks Application (7 marks) (4 marks) Justified evaluation based on 7 argument in context Developed evaluation based on 6 argument in context An evaluative statement based 5 on argument in context Shows 4 Developed argument based on 4 understanding of two concerns/disadvantages of two concerns that the joint venture the factory manager might have about the joint venture Shows 3 Developed argument based on 3 understanding of one concern/disadvantage of one concern that the the joint venture factory manager might have about the joint venture Shows knowledge of 1–2 Limited analysis of two 2 joint ventures concerns/disadvantages of a joint venture Limited analysis of one 1 concern/disadvantage of a joint venture No creditable content 0 2(d) Note An answer that makes no reference to factory/operations concerns can only be awarded a maximum of 2+2, no matter how developed the argument is or whether it uses other (non-operations based) context Application (APP) marks are about applying the knowledge of a joint venture to the operations of the factory – the context can include: • On the production of chips • quality of chip production • TT use of flow production • TT’s specific production process (sliced, cooked, flavoured, packaged) • Different flavours produced each day • Capacity of factory – factory runs 24 hours a day, 5 days a week • Four flavours produced • New variety to be produced Content A joint venture involves two separate businesses working together but not becoming one business (ie it is not a merger or takeover) • Will the factory have capacity to produce the chips for the supermarket – currently running 24 hours a day, five days a week – would it require producing less TT branded chips? • Will the factory need to run at weekends – overtime payments? When would the machines be maintained/cleaned etc.? • Might the ‘own label’ chips damage the TT brand if people found out they were the same? • Would demand reduce for TT chips when the new supermarket chips are sold? • Will the supermarket continue to stock TT chips if the business does not agree to make the own label chips? • What will the profit margin be on the new chips? Would it make more profit to turn down the order and maintain the high profit margins? • Will this stop the new variety being produced and therefore jeopardise the expansion of the product portfolio? 2(d) ARA An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL TT will Which may This will And with a The biggest produce mean that increase lower profit concern is more crisps TT has to TT’s costs margin, TT likely to be for the open the (AN) may make a about supermarket factory for loss from having to to sell (K) six days a this joint open an week venture extra day instead of (DEV) each week five (APP) (EVAL) It may also Which may This might Which may which will mean that mean that lead to less damage mean more TT does not TT cannot sales in the TT’s profit strain on the concentrate produce the future (AN) (DEV) machinery as much on new variety (EVAL). it’s branded (APP) crisps However, in because the long they are term a making ones reduction in for joint profit could venture (K) be more of a concern, especially if it leads to the business shutting down (EVAL).

Question 6

First Nature (FN) FN is a co-operative farm producing milk, beef and vegetables. Products are sold in its shop and at local farmers’ market…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘mission statement’ (line 2). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: Do not allow objectives or confusion with a business’s objectives Answers could include: A written summary of an organisations main purpose / focus. Usually doesn’t change over time. Shows what is important to the organisation, communicates sense of intended direction to external and internal stakeholders. May give examples. A correct definition should include two aspects of a mission statement, for example two of the of the following: • Vision / beliefs • Purpose • Goals • Values • Focus • Marketing / communication – attract customers • (Core) aim • Motivational • Long term • Sense of direction • Creates interest by external groups • Communicates to stakeholders • It is not an objective Exemplar Mark Rationale The goals and aims of a 2 Two aspects business Statement of an organisation’s 1 Simple but correct definition vision Document showing the purpose 1 Partial definition of a business A mission statement is a 0 Do not reward linking to statement of objectives being an objective 1(a)(ii) Explain the term ‘co-operative’ (line 1). 3 Award one mark for each point of explanation: Example or some other way of showing good understanding, e.g. bulk buying, common in 1 mark C agriculture, motivational, slow decision making, allows Pink the achievement of economies of scale etc. • Responsibilities are shared • Owners may contribute to the running of the 1 mark B business Yellow • Shared decision making • All members have one vote • Owned / financed by workers / customers / 1 mark A members Blue • Profits are shared Note: using the case as an example is repetition and not rewardable as the C mark A co-operative is a business structure where the workers are the owners. The profits are shared with workers. Workers (owner) do not have to run the business, they will vote for Directors. In smaller co-operatives such as co- worker operatives then workers may also run the business. Exemplar Mark Rationale Members (A) own a co-operative and share the running (B) of the business. QL is a 3 A, B and C worker co-operative which mean the workers are the members (C). A co-operative can be owned by customers or workers (A) who will each have a vote 3 B and C (B). Because they own it, they are motivated for it to do well (C). A co-operative has shared profit (A) and 2 A and B responsibilities (B) Members (A) who join together to benefit 2 A and C from bulk buying (C) A co-operative is made up of people who Three points but share the responsibilities of the business 1 all from so only (B). Each person has a vote and the one mark. decision making is shared. 1(b)(i) Refer to Table 1.1. Calculate the value of X in quarter 4. 2 Rationale Marks Correct answer with or without correct working or $ or 000s 2 Correct formula* or the correct identification of figures 1 No creditable content 0 *Correct formula can be implied through the use of figures Formula: Opening balance + cash in – cash out –$100 000 + $200 000 – $10 000 = $90 000 (accept 90) Answer Mark Rationale 90 (no working) 2 A correct answer 200 – 10 – 10 = 180 1 Only mistake is doubling up the cash 180 – 100 = 80 out figure, so one mark –100 + 200 – 20 = 80 1 Formula implied through use of figures (i.e. one added and one subtracted from opening balance) but wrong cash out and wrong answer 0 A wrong answer with no working to 80 (no working) show thinking $100 000 + $10 000 = 0 Formula is obviously wrong and 110 000 answer is also wrong 1(b)(ii) Explain two benefits to FN of cash flow forecasting. 4 Level Knowledge and Application Marks 2b Explanation of two benefits of cash flow 4 (APP+APP) forecasting in context Explanation of one benefit of a cash flow 2a (APP) 3 forecasting in context 1b (K+K) Identifies two benefits of cash flow forecasting 2 1a (K) Identifies one benefit of cash flow forecasting 1 0 No creditable content 0 Note: an answer which explains ONE benefit in context (i.e. APP annotation) gains 3 marks. Content is likely to come from: • Identifies potential cash shortfalls – If a business runs out of cash and is able to obtain new finance, it will become insolvent. • To measure the financial performance of the business • Makes sure the business can pay debts / bills • Identifies potential problems with customer payments • Allows better management of a business’s finances • To give information to other stakeholders, e.g. banks • Identify potential shortfalls in cash balances in advance – ‘early warning system’. Note: cash flow forecasting does not allow a business to forecast profit / loss Context may come from: • Expansion • Use of numbers from Table 1.1 • Purchase of neighboring farm • Answer to 1(b)(i) Example of how responses should be marked: Identification of a benefit of Explanation of a benefit in context cash flow forecasting (K) (APP) Manage cash To see if they can afford to expand Identify times when they do not For example in the first three quarters have cash 1(c) Analyse two sources of finance, other than selling shares, FN could 8 use to purchase the neighbouring farm. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding Developed analysis of two sources of 4 two sources of 4 finance in context finance in context 2 Shows understanding Developed analysis of of one source of 3 one source of finance 3 finance in context in context Shows knowledge of Limited analysis of two sources of finance 2 two (or more) sources 2 of finance 1 Shows knowledge of Limited analysis of 1 1 one source of finance one source of finance 0 No credible content Note: do not reward the sale of share OR the change of legal structure to a PLC (unless it is totally unrelated to share issue) Content: Internal sources of finance: • Retained earnings • Sale of unwanted assets • Sale and leaseback of non-current assets • Working capital External sources of finance: • New partners • Venture capital • Overdrafts • Leasing • Hire purchase • Bank loans • Mortgages • Debentures • Micro-finance • Crowd funding • Government grants 1(c) Could choose any source of finance but, from the context, most likely to consider getting more members in the co-op or obtaining a bank loan – analysis and understanding will come from the context Note: ‘internal’ and ‘external’ can be sources of finance in themselves Contextual analysis likely to come from: • Amount to raise is $80 000 (or $140 000 based on negative cashflow) • One option discussed to invite more members of the co-op • Bank loan – cash flow predicts a healthy surplus in just over a year • Internal finance may not be suitable as FN has limited capital / poor cashflow • Being a co-operative Example of Examples of application Examples of possible a source of / context (APP) analysis (AN + DEV) finance (K) Bank loan Been established for 10 Interest will have to be repaid years so likely to be (AN) which may mean that FN granted has even worse cashflow (DEV) Mortgage The farm is a property so Mortgage would have a lower a mortgage would be interest rate than a bank loan suitable (AN) but still reduces the profits of the business (DEV) 1(d) Evaluate the likely impacts on the local community if FN changes from 11 a co-operative to a public limited company. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation based on arguments in 6 context An evaluative statement based on arguments in 5 context Argument based on two impacts of FN changing from a co-operative to a 4 public limited company on Shows understanding of the local community changing from a 3–4 cooperative to a public Argument based on one limited company in context impact of FN changing from a co-operative to a 3 public limited company on the local community Limited analysis of two impacts of a change in 2 legal structure a local Shows knowledge of community changing from a co- 1–2 operative to a public limited Limited analysis of one company impact of a change in legal 1 structure on a local community No credible content 0 Note: local community could include customers, neighbouring farms, suppliers. Internal stakeholders are not local community, such as investors and members. 1(d) This is a question about changing legal structure, not creating jobs. If knowledge of changing legal structure has been shown, then creating jobs can be an impact (i.e. analysis) but no reward if that knowledge has not been shown earlier in the answer. Context / content: • Customer focused business – will it alienate their customer base • Will prices rise as shareholders would want high profit / dividends • Culture of a PLC very different to a co-operative • Will it affect working relationships • Not all members agree so already causing conflict • Could provide finance for the expansion and no interest to pay • Provide income for members • Would have to appoint Board of Directors – members might all want to be on the board • Currently all have equal rights – this could change • Will it change mission statement especially in relation to local community? • Will it change plans for use of additional land from education and events for the local community? • Will it still commit to sustainable farming? • Neighbouring farms may fear possible takeover An example of how an answer could develop and how it should be annotated: K APP AN A PLC can sell shares It could use the capital It can afford to employ (K) so FN can gain to open more local more people from the more capital (K) farm shops (APP) and local community (AN) provide more and living standards educational would rise (AN) programmes (APP) A PLC can sell shares FN may no longer offer To increase profits to the general public educational prices may go up (AN) (K) its main business programmes (APP) or lower quality objective is profit and may cut costs by products offered (AN) maximization (K) using lower quality seeds (APP) 1(d) DEV EVAL If shops are nearby In the short-term then this will be more converting to a PLC convenient for local will benefit the people who will buy community (EVAL) as their daily foods more they will have lower easily which will reduce living costs and higher travelling costs (DEV). incomes from employment (EVAL). More educational programmes will mean In the long run the that more local people educational can benefit from these programmes will also programmes and their give them skill levels will increase qualifications which and they will be more will make it easier for employable (DEV) those people to get better paid jobs (EVAL) FN’s mission to The impact on the contribute to the local local community will be community may no negative (EVAL) as longer be an aim and they will not be offered the local community programmes to will not be able to increase their skill benefit from the levels and educational employability (EVAL) programmes (DEV) and, at the same time, The rise in the price of will face lower living products will impact the standards as there is a local community, greater impact on especially the poorest, income, from paying as they will be unable higher prices for a to buy as much and necessity (EVAL) food is a necessity (DEV)

Question 7

Gemini Theatre (GT) GT is a private limited company fully owned by the Gemini family. It owns a small theatre. This building is used to sho…

Accepted Answer

2(a)(i) Define the term ‘cost-based pricing’ (line 14). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A correct definition should include the following elements (allow one mark for each element): • An amount is added on to give the amount the customer must pay (1) • Based on the cost to produce a product (1) Exemplar Mark Rationale The business works out how much it 2 Both elements. costs to make a product and then adds on a set percentage. Adding on to the costs. 1 Second element only. Cost-based pricing means pricing a 1 First element only – product based on the costs of based on the costs of production. production is good enough. Cost-based pricing means pricing 0 Tautology based on the costs. 2(a)(ii) Explain the difference between ‘cash’ (line 15) and ‘profit’ (line 15). 3 Award one mark for each point of explanation: Rationale Marks C Explanation of the difference between cash and profit 1 B Understanding of profit 1 A Understanding of cash 1 Content • Cash is the liquidity of a firm – the money available to pay debts/bills/everyday costs • Profit is the difference between cost and revenue. • Cash is required and will come from revenue, but not all cash is profit as costs need to be paid. • Cash is an asset of the business. • Cash is required to run a business, whereas profit is something to aim for. • A business is unlikely to operate without cash but can operate without profit. Exemplar Mark Rationale A business is unlikely to 3 A difference shown, so all three operate without cash but marks gained – the candidate can operate without profit does not need to show (C). understanding of cash or profit if a valid difference has been explained. Cash can be used to pay 3 Clear understanding of both cash the business costs (A) and profit, the word ‘whereas’ whereas profit is the shows a difference. difference between costs and revenue (B). Cash can be used to pay 2 Two statements but no attempt the business costs (A). to compare them, so only two Profit is the difference marks. between costs and revenue (B). 2(b)(i) Refer to Table 2.1 and any other relevant information. Calculate the 3 revenue GT will receive from all the performances of ‘A Summer Dream’ in January 2021. Rationale Marks Correct answer with or without correct working or $ 3 Correct calculation of TR 2 Correct use of numbers 1 No creditable content 0 Content Formula: $40 × (250 tickets × 9 performances) $40 × 2250 = $90 000 (TR) 50% of revenue to GT = $90 000 / 2 = $45 000 Answer = $45 000 OFR Common incorrect answers Answer Mark Rationale 45 000 3 Correct answer – does not need $ $40 × 9 = $360 2 Candidate has missed out the $360 / 2 = £180 number of seats – however, all the other stages of the calculation have been completed correctly (OFR). $180 (no working) 0 Do not reward incorrect answers without working to show correct stages of the calculation. $40 × 250 = 10 000 2 Candidate has missed out the 50% of 10 000 = $5000 number of performances – however, all the other stages of the calculation have been completed correctly (OFR). $5000 (no working) 0 Do not reward incorrect answers without working to show correct stages of the calculation. 2(b)(ii) Explain one possible advantage to GT, other than increased revenue, 3 of renting the theatre to visiting groups. Level Knowledge and Application Marks 2 (APP) Explanation of an advantage of renting the theatre 3 to visiting groups 2 (K + K) Explanation of an advantage of renting a capital 2 item 1 (K) Identification of an advantage of renting a capital 1 item 0 No creditable content 0 Content • Reduces the risk of operating the theatre • Reduces the average cost of productions (fixed costs are spread over more performances) • May advertise GT performances at a visiting group • Makes use of a redundant resource/capital item • Increases GT’s usage of the theatre • Increases GT’s cashflow ARA Identification of a Explanation Possible context difficulty Advertises the theatre. Which may bring in For example, GT can more customers to a advertise Wise Owl GT show. during the performances of A Summer Dream. Spreads fixed costs. Because the extra Such as upkeep of the performances can be building. allocated some of the fixed costs. 2(c) Analyse two factors which might affect the demand for the 8 performances at GT’s theatre. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Good analysis of of two factors affecting two factors affecting 4 demand in context demand in context 2a Shows understanding 3 Good analysis of of one factor affecting one factor affecting 3 demand in context demand in context 1b Shows knowledge of 2 Limited analysis of two factors affecting two factors affecting 2 demand demand 1a Shows knowledge of 1 Limited analysis of one factor affecting one factor affecting 1 demand demand 0 No creditable content 0 Content Candidates may choose to analyse the demand from consumers or the demand from visiting theatre groups • Changes in income – being a normal/luxury product, consumers are likely to increase spending on GT performances based on increasing income. • Fashions/trends/tastes/preferences – going to the theatre may become fashionable, or may become a new trend • Advertising – if GT spend on advertising, then it is likely to increase demand for their performances • Brand awareness • Price of substitutes/complements • Availability of substitutes/compliments (for example Netflix, Amazon, other theatres) • Population size • Quality • Uniqueness (USP) • Price – likely to be an increase in QD if price falls and vice versa. 2(c) Example of a Examples of Examples of possible factor (K) application/context analysis (AN + DEV) (APP) Tastes of Customers obviously Which means that more customers (K) prefer A Summer Dream tickets were sold for A to La Poeme Ballet (APP) Summer Dream (AN) and this gains GT more profit (DEV) Income (K) Theatre tickets are likely to Which means that the be a luxury good (APP) higher the income the more tickets GT will sell (AN) and the more profit GT will make (DEV) 2(d) Recommend whether GT should employ Nick or Portia for the position 11 of Theatre Manager. Justify your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument in context Developed recommendation 6 based on argument in context A recommendation / evaluative statement based on 5 argument in context Shows understanding Argument based on factor(s) of two factors of 4 affecting the selection of Nick 4 selection in context and Portia Shows understanding Argument based on factor(s) of one factor of 3 affecting the selection of Nick 3 selection in context or Portia Limited analysis of factor(s) Shows knowledge of 2 affecting the selection of Nick 2 two factors of selection and Portia Limited analysis of factor(s) Shows knowledge of 1 affecting the selection of Nick 1 one factor of selection or Portia No creditable content 0 Content Nick • Experience in the sector (three years for a similar business) • A-Level in Business – helps with the admin • Organised and efficient – helps with the admin • No management experience – so will he be able to do the job? • May not stay for long Portia • Eight years of experience in a bank – helps with finance • Good sense of humour – likely to help in job • Likely to stay for a long time • No formal qualifications – but is this made up for by the bank experience? • Late for the interview – does this suggest she is disorganised – however worked for the bank for eight years 2(d) Examples of how an answer could develop K APP AN DEV EVAL Experience Nick has That could Leading to a Nick is the (K). appropriate mean that better better person theatre GT has to chance for to employ experience, pay less GT to make (EVAL) which training profit (DEV) because means he costs if they experience in knows what hire Nick a theatre is to do (APP). (AN). more important than personality in a job that requires administration and accounting Personality Portia has a Which may Which may (EVAL). (K) good sense mean that lead to an However, this of humour GT attracts increase in might depend making her more visiting revenue for on how easier to theatre GT (DEV). complex the work with companies accounting is (APP). (AN). as Portia’s banking experience might make her the better employee (EVAL).

Question 8

Tin Mines (TM) TM is a private limited company in the primary sector. Tin is found underground and is extracted by mining. TM operates seve…

Accepted Answer

2(a)(i) Define the term ‘primary sector’ (line 1). 2 Knowledge Marks B Provide to secondary / manufacturing business / first stage of 1 production / example A Extraction or collection of natural resources / raw materials 1 No creditable content 0 Indicative content AO1 Knowledge and understanding Industry involved in extraction/collection – of natural resources (e.g. farming, mining, etc.). First part of the supply chain/provide to secondary/ manufacturing process. A correct definition should include: • Extraction of natural resources/raw materials • First sector/stage of production Content Exemplar Marks Rationale Extraction of natural resources (A), e.g. 2 A + B tin mining (B) Extraction of raw materials (A) in order 2 A + B for production and manufacturing to happen (B) First stage of production, e.g. mining 1 B only Collection of raw materials 1 A only 2(a)(ii) Explain the term ‘market’ (line 19). 3 Award one mark for each point of explanation: Knowledge Marks C Example or some other way of showing good understanding, e.g. sum total of buyers and sellers interact 1 to exchange goods and services for a price/the interaction between price, demand and supply in an area/region B Buyers and sellers interact 1 A (Place) where goods/services are sold 1 Indicative content AO1 Knowledge and understanding Consumers who want a product/service / the demand for a product/service (1) from different types/groups/segments of consumers (1) who are willing/able to pay for it (1) in the area or region considered. The term ‘market’ has a number of different meanings. Any legitimate definition can be used. The most common definition (as a means of trade) is likely to include: • A system/place/facility whereby products are bought (1) and sold (1) • Where businesses and consumers (1) trade (1) However, other definitions may include: Market as a group of potential customers for a product: • The customers/consumers (1) who may potentially purchase a product (1) • The businesses (1) which are competing to sell a product (1) • The group of people (1) to whom the business is trying to sell (1) AO2 Application Application of a market to a business, such as: • an example of a market • the interaction of supply and demand in a market • an example of the agents in a market • area/region, e.g. could be local, national, international, virtual, physical • sum/total of all buyers and sellers/consumers/producers • market can exist without agents meeting 2(a)(ii) Content Exemplar Marks Rationale Where consumers buy goods and 3 A correct definition with services and businesses sell goods and an example services (A+B). Markets tend to be in specific groups, e.g. McDonalds sell in the fast food market (C) Where buyers and sellers (B) come to 2 A correct definition trade (A) Where goods and services (A) are 2 A correct definition exchanged (B) The market is a group of businesses (B) 1 An idea of the market (from the businesses’ point of view) but not selling/competing 2(b)(i) Using the information in Table 2.1, calculate the value of the opening 2 balance (X) for 2022. Rationale Marks Correct answer, with or without working 2 Attempt/correct approach/method 1 No creditable content 0 Content X + 0 – 60 – 0 = –80 X = – 80 + 60 Opening balance = –$20m accept –20 Common incorrect answers Exemplar Marks Rationale (20) 2 Correct answer – $ or million not needed 20 1 Minus sign missing X – 60 = –80, 1 Mark for attempt, miscalculation shown X = 140 from working out 2(b)(ii) Using the information in Table 2.1, calculate the value of the sales (Y) for 2 2026. Rationale Marks Correct answer, with or without working 2 Attempt/identifies correct figures/correct method 1 No creditable content 0 Content 5 + Y – 0 – 15 = 240 (1) Y = 240 – 5 + 15 Y = 240 + 10 (1) Sales = $250m accept 250 Common incorrect answers Exemplar Marks Rationale 250 2 Correct answer – $ or million not needed 5 + Y – 0 – 15 = 240 1 Correct method 2(c) Explain one use of the cash flow forecast for TM. 2 Level Knowledge and Application Marks Explanation of one use of a cash flow forecast in 1(APP) 1 context 1(K) Identifies one use of a cash flow forecast 1 0 No creditable content 0 Indicative content AO1 Knowledge and understanding Uses of a cash flow forecast: • identifies potential cash shortfalls – if a business runs out of cash and is able to obtain new finance, it will become insolvent • to measure the financial performance of the business • makes sure the business can pay debts/bills • identifies potential problems with customer payments • allows better management of a business’s cash • to give information to other stakeholders, e.g. banks • to identify potential shortfalls in cash balances in advance – ‘early warning system’ A cashflow forecast does not forecast profit/loss. AO2 Application Application to QF, including: • expansion • use of numbers from Table 1.1 • opening of new mine • answer to 1(b)(i) (OFR) Example of how responses should be marked. Identification of a way Application (K –1 mark) (APP – 1 mark) Helps in future planning as in 2023, where a negative balance indicates cash flow issues so managers can seek a source of finance May be used to get a bank loan as TM will have $240m cash in 2024, the bank will be willing to lend to TM 2(d) Analyse two methods of recruitment that TM’s Human Resources 8 Director can use to recruit employees for the new mine. Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Shows understanding 4 Good analysis of two 4 of two methods of methods of recruitment recruitment in context of new mine employees 2a Shows understanding 3 Good analysis of one 3 of one method of method of recruitment recruitment, in context of new mine employees 1b Shows knowledge of 2 Limited analysis of two 2 two methods of methods of recruitment recruitment 1a Shows knowledge of 1 Limited analysis of one 1 one method of method of recruitment recruitment 0 No creditable content Indicative content AO1 Knowledge and understanding Knowledge of methods of recruitment, including: • employment agencies • online recruitment • internal • external • job advertising, e.g. newspaper, flyers, etc. • recruitment events AO2 Application • Seven mines in country C. • Different types of employees required such as miners, construction, managers, etc. • New mine will be in a remote area. • High local unemployment. • Average incomes are low. • Locals may be unhappy with development. 2(d) AO3 Analysis • Employment agencies – reduces hiring time, may cost less although can be expensive, culture may not fit, may have a pool of potential recruits, communication difficulties, quantity v quality. • Online recruitment – larger potential pool, quick, cheap, flexible, reduces paper files, informal, lots of competition as hope to recruit from local community where incomes low may miss some potential applicants. • Internal – move from one of existing mines, already trained, know culture, known to management but may not want to move to remote location and will still mean vacancies in mines left. • External – from local community, pool of unemployed but may lack required skills/need more training adding to costs. Examples of how an answer could develop and how it should be annotated. K APP AN DEV External from country C easier to recruit this will increase the recruitment since people have and train reputation of TM as low income and they are getting high most of their unemployment employees from the local area. However, this could take a long time Internal from within the easier to recruit they will already be recruitment other seven mines as they will be skilled and will not in country C known to the need much training. company However, this will lead to vacancies in those other mines Recruitment pick the people can advertise to training costs will be agency with the right a greater lower and will lead mining skills for the number to efficient and job effective mining before it runs out Advertising in a mining where highly however, this might vacancies magazine skilled not be possible in engineers or the local area where miners will see low incomes and it high unemployment means local people will not see the advert ARA 2(e) Evaluate possible conflicts between the aims of two of TM’s 11 stakeholders. Knowledge and Analysis and Application Evaluation (4 marks) Marks (7 marks) Marks Annotation Annotation A justified judgement based on a developed + + analysis of two or more 7 possible conflicts EVAL EVAL EVAL between stakeholder aims of TM A developed judgement based on a developed + analysis of two or more 6 possible conflicts EVAL EVAL between stakeholder aims of TM A basic judgement based on a developed argument of at least one 5 EVAL possible conflict between stakeholder aims of TM Shows Developed analysis of + + understanding of two or more possible 4 4 two stakeholder APP conflicts between DEV APP DEV aims, in context stakeholder aims Shows Developed analysis of understanding of one possible conflict 3 3 one of stakeholder APP between stakeholder DEV aims, in context aims Limited analysis of two Shows knowledge K + possible conflicts of two 2 + 2 AN K between stakeholder AN stakeholders’ aims aims Shows knowledge Limited analysis of one of one 1 K possible conflict between 1 AN stakeholder’s aim stakeholder aims No creditable content 2(e) Indicative content AO1 Knowledge and understanding Knowledge of the aims of stakeholders, including: • local community – nice place to live/work, clean environment • managers – high pay, status, perks • employees – high pay, holidays, security • suppliers – security, sales, profit • customers – low prices, quality product, good service • owners – profit, dividends • government – welfare, tax revenue, economic growth, low unemployment Note: Aims may be implied rather than explicitly state that it is an aim. AO2 Application Application of stakeholder aims to TM: • local community, e.g. environmental impact, pollution of water supplies, employment/unemployment, living standards • employees/recruits, e.g. training, skilled work, higher incomes • manufacturers of electric vehicles / batteries / mining equipment, etc. Note: Take reference to TM if using as a proxy for owners. AO3 Analysis Analysis of conflicts between stakeholder aims may include: • government and local community – higher employment/tax revenue so likely to give planning permission, whilst community concerned about pollution of water, buildings in local area or longer term impact when mine closes • employees and owners – employees want higher payments, job security, permanent contracts – all increase costs and conflict with owner’s aims to maximise profits/keep costs low • suppliers and owners – both aim to maximise profits so owners want low priced supplies whilst suppliers would like higher prices AO4 Evaluation • A judgement may consider the importance of conflict, the potential impact of conflict, whether some stakeholders are more important than others and the need to prioritise stakeholders’ interests and conflicts. • A judgement over the relative effects on TM of the stakeholder conflicts. • Elements that the judgement could depend upon, including how this may vary over time and in relation to different specific business decisions. 2(e) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Shareholder TM is a they want to exploitation The conflict of s want to private exploit as of minerals the aim for obtain high limited much as they from the increasing profits (K), company can from the ground will output would local ground to pollute the highly conflict community obtain higher local water with the aim of aims for a profits, but supplies, the community clean this conflicts damaging (eval) since environment with the local the the mining of (K) community’s environment tin comes with aim for a for future negative clean generations. externalities. environment But reducing This will also the pollution increase the will reduce conflict with the profits, the so increasing shareholders’ the conflict aim of high between the profits (eval of two aims two conflicts) as they may face fines or be required to clean up the pollution or face being shut down (justified judgement of two conflicts ) ARA

Question 9

Van Man (VM) Obi is a sole trader who operates a van service. He used to be employed by a similar business but realised that he likes to be…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘sole trader’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Must be distinct from other ownership types Indicative content AO1 Knowledge and understanding • A business in which one person provides the finance and in return has full control of the business and keeps all the profits. • An only trader has all the risk / unlimited liability. • An only trader pays income tax. Exemplar Marks Rationale A person who invests all the capital and 2 Correct definition has unlimited liability The only owner of the business who 2 Correct definition invests all the capital The only owner of the business/owns a 1 Partial knowledge business by themselves A person who owns the business 1 Partial definition The owner of a business 1 Implied ‘only’ An owner operator 1 Implies a single person Finance may be limited 0 Limited for all business structures ARA 1(a)(ii) Explain the difference, for a business, between price and cost. 3 Award one mark for each point of explanation: Rationale Marks Understanding of the difference between a price and a cost 1 Understanding of a cost 1 Understanding of a price 1 Indicative content AO1 Knowledge and understanding • A price is an amount paid by a customer / the amount a business sells/charges for its product/service. • A cost is an amount paid by a business / to a supplier. • A cost is the amount of money used to produce the goods/service. AO2 Application Application of the difference between a price and a cost, such as: • Businesses receive the value of a price (from the customer) but pay the value of a cost (to a supplier). • The difference between price and cost is profit. 1(a)(ii) Knowledge of a price and a cost may be assumed from application. Exemplar Mark Rationale Price is more than its cost 3 The simplest form of answer The mark-up/the profit margin/profit 3 Simplest form of answer A price is the amount paid by a 3 All three elements customer, a cost is the amount paid for clear raw materials used in the manufacture and the difference is the profit made. A cost is the amount the raw materials 3 All three elements cost, whereas the price is the amount a clear business charges its customers for the finished product. Cost is the expenses incurred in making 3 All three elements a product, whereas price includes the clear profit set by the seller. Cost is the expenses incurred in making 2 No difference shown a product. Price is the amount a business charges its customers for the finished product. ARA 1(b)(i) Calculate the profit that Obi will make from a customer who hires two 3 vans for three days. Rationale Marks Correct answer with or without correct working or $ 3 Correct calculation of TR and TC 2 Formula or correct calculation of TR or correct calculation of 1 TC No creditable content 0 Indicative content (Total) revenue – (Total) cost = profit Total revenue = ($250 + $225 + $225) × 2 = $1400 Total cost = ($170 + $170 + $170) × 2 = $1020 $1400 – $1020 = $380 Profit = $380 OFR If candidates continue to discount 10% beyond the second day, then award as a correct answer. Common incorrect answers Answer Marks Rationale $330 3 Continued use of 10% discount $190 2 Only calculated one van – incorrect final answer but correct formulae implied by use of figures $165 2 Only calculated one van – incorrect final answer but correct formulae implied by use of figures 1(b)(ii) Explain one factor which may affect the demand for Obi’s services. 3 Level Knowledge and Application Marks 2b Explanation of one factor in context 3 (APP+APP) 2a (APP) Identification of one factor in context 2 1a (K) Identification of one factor 1 0 No creditable content 0 Indicative content AO1 Knowledge and understanding Knowledge of a factor affecting demand may include: • (perceived) waiting/lead time • (perceived) price • population • income level • consumer tastes and preferences • level of competition • advertising AO2 Application • Price – Obi charges $250 – how do Obi’s prices compare with competition? • Population – direct correlation between number of people wanting to move and the population – Obi’s service is likely to be required more often if it is located in an area with a high population. • Income levels – higher income likely to move household/bulky items more often – and use a service as opposed to doing it themselves. • Consumer tastes and preferences – service based so potential customers will look for reviews – Obi might have good reviews of his service from past customers. • Level of competition in the local/national market – Obi used to be employed by a similar business – therefore some competition. • Advertising – a service sector business and likely to be competitive – customers need to know about the service to book it. 1(b)(ii) Application (APP) is likely to come from the context, with developed application (APP+APP) from further use of that context. Example of how responses should be marked. Identification of a Application Developed application way (APP – 2 marks) (APP + APP – 3 marks) (K – 1 mark) Competition from the other who may reduce prices to business he was attract Obi’s customers employed by Income level is $250 per day too expensive ARA 1(c) Recommend whether Obi should purchase Van A or Van B. Justify your 11 recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument(s) in context Developed recommendation 6 based on argument(s) in context An evaluative 5 statement/recommendation based on argument(s) in context Shows understanding 4 Argument based on Van A 4 of factor(s) affecting AND Van B in context Van A AND Van B in context Shows understanding 3 Argument based on Van A 3 of factor(s) affecting AND Van B in context Van A OR Van B in context Shows knowledge of 2 Limited analysis of Van A 2 two or more factors AND Van B affecting decision making Shows knowledge of 1 Limited analysis of Van A OR 1 one factor affecting Van B decision making No creditable content Arguments for Van A on one side and Van B on the other to show arguments for each Indicative content AO1 Knowledge and understanding Knowledge of factors affecting decision making, including: • cost(s) • timescale • revenue • utility 1(c) AO2 Application 11 Application may include: • sole trader • main business is based on the use of vans • already owns three vans • eight full-time employees • demand is growing fast • use of Table 1.2 AO3 Analysis Analysis of Van A may include: • lower purchase cost • higher maintenance costs • shorter lifespan • lower (slightly) insurance costs • high level of reliability • are other qualitative elements relevant? Analysis of Van B may include: • higher purchase cost • lower maintenance costs • longer lifespan • higher (slightly) insurance costs • possibly less reliable based on customer review • use of colours may provide an advertising benefit • speed of manufacturer response to break down is good • faster – may allow a speedier service (but could also have legal issues) • are other qualitative factors relevant? AO4 Evaluation • A recommendation about whether Ralph should choose Van A or Van B. • A judgement over the relative suitability of the vans. • Elements that the recommendation/judgement could depend upon, including availability of finance/amount of finance, how long Obi keeps his vans for on average, length of warranty, past reviews, whether he trusts his employees not to speed, fuel economy as a factor. • Weighing up of the relative impacts on Obi of the vans. 1(c) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Cost VAN A – Reduces Increases Should buy boring but direct costs profit margins Van A fuel efficient of petrol Because Lifespan1 VAN B – Capital cost Helps long- lower direct lasts 9 years spread over term costs more a longer time budgeting important than long- term budgeting Even though the image may be impacted ARA 1(d) Analyse two factors which may influence the source of finance that Obi 8 chooses for the new van. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Good analysis of two 4 of two factors which factors which may may influence the influence the source of source of finance in finance in context context 2a Shows understanding 3 Good analysis of one 3 of one factor which factor which may may influence the influence the source of source of finance in finance in context context 1b Shows knowledge of 2 Limited analysis of two 2 two factors which may factors which may influence the source of influence the source of finance finance 1a Shows knowledge of 1 Limited analysis of one 1 one factor which may factor which may influence the source of influence the source of finance finance 0 No creditable content Indicative content AO1 Knowledge and understanding Knowledge factors affecting sources of finance, including: • size/structure of business • cost of finance • costs of the business • flexibility • need to retain control • use of the finance • level of existing debt AO2 Application • Sole trader • Main business is based on the use of vans • Already owns three vans • Eight full-time employees • Demand is growing fast • Use of Table 1.2 – may be based on recommendation made in Q.1(c) AO3 Analysis • Speed of acceptance – requires a source of finance that will allow immediate purchase – capitalise on the increased demand – • Running costs – some sources of finance may allow this to be included (such as leasing or hire purchase) – reduces variable outgoings • Flexibility – Obi may need to repay over the lifetime of the van, or he may be able to reduce the cost of finance and repay earlier if demand remains high – can manage cashflow • Need to retain control – Obi likes to be in control so is unlikely to want a source of finance that means he loses control (such as taking a partner or selling shares) – • The use of the finance – acquiring a van – some sources of finance are more suited to longer term options (such as bank loans) or the acquisition of a capital item that loses value (such as leasing or hire-purchase) • Level of existing debt – Obi used his savings to set up VM so he has no debt – has to use external sources Examples of how an answer could develop and how it should be annotated. K APP AN DEV Cost of finance $30/40k loan Higher loan = Reduces larger cashflow/profits repayments Level of Savings used Means has to use Which may existing debt so no debt external sources involve loss of control ARA

Question 10

Priya’s Bookshop (PB) Priya lives in town R which is situated in beautiful countryside with nice walks nearby. Many tourists visit town R. …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘market segmentation’ (line 25). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: Do not accept ‘segment’ as a ‘split’ term A correct definition should cover the following:  splits a market into different groups  segmentation could be by age/gender/geographic/demographic or each group has similar characteristics Exemplar Rationale Marks Looks at different groups e.g. Both elements covered 2 by sales value/volume Splits a market into groups, Both elements covered 2 each of which has similar characteristics Splits a market into groups An understanding of 1 segmentation (no expansion) Splits a market by sales Only one element of the flow 1 value identified Segments a market Tautology 0 ARA 1(a)(ii) Explain the difference between cash and profit (line 23). 3 Award one mark for each point of explanation. Point Explanation Marks C* Cash is the revenue a business has after sales 3 while profit is revenue minus expenses B Profit is revenue minus expenses 1 A Cash is the physical flow of money in and out of a 1 business Note: The difference does not need to have clear definitions – implied knowledge is acceptable when in the context of a difference Content could come from:  Cash is the physical flow of money in and out of a business  Cash is the capital used to pay for day-to-day costs  Cash is an example of revenue, ignoring any expenses  Profit is revenue minus expenditure  Profit is the difference between revenue and costs  Profit is calculated at the end of a trading period  Profit is shown on the Income Statement Exemplar Rationale Marks Cash is the revenue a Shows a difference 3 business has after sales while profit is revenue minus expenses Cash is more liquid than Shows a clear difference 3 profits Cash is a current asset, but These are not definitions but 3 profit is on the Income there is a clear difference Statement They appear on different A clear difference 3 accounting statements Cash is the revenue a Both elements correct but a 2 business has after sale. Profit difference not shown is revenue minus expenses Splits a market into groups An understanding of 1 segmentation (no expansion) ARA 1(b)(i) Refer to Table 1.1. Calculate PB’s forecast closing balance in month 3 2 (X). Rationale Marks Correct answer (with or without working or $) 2 Correct formula/identifies correct figures 1 No credible content 0 Content Closing balance = opening balance + inflows – outflows (1) Opening balance –1000 add inflows 11 000 minus outflows 13 000 (1) X = – $3000 (accept –3000, (3000) or –3) (2) Common incorrect answers (2000) No marks no working 3000 No marks No working –1000+11000 1 mark for calculation –13000 = 3000 11000 – 13000 1 mark one mistake (not used opening = –2000 balance) OFR for last stage 1000 + 11000 0 mark Incorrect opening balance and – 13000 = incorrect answer 3000 1(b)(ii) Analyse two benefits to Priya of producing a cash flow forecast. 8 Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Shows 4 Developed 4 understanding of analysis of two two benefits in benefits in context context 2a Shows 4 Developed 3 understanding of analysis of one one benefit in benefit in context context 1 Shows 2 Limited analysis 2 knowledge of two of two benefits benefits Shows 1 Limited analysis 1 knowledge of one of one benefit benefit 0 No creditable content Note: As the business has started trading, using the CFF either before or after starting trading is acceptable. Knowledge of benefits may include:  Anticipate potential shortfalls in cash  Keep track of payments  Understand the impact of future plans  Manage surplus cash  Track whether revenue/spending is on target Application may include:  Buying and selling new and used books  Priya applied for a council grant for entrepreneurs willing to open a bookshop; grant application included a CFF  Any information from Table 1.1  Used to decide promotional methods 1(b)(ii) Analysis of benefits may include:  PB is a new business and having a cash flow forecast will have helped/will help her to receive the grant – which allowed for initial survival  Allows/ed Priya to plan ahead and manage the budget more effectively e.g. the deficit in the first few months – to avoid overdraft fees in months 2 and 3  Many small businesses fail due to a lack of cash flow, so this allows/ed Priya to arrange an overdraft for months 2 and 3  Allows Priya to manage cash flow, e.g. the deficit in months 2 and 3 could be overcome through reductions in cash outflows e.g. marketing. ARA 1(c) Explain two entrepreneurial qualities that Priya has shown. 4 Point Explanation Marks App+App Two entrepreneurial qualities explained in context 4 App One entrepreneurial quality explained in context 3 K+K Two entrepreneurial qualities identified 2 K One entrepreneurial quality identified 1 Content and context could come from:  Motivated – wants to start her own bookshop  self-disciplined – financial discipline by creating a cash flow forecast  risk-taking – has invested $15K of own capital  creative – making appropriate marketing materials for 0 to 15-year-olds  leadership – will manage up to 3 employees  confident – starting own bookshop by risking $15K of own capital  initiative – has applied for a $20K grant Exemplar Mark Rationale She applied for a $20K grant which 4 Two applied shows initiative and is motivated to start qualities explained her own bookshop Priya showed initiative by researching 3 Applied quality and applying for a $20K grant explained Initiative and leadership 2 Two entrepreneurial qualities identified Initiative is taking an opportunity 2 Two generic available to you and risk taking is taking qualities explained a decision which could have negative consequences Initiative is taking an opportunity 1 Generic quality available to you explained 1(d) Recommend suitable promotional methods that Priya could use to 11 raise awareness of PB in town R. Justify your recommendation. Knowledge and Marks Analysis and Marks Application (4 marks) Evaluation (7 marks) Justified judgement(s) 7 that follows on from a discussion based on two promotional methods relevant to PB Recommendation(s) 6 that follows on from a balanced argument relevant to PB A simple 5 recommendation based on a balanced argument relevant to PB Shows knowledge of 4 A balanced argument 4 two promotional based on analysis of methods in context two promotional methods with context Shows knowledge of 4 Argument based on 3 one promotional analysis of one method in context promotional method with context Shows knowledge of 2 Limited analysis of two 2 two promotional promotional methods methods Shows knowledge of 1 Limited analysis of one 1 one promotional promotional method method No creditable content Knowledge may include:  Above and/or below the line promotion with some explanation  BTL examples: direct mail, in-store offers, direct selling, social media, trade shows, catalogues, sponsorship, branding and merchandising and targeted search engine marketing  ATL: examples: radio, television, billboards, magazine and newspapers 1(d) Application may include:  New bookshop  Likely to be lots of competition in ‘booktown’  Any financial information from table 1.1  Using market segmentation  Any market research information from table 1.2 Analysis may include:  BTL is cheaper than ATL and as PB is new and cashflow is restricted/poor – may not be able to survive/pay bills – In-store offers; can offer 15% discount on books which would lead to increased revenue – increased profit  ATL hits a mass audience – but too expensive – Local radio; can advertise to target audience of 16–64 which increases sales of books – raises profile/brand awareness  High competition means tourists are likely to impulse buy based on price so in-store and personal selling – may be useful to provide purchasing incentives so more sales Evaluation may include:  A recommendation for Priya based on arguments in context as to which promotional methods Priya could use  A judgement over which method is/are most suitable  An evaluation on the level of argument  What the judgement/evaluation may depend on: target audience, type of book, price sensitivity, advertising elasticity, competition K APP AN DEV EVAL in store To Which As Priya should use offers persuade increases customers both instore offers tourists to sales may be and social media buy price As social media sensitive can help drive due to traffic and in store competition offers can convert browsers. Social To As it is a To build PB However, it media showcase cheap brand depends on book method and profile whether Priya’s signings easily target audience is updated likely to social media and how diligent she is in updating her profile.

Question 11

Move Well (MW) MW is a business that organises the transportation of people’s possessions when they move from one house or apartment to ano…

Accepted Answer

2(a)(i) Define the term ‘corporate objectives’ (line 3). 2 Knowledge Marks Reference to long term goals/over a period of time or 2 focus/direction or helps form strategic business plan / should be SMART Reference to goals/aims/targets 1 No credible content 0 A correct definition could cover the following: • The (long term) goals of a company • Give focus and direction to the business. Exemplar Rationale Marks The long-term goals of a Two elements covered 2 company Goals of a company giving Two elements covered 2 direction to employees Gives focus to a business A simple statement 1 Company goals An understanding but too vague 1 Aims Vague but alternative for 1 objectives 2(a)(ii) Explain the term ‘internal growth’ (line 3). 3 Award one mark for each point of explanation Point Knowledge Marks C Example or some other way of showing good 1 understanding – by means of opening new branches, shops, factories. Contrasts with external (takeovers, mergers etc.) B From within – organic 1 A Expansion of a firm/business. 1 Content: Internal/organic growth is when a business uses its own funds to reinvest in itself and increase the capital. Exemplar Rationale Marks Increase of the business scale All three elements 3 (A), from within (B), does not involve external parties such as mergers (C) Expansion of a business, from All three elements 3 within, which can be slow when compared with external growth through a merger Expansion of a business, from All three elements 3 within, which requires investment to open new branches Expansion of a business, from A and B 2 within, which can take a long time and requires investment Slow growth of a business. B only 1 Expansion of a business Identified key themes only, no 1 real understanding Increase market Not necessarily growth as e.g. 0 share/employees market share could increase because of successful promotion without growth 2(b)(i) Refer to Table 2.1. Calculate the forecast profit margin for year one. 3 Rationale Marks Correct answer (with or without formula or %) 3 Correct calculation of profit 2 Correct formula 1 No credible content 0 profit  100 sales revenue Profit = 110 – (50+20) = 40 40 110 = 36.36% allow 36, 36.3, 36.4 (3) Common answers Answer Mark Rationale 36.3% 3 Correct answer 110-70 = 40 2 Correct calculation of profit 40/110 2 Correct calculation of profit Profit/sales revenue  100 1 Correct formula Profit/sales revenue 0 Incorrect formula (no  100) 2(b)(ii) Explain one method MW could use to improve its cash flow. 3 Level Knowledge and Application Marks 2 (APP) Explanation of one method to improve cash flow in 3 context 1b (K+K) Explanation of one method to improve cash flow 2 1a (K) Identification of one method to improve cash flow 1 0 No creditable content 0 • Reducing costs – to reduce outflow • Increasing revenue – to increase inflow • Bank overdraft • Debt factoring Context is likely to come from: • The time between booking and receiving revenue • Higher costs due to inefficiency in systems • Take a deposit at the time of booking ARA Exemplar Mark Rationale Take a deposit at the time of booking a 3 Explanation in context move to increase revenue Reduce costs by finding a cheaper 2 Explanation of method supplier Get a bank overdraft 1 Identification only 2(c) Analyse two benefits to MW of introducing process innovation to update 8 its information systems. Level Knowledge and Marks Analysis Marks application Annotation 2 Understanding of 4 Developed 4 two benefits of analysis of two process benefits of DEV APP innovation in + process + context APP innovationcontext in DEV Understanding of 3 Developed 3 one benefit of analysis of one process benefit of process innovation in innovation in context APP context DEV 1 Knowledge of two 2 Limited analysis of 2 benefits of two benefits of AN process K+ process + innovation K innovation AN Knowledge of one 1 Limited analysis of 1 benefit of process one benefit of innovation process K innovation AN 0 No creditable content 0 ARA Indicative content AO1 Knowledge and understanding • Information – keep up-to-date, • Time saved • Increase cash flow • Reduce costs • Increase quality • Increase efficiency • Ease of access to information AO2 Application • Wants to achieve internal growth • Many locations in country Q • Successful business • Growth affecting cash flow 2(c) • Want to locate to other countries • Want to achieve cost savings • Current system uncoordinated • Use paper customer records • 3 different computer-based systems • Records not kept up to date • Need to improve cash flow AO3 Analysis • Information – keep up-to-date, easier to co-ordinate • Time saved – quickly find the correct information • Increase cash flow – Decrease the time between booking and receiving revenue • Reduce costs – improve profit/help fund expansion 2(d) Evaluate the factors that John needs to consider before opening the 11 new location in country P. Knowledge and Marks Analysis and Marks Application (4 Evaluation marks) (7 marks) Annotation Annotation A justified 7 judgement on the + + importance of each factor EVAL EVAL EVAL A judgement on the 6 + importance of each factor EVAL EVAL An evaluation 5 statement of the given arguments of two factors in context EVAL Understanding of + 4 Developed analysis 4 + two factors in of two or more context APP APP factors in context DEV DEV Understanding of 3 Developed analysis 3 one factor in of one factor in context APP context DEV Knowledge of two + 2 Limited analysis of 2 + factors K K two factors AN AN Knowledge of one 1 Limited analysis of 1 factor K one factor AN No creditable comment 0 Indicative content AO1 Knowledge and understanding • Language barriers, • Costs, • Opportunities, • Competition, • Available resources • Infrastructure • Communication 2(d) AO2 Application • Growth in housing demand in other countries. • Business successful in the past • Decline in sales in country Q • Fewer people moving in country Q • Each city location made a loss last year • Requires good transport infrastructure • Tracking vehicles requires a good communication system AO3 Analysis • Expensive to set up operations in another country, can MW afford it? • Might be a competitive market so hard to break into • Might be legal barriers such as licence requirements • Will require employees in the new country adding to expense • Important to consider culture of new country – will it be a good fit for MW? AO4 Evaluation • Inefficient operation – should they expand internationally if own business inefficient • Will need to spend a lot on infrastructure in another country, can they afford it if made losses last year • Inefficient systems could be a major issue when trying to coordinate internationally • But declining market in country Q • Need to research carefully before making a decision • Will take a long time to establish ARA

Question 12

Office Furniture Designs (OFD) Markus is an entrepreneur and is planning to set up a private limited company called OFD in four weeks’ time…

Accepted Answer

1(a)(i) Identify one quality an entrepreneur needs for success. Indicative content Identification of a quality may include:  Creativity  Innovation  Risk-taking  Effective communicator  Ability to negotiate  Confidence  Determination  Hard-working. Accept all valid responses. Question Answer Marks 1(a)(ii) Explain the term opportunity cost. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of opportunity cost may include:  Opportunity cost is the benefits forgone/lost of the next best alternative/when a decision is made.  What is lost when a decision is made. AO2 Application Limited application applies knowledge of opportunity cost to a  choice/decision OR to the lost benefit. Developed application + applies knowledge of opportunity cost to a  choice/decision AND to the lost benefit. Application can be made to Markus/OFD or any other scenario/context/business/person. Accept all valid responses. 3 Question Answer Marks 1(a)(ii) Exemplar and annotations Mark Rationale The next best alternative that has been given up . For example, if Markus chooses to spend money on customer services and not marketing then the opportunity cost would have been the loss of the marketing benefits . 3 An answer which starts with the knowledge and then applies it to Markus. The next best thing forgone when making a decision . A business could choose to buy some desks , but they would miss out on being able to buy chairs . 3 Again, knowledge first, followed by application to a decision (choose to buy some desks) and to the lost benefit (not being able to buy chairs). If a business has £100 and they choose to buy inventory instead of fuel , then the opportunity cost is the lost benefit of the fuel because it has been lost . 3 A different way of answering the question. There is application of both elements of opportunity cost (the choice and the lost benefit) as well as clear knowledge of the concept by the end of the response. The next best opportunity forgone . For example, when you choose to buy a chocolate bar . 2 Clear knowledge. Some application of a choice, but not the lost benefit. What you miss out on when a decision is made . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. It is about choices that have to be made by a business, for example choosing to buy a new piece of machinery. 0 No knowledge of opportunity cost. Too vague. Question Answer Marks 1(b)(i) Refer to Table 1.1. Calculate the forecast closing balance for August 2023. Indicative content Formula to find closing balance = Net cashflow for month + Opening balance (1) Knowledge that closing balance of one month is the opening balance of the next month (written explanation or demonstration by completing the cash flow forecast) (1) June July August Cash sales 8 12 15 Credit sales 0 15 24 Total cash inflows 8 27 39 Supplies 25 32 34 Utilities 3 3 4 Rent 15 15 15 Salaries/wages 10 11 11 Operating expenses 5 7 8 Total cash outflows 58 68 72 Net cash flow (50) (41) (33) Opening balance 10 (40) (81) Closing balance (40) (81) (114) 3 Question Answer Marks 1(b)(i) Final answer for X = (114) (1) Answer = ($114 000) or –114 000 allow –114 (3) OFR applies Allow 2 marks for $114 000 or 114 000 or 114 Marks 3 marks Correct answer (including minus) (114 000) or –114 000 allow –114 and (114) Working and $ do not matter. Allow brackets or minus sign to denote a negative number. Must be three to denote the three marks. 2 marks Two of the following:  Correct formula  Correct calculation of Net Cash Flow (33) or -33  Correct identification of opening balance (81) or -81 OR An incorrect answer with one mistake allowing OFR for final stage. OR $114 000 or 114 000 or 114 (no minus) To award two marks, there must be:  Two and a OR  One , one and one 1 mark One of the following:  Correct formula  Correct calculation of Net Cash Flow (–33)  Correct identification of opening balance (–81) To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be:  One Question Answer Marks 1(b)(ii) Explain one factor that will influence Markus’ choice of a source of finance. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a factor that may affect the choice of source of finance :  Cost of finance  Flexibility  Need to retain control  The use/reason/amount needed  Level of existing debt/cashflow. AO2 Application Limited application , applies knowledge to Markus/OFD once. Developed application + applies knowledge to Markus/OFD twice. Application of a factor may include:  OFD is a new business  OFD will be a private limited company  Markus will have limited start-up funds  OFD will operate in a highly competitive market  Data from Table 1.1 3 Question Answer Marks 1(b)(ii)  Answer from Q1b(i) (OFR applies)  OFD will offer customers one month trade credit  OFD’s suppliers may insist on payment on delivery (immediate payment). Accept all valid responses. Exemplar and annotations Mark Rationale A factor would be flexibility , because OFD needs $40 000 in June but this increases to $114 000 by August . 3 Flexibility is a reasonable factor, explained in the specific context of OFD/Markus by using the data in Table 1.1. Markus may want to keep control of OFD , so he would not want to sell any of the shares of the new private limited company . 3 Keeping control is and there are two specific pieces of context based on this so two . OFD is a new business and Markus has limited start-up funds so the most important factor is how much debt he already has . 3 Although the appears first, it cannot be awarded until the has been found. However, there is obvious , so you can go back and award the . Markus chose trade credit so that he can have inventory which is vital to a new business . 2 The fact that Markus chose trade credit is irrelevant, however the use of the source of finance is . The context of new business linked to this is reasonable , but only one point of application. How much it costs because the more it costs the worse his cashflow will get. If the cashflow is poor, he may build up debts and the business might ultimately fail. 1 Knowledge of a factor. The rest of the answer is not applying it to the context, so (Not Answering Question). Markus has chosen trade credit, which may mean he can improve his cashflow in June by reducing the outgoings by $25 000. This means that the closing balance will only be ($15 000) and mean that he may only need a small overdraft . 0 Although there is some relevant context, there is no knowledge of a factor, so no marks can be awarded. Question Answer Marks 1(c) Analyse two benefits to OFD of offering induction training to all employees. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 marks 2 3–4 marks Developed analysis  Developed analysis that identifies connections between causes, impacts and/or consequences of two points.  Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Annotate the first benefit in the left-hand margin and the second benefit in the right-hand margin. 8 Question Answer Marks 1(c) Indicative content AO1 Knowledge and understanding Knowledge of the benefits of induction training (max 2 s), may include:  Understanding workplace issues  Knowing who you are working with; organisational structure  Information about basic terms and conditions, e.g. holiday entitlement  Information about the goods/services sold, e.g. desks and office chairs  IT training to help new employee use the IT system  Basic customer service training/expectations  How to ensure that the products are fit for purpose AO2 Application Max one for application in the first benefit and max one for application in the second benefit, including;  OFD is a new business (do not reward repetition of the question)  Entrepreneur  Private limited company  Opening in four weeks’ time  Business took several months to set up  Limited start-up funds  Eight employees; five employees in warehouse, three in customer service  All employees are new / undergo induction together  Two-week induction training  Competitive service  High-quality customer service  Operate in a warehouse (but does not manufacture furniture)  Sell direct to customers (online retailer). Question Answer Marks 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis.  All of the five employees are new and undergo induction together. It will help to ‘build’ the new team by helping them get to know each other so they will start to work productively quicker.  As it is a new business, the employees can agree the processes/procedures to operate and solve any potential issues before opening.  Markus is keen to offer a high-quality customer service. The induction training is an ideal time to embed a high-quality culture throughout the business.  The employees will become familiar with the technology used to operate the online retail business.  The training will motivate the employees as they will feel valued by their new employer which will encourage them to work hard.  The employees will settle in quicker as a result of the induction training, reducing labour turnover. This will save recruitment costs as Markus will not have to replace employees. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis The workers will understand the health and safety rules by spending two weeks on the induction training. The employees are less likely to have an accident which could reduce the productivity of OFD which may mean that the business is more likely to survive its first year of trading . It will improve teamwork of the three customer service assistants which may mean that the customers get better customer service, feel loyal to the business and repeat purchase . Question Answer Marks 1(d) Evaluate whether Markus needs accurate cost information before setting up OFD. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 12 Question Answer Marks 1(d) Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/ conclusion is made with limited supporting comment/ evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of cost information (max 2 s), including:  Costs are the amounts a business incurs when producing products and services.  Cost information data may be required to set up and operate the business, including pricing.  Cost information allows a business to calculate profit, profit margins, break-even etc.  There are many different types of costs: fixed, variable, direct and indirect.  A business may not have actual cost information – only estimates. AO2 Application Limited application applies knowledge of cost information to OFD once. Developed application + applies knowledge of cost information to OFD twice.  OFD is a new business / opening in four weeks  Use of data from Table 1.1  OFD will operate in a competitive market  Limited start-up funds Question Answer Marks 1(d)  Five warehouse employees  Three customer service assistants AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis.  Cost information is used to create financial forecasts. If the data is inaccurate, Markus’ predictions will be incorrect and may lead to him overspending and getting into debt.  Cost information supports the cashflow forecast which will be used for decision making. Inaccurate information will lead to poor decision making, e.g. pricing of products or applying for finance.  It is challenging to predict everything that could happen, especially for a new business. Unexpected events could have major implications for costs.  Cost information will be used to make profit predictions and monitor/improve business performance. AO4 Evaluation Annotate evaluative judgements in the left-hand margin and evaluative comments in the right-hand margin. Limited evaluation - unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context.  Relative importance of cost information – are other issues more important, e.g. potential customer demand, marketing, qualities/skills of the entrepreneur setting up the business  Accuracy depends on the Markus’ market research and business knowledge/experience. Significant events may occur that could impact the accuracy of the cost information, e.g. global pandemic  Is this the first business that Markus has set up/run?  The impact of inaccurate cost predictions may be reduced by higher-than-expected income.  The more time spent on cost predictions, the more likely they are to be accurate. However, is the benefit of accurate cost information worth the opportunity cost of the time spent?  A judgement that other factors are more important than cost information. Accept all valid responses. Question Answer Marks 1(d) Exemplar and annotations Markus needs accurate cost information so that he can accurately price his products . This is particularly important as OFD is operating in a competitive market . With accurate cost information, Markus can make sure the price includes an adequate profit margin and is not too high which could put off the business customers and reduce sales which could lead to OFD not making any profit . Therefore, Markus is highly unlikely to get his pricing strategy correct without accurate cost information and pricing is likely to be the most important aspect in this highly competitive market . However, this depends on whether Markus can obtain accurate cost information . The data can only be an estimate as OFD is a new business, and he might be better to just copy the cost and price information of one of his competitors and save the time involved in calculating accurate costs for OFD . AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question 13

Great Desks (GD) GD is a co-operative owned by all of its employees. It manufactures desks for schools, offices and home use. The products …

Accepted Answer

2(a)(i) Identify one advantage to a business of using job production. Indicative content Identification of an advantage may include:  (High) quality product  Can customise orders/wants.  Workers involved in the entire process. Accept all valid responses. 1 Question Answer Marks 2(a)(ii) Explain the term just in time (JIT). AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding. Just-in-time production minimises the time, labour, and materials in a manufacturing process. It does so by only producing goods as they are needed. The desired outcome is a streamlined production system that maintains a minimal amount of on-site raw materials, minimal wait times in the production process and small batch sizes. Knowledge of JIT may include:  Inventory control system/production system  Buying inventory occurs when needed for production rather than using buffer stock (production).  JIT conditions need to be met e.g., reliable suppliers. AO2 Application Limited application applies knowledge of JIT to  An example of inventory OR an example of when it is needed. Developed application + applies knowledge of JIT to  An example of inventory AND an example of when it is needed. 3 Question Answer Marks 2(a)(ii) Application can be made to GD or any other scenario/context/business. Accept all valid responses. Exemplar and annotations Mark Rationale Order raw materials when needed . For example, a manufacturer requires 1000 pieces of wood to produce a product would order when there is 1000 pieces of wood left .This could reduce waste and employees would know that there is not any spare materials so they can’t make mistakes. 3 An answer which starts with the knowledge and then applies it to a business context. Holding zero buffer inventories . Components for making desks will be ordered when GD needs them . This will reduce storage costs for GD . 3 In the context of the business, GD. Inventory would come just when needed , but the company may need expensive IT systems to manage orders . 2 Clear knowledge. Some application but not developed. Not keeping any inventory, just ordering when needed. . 1 A reasonable definition but no application. Question Answer Marks 2(b)(i) Refer to Table 2.1. Calculate GD’s forecast closing balance in 2025. Indicative content Responses may include: Formula/implied formula: closing balance = net cash flow +opening balance (1) Net cash flow = 9 – 12 (1) = –3 (1) Closing balance 2020 = –3 + 1 = –2 (3) Accept 2 in brackets in place of – sign OFR Marks Answer Rationale 3 marks Correct answer –2 or (2) Working and $ sign do not matter. Must be three to denote the three marks. 2 marks Both of the following:  Correct/implied formula (net cash flow +opening balance)  Correct calculation of net cash flow (-3) OR An incorrect answer with one mistake allowing OFR for final stage. OR 2 (has not included – sign) To award two marks, there must be:  Two and a OR  One , one and one 1 mark One of the following:  Correct/implied formula (net cash flow + opening balance)  Correct calculation of net cash flow (–3) To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be:  One 3 Question Answer Marks 2(b)(ii) Explain one disadvantage to GD’s employees of it being a co-operative. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a disadvantage may include:  Complex decisions = uncertainty = poor performance  Workers and worker directors might not have skills for decisions  Management roles unclear and therefore inefficiencies can occur  Unpredictable income for employees  Conflict/disagreements between employees AO2 Application Limited application , applies knowledge to GD once. Developed application + applies knowledge to GD twice.  Ownership by workers who may be more interested in high profits.  Low wages compensated by profit share.  Poor decision making by manager.  Take decisions on votes not valid arguments. 3 Question Answer Marks 2(b)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale They may have limited capital as need $2m to open their own retail shop , as the members (employees) accept low salaries and the investment may mean a lower share of profits for each of them. 3 A disadvantage using the context of opening a retail shop and that members accept low wages. They may face conflicts among members, as all have a vote, due to differences in opinions , interests or planning, especially regarding the plan to open their own retail shop or the management style of Steve . 3 Conflict is reasonable and two references to the case study for 2 s. Part of the income employees earn comes from profit- share. This may mean that the employees could face lower income if sales fall or costs rise. 2 As there is knowledge of a disadvantage so can go back and award the APP. They may lack secrecy as the affairs of the co- operative are open to all members and sometimes to the public, which may expose them to competition. 1 Lack of secrecy a reasonable disadvantage, but the rest is not specifically related to GD. They may have inefficient management as Steve, the Managing Director, spends too much time trying to make people happy rather than solving problems and responds to opinions rather than setting long-term plans. 0 Although there is some relevant context, there is no knowledge of a disadvantage specific to a co-op (inefficient management could be in any business structure), so no marks can be awarded. Question Answer Marks 2(c) Analyse two sources of finance GD could use to open its new shop. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 marks 2 3–4 marks Developed analysis  Developed analysis that identifies connections between causes, impacts and/or consequences of two points.  Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 8 Question Answer Marks 2(c) Indicative content Knowledge of sources of finance (max 2 s), may include: AO1 Knowledge and understanding.  Bank loan  Open own shop so mortgage  Owners’ capital  Sale of unused assets  Venture capital can be awarded for knowledge of any source of finance. AO2 Application Max one for application for the first source and another for application for the second source Application of knowledge of a source of finance for GD (max 2 s), including:  $2m needed  Retained profits not known but could make useful contribution if available  Few current assets (JIT) so not suitable to convert into cash  No loan payments shown so no debts  Employees are the owners, low paid  Cash balance reducing AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Analysis of sources of finance may include:  Long term loan may be suitable – but would banks lend to a co-operative?  Unlikely to be any unused assets – even if there were it may not be enough for such a large sum.  Owners/employees/members may not agree with the plan – so may not be willing to contribute more  Effect on liquidity – interest payments will increase cash outflow. and can be awarded for analysis of any source of finance. Accept all valid responses. Question Answer Marks 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar of an advantage Annotations for the first source should be placed in the left-hand margin. Retained profit Employees would receive less through profit-sharing at the end of the year . This option would allow GD to use its own money without increasing its debt or giving up any ownership. However, it would also mean that the employees would receive less profit-sharing at the end of the year, which could affect their motivation and satisfaction. Exemplar of a disadvantage Annotations for the second source should be placed in the right-hand margin. Venture capital Might be attractive to an investor as have 5 years of rapid growth with a forecast of higher demand for desks . This option would not require GD to repay or pay interest on the money received but may come with some conditions or expectations from the investors . This could limit GD’s autonomy or flexibility in running the business or pursuing its social or environmental mission. It could also create a dependency on external funding, which may not be sustainable or reliable in the long term. Question Answer Marks 2(d) Evaluate whether Steve’s management style will contribute to GD’s future success. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 12 Question Answer Marks 2(d) Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/ conclusion is made with limited supporting comment/ evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of management styles (max 2 s), including:  Democratic – The manager shares the decision-making power and authority with their employees. The manager encourages and facilitates collaboration and teamwork among the employees and allows them to have a say in how they work.  Laissez-faire – The manager gives their employees complete freedom and autonomy to make their own decisions and manage their own work. The manager provides minimal guidance and supervision and trusts the employees to perform well.  Autocratic – The manager dictates exactly what they require their subordinates to do and how they should do it. Sets targets. The manager has all the power and authority and does not tolerate any deviation or feedback from the employees.  Paternalistic – The manager acts like a parent or a guardian to their employees, providing them with guidance, support, and protection. The manager has all the power and authority, but also cares about the welfare and personal development of the employees.  Functions of management – Planning, organising, directing, controlling. Question Answer Marks 2(d) AO2 Application Limited application applies knowledge of management styles to GD once. Developed application + applies knowledge of management styles to GD twice.  There are suggestions that Steve is too democratic/laissez faire or may be described as paternalistic as wants people to be happy.  Theory Y manager  Managers need to make effective decisions and be responsive, but employees don’t think that Steve makes effective decisions.  Steve does not see threats to the business.  Steve does not make-long term plans.  Steve does not consider the merits of an argument but relies on votes of members.  Rapid growth in sales and profits over the past 5 years but negative cash flow recently  Evidence of planning as aim to open own retail shop.  Motivated employees as Steve concerned about their welfare/demotivated as evidenced by concerns about Steve’s style. AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis.  Builds good relationships – particularly as owners are the employees.  Some workers may feel that the Steve has the right approach – so feel secure as a result of this; for example, they have a vote and key role in decision making.  Suitable for GD’s highly skilled and motivated staff – but could lead to power struggles.  There is a lack of strategy for the future of the business – so there is a risk to the security and stability of GD.  If threats are not being monitored – then GD is at risk and could fail.  Motivated workers – greater productivity  Lack of long-term planning – less potential for future growth  Plans to open retail shop – evidence of planning. Question Answer Marks 2(d) AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context. An evaluation is likely to come from candidates making a judgment and justification on the effectiveness of Steve’s management style e.g. It may be suggested that the Steve need to be more ‘hands on’ and autocratic, due to the change from batch production to mass customisation. Is this suitable for a co-operative? It may result in conflict which reduces productivity, output and sales.  Any changes that might need to be made to make it more effective.  Suitability of management styles for a co-operative  In relation to the change in production process  Judgement on most likely effects on success Accept all valid responses. Question Answer Marks 2(d) Exemplar and annotations Steve’s management style seems to be a democratic one , which is a type of participative management style . This means that he values the input and opinions of his employees and tries to involve them in decision-making and problem-solving. He also tends to be flexible, adaptable, and responsive to feedback which might suit a co-operative organisation . Some of the advantages of this management style are that it can increase employee engagement, motivation, creativity, and satisfaction . It can also foster a positive work culture, where employees feel respected and valued . It can also lead to better decisions, as more perspectives and ideas are considered . However, some of the disadvantages of this management style are that it can be time-consuming, inefficient, and confusing . It can also create conflicts among employees, or between employees and managers. It can also make it difficult to implement changes or deal with crises, as there may be too much debate or uncertainty . It can also undermine the authority and credibility of the manager, if they appear indecisive, weak, or dependent on others . Therefore, Steve’s management style may not contribute to GD’s future success, unless he can balance it with other styles when needed. For example, he may need to adopt a more authoritative or persuasive style when he needs to set clear goals, communicate expectations, or motivate employees to achieve results . He may also need to adopt a more transformational or visionary style when he needs to inspire employees with a shared vision, foster innovation, or cope with change. He may also need to adopt a more coaching style when he needs to develop the skills and potential of his employees. In conclusion, Steve’s management style has its strengths and weaknesses, but it may not be enough to ensure GD’s future success. He should be able to adapt his style according to the situation, the goals, and the people involved . AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question 14

Jake’s Cakes (JC) Jake started baking cakes while at university. He baked cakes for friends’ birthdays and other celebrations. He posted pi…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one element of a business plan. 1 Identification of a business plan element may include: ( ) • executive summary • business objectives • description of the business opportunity • marketing and sales strategy • management team and personnel • operations • financial forecasts Accept all valid responses. 1(a)(ii) Explain the term variable costs. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer Limited application of one relevant point to a business context. the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content: AO1 Knowledge and understanding Knowledge of variable costs may include: • Costs that vary with output AO2 Application Limited application applies knowledge of variable costs to one of the factors: Developed application + applies knowledge of variable costs to two of the factors • Any relevant example e.g. raw materials, packaging • Increase or decrease with the production volume • Increase or decrease with the sales volume Application can be made to the source material or any other scenario/context/business/person Accept all valid responses. 1(a)(ii) Exemplar and annotations Mark Rationale Expenses that change with the level of output such as raw 3 There is developed application of raw materials for example the flour used for cakes. materials (flour) as well as clear knowledge of the concept at the start of the response. Expenses that change with the level of output such as raw 2 Knowledge first, followed by application to materials . an example Expenses which vary with output . 1 Knowledge mark. No attempt to apply. Expenses which do not stay the same 0 No link to output 1(b)(i) Refer to Table 1.1. Calculate the forecast closing balance in March 2024. 3 Indicative content: Calculation Value 3 marks Net cash flow Total cash in − Total cash out 2.7 1 mark Opening balance Closing balance (Feb) (0.5) 1 mark Closing balance Net cash flow + Opening balance 2.2 1 mark (or )3 OFR applies ONLY if calculation is explicit and correct data values used in calculation Marks 3 marks Correct answer (3) Working is not required. Must be three to denote the three marks. 2 marks EITHER To award two marks, there must be • Correct formula AND • Two and a • Correct identification of figures OR • One , one and one OR • An incorrect answer with one mistake allowing OFR for final stage. 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct identification of figures in an incorrect formula 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one of Jake’s human needs that may be satisfied by operating JC. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer Limited application of one relevant point to a business context. the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content: AO1 Knowledge and understanding Knowledge of a factor that may satisy a human need • Social connections • Challenge • Significance • Certainty • Maslow’s hierarchy of needs AO2 Application Limited application , applies knowledge of one factor that satisfies Jakes needs once. Developed application + applies knowledge of one factor that satisfies Jakes needs twice. • via followers on social media • unique cakes • creating customer designed unique cakes/orders • sole business owner/sole trader/owns 100% of business • of praise from local celebrity (sharing JC social media posts • garage conversion plan • he is an entrepreneur 1(b)(ii) Exemplar and annotations Mark Rationale Social connections via followers on social media 3 Knowledge plus two specific elements from increases pride in bakery the case study The challenge of creating customer designed unique 2 A challenge is a human need with specific cakes/orders reference to the case material once Esteem needs 1 One of Maslow’s Needs identified only Hygiene factors 0 Incorrect theory Accept all valid responses. 1(c) Analyse two benefits to JC of using digital promotion. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 2 marks 4 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is used relevant points to a • Limited analysis that identifies connections to answer the question. business context. between causes, impacts and/or consequences • Knowledge of one • Application of one of two points. relevant point is used to relevant point to a • Limited analysis that identifies connections answer the question. business context. between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 1(c) Indicative content AO1 Knowledge and understanding • Digital promotion: the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations online • Methods of digital promotion (without reference to JC) e.g. Twitter, hashtags, Facebook, YouTube Knowledge of the benefits of using digital promotion (max 2 ), may include: • wide customer reach • inform consumers and persuade them to buy. • promotional objectives: − increased sales/awareness; − demonstrating abilities/showcasing products • creating or reinforcing a brand image • correcting misleading reports • cheaper than non-digital promotion 1(c) AO2 Application Max one for application to each benefit of using digital promotion. • Jakes uses social media as a source of digital promotion • Use of website to enable customers to design and order cakes • Celebrity share of JC social media posts • Attracting potential investor with $25 000 capital offer AO3 Analysis Limited analysis candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. • (Costs) low cost and does not require the use of external agencies who may charge a fee – reduces overheads • (Viral marketing) ease to attract the target audience – brand can grow quickly and reach new markets • (Message and image) taken and uploaded regularly without the need to use marketing agencies–increases personal interaction and brand loyalty • (Allows for feedback and direct contact) improve customer loyalty – increases chance of return custom/sales Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Wide customer reach online From cake pictures on social media Attracts target audience and increases number of orders . Reinforcing brand image Of customer designed cakes Which increase the number of social media shares increases profit margins . 1(d) Evaluate whether a bank loan is the most appropriate source of finance for JC’s growth. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to the connections between judgement/conclusion is made. to answer the question. business context. causes, impacts and/or • Developed evaluative consequences. comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to that identifies • A judgement/conclusion is and/or factor(s) is used the business context. connections between made with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of Bank loans (max 2 s) • set amount • fixed period of time • fixed interest rate • requires good credit/reputation Knowledge of other internal and external sources of finance; (max 2 s) • retained earnings • owners investment • mortgage • hire purchase • overdraft • partner AO2 Application Limited application applies knowledge of appropriateness of sources of finance to DC once. Developed application + applies knowledge of appropriateness of sources of finance twice. • retention of 100% stake, not a 50% stake • $25 000 investment offered requires a 50% sale of JC • capital investment to rent business premises/a kitchen, employ staff and invest in promotion • current gearing ratio of 0 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Bank loan as an appropriate source of finance • retains full control – is able to make investment decisions in his own long term best interest • keeps all future profits for own benefit – no risk of externals hindering future expansion • liable for interest and loan repayments – may reduce cashflow which is already poor and will require an alternative short term SoF such as an overdraft or owners investment Investor as an appropriate source of finance • loss of complete ownership – may have negative implications on Jake’s motivation levels • ability to control finances would be reduced (as he would have to gain agreement from the investor on any financial decisions) – investor may not want to invest capital on non-owned property • able to invest to improve marketing/employ staff – no financial repayment risk – all future profits can be reinvested or taken as dividends Any alternative source of finance compared with the business loan/suitability for JC to be accepted AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • does JC need the investment as he was able to keep up with demand, invest in his equipment and as the closing balance is positive and growing each month? • does Jake have the necessary ability to manage the risk of an external source of finance? • the most important benefits and drawbacks of a bank loan as a source of finance • weighing up the objectives and risks of choosing a bank loan • a judgement on whether a business loan is most appropriate for JC based on the evidence 1(d) Accept all valid responses. Bank Loans means a fixed amount of money from the bank but can have high interest rates which would lead to increased costs/outflows and lower profits for the business which means he will not be able to improve his cash flow issues as shown by the negative cash flow forecast. Retained earnings can also be another type of source of finance JC can get from its profits. Which means there are no cash outflows required such as when borrowing money. This is a method that JC already used for marketing and new equipment This will allow JC to have a better cash flow but he may not have enough capital to invest into the garage conversion straight away. A bank loan is the most appropriate method as a source of finance as JC requires $15 000 so he can specifically ask for this amount from the bank to be able to reach its aim for growth. However, this also depends on whether JC is able to take a loan from the bank or not and if so whether the interest rate is affordable because if it is not affordable then the cost will increase drastically which will further affect the poor cash flow forecast negatively

Question 15

Samira’s Whiteboards (SW) Samira left school at the age of 18 in country H. She had a small amount of savings and an idea to create a flexi…

Accepted Answer

1(a)(i) Identify one traditional function of a manager. Indicative content Responses may include:  Planning/setting objectives  Organising – coordinating activities  Directing – supervising and motivating employees, commanding, leading the business/team  Controlling – measuring performance against targets Do not reward tautological answers e.g. manage employees/resources Do not reward vague answers, e.g. making decisions Accept all valid responses. 1 Question Answer Marks 1(a)(ii) Explain the term ‘working capital’. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding  Finance used in day-to-day / trading operations / to enable the business to produce its goods or services / to operate  Current assets – current liabilities AO2 Application Explanation of working capital  APP can be awarded for a second AO1 point  To pay for the running costs – bills/expenses such as staff wages  Finance trade credit periods offered to customers  Reference to short-term (less than 12 months)  Sufficient working capital is needed to ensure that the business has enough liquid assets/avoid liquidity problems Application to a context applied to SW to explain the term working capital  Examples of current assets, e.g. stock, inventory, debtors; or examples of current liabilities, e.g. bank overdraft, short- term loans, creditors  Examples of expenses/costs, e.g. staff wages 3 Question Answer Marks 1(a)(ii) Application can be made to SW or any other scenario/context/business/person. Allow application to working capital. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of working capital 1 mark Explanation Explanation of working capital 1 mark Context Applied to a business context/ business environment 1 mark 1(b)(i) Refer to Fig. 1.1. Calculate the total number of whiteboards sold between January and July. Indicative content 1 mark for the formula for the total number of units sold (words or figures) 1 mark for calculating the maximum stock level and the minimum stock level 1 mark for calculating the total number of whiteboards sold (OFR)  Total number sold = maximum stock level – minimum stock level per month  Maximum stock level = 800 + 600 + 700 + 500 2600 units  Minimum stock level = 100 + 200 + 0 + 400 700 units Answer = 1900 units (3) 3 Question Answer Marks 1(b)(i) Marks 3 marks Correct answer 1900 (units) allow 1900 Working and units do not matter. Must be three to denote the three marks. 2 marks Both of the following:  Correct calculation of the maximum stock level AND  Correct calculation of the minimum stock level OR  Identifying the number of whiteboards sold in each time period OR An incorrect answer with one mistake allowing OFR for final stage. To award two marks, there must be  Two and a OR  One , one and one 1 mark One of the following:  Correct formula for number of units sold (figures or words) OR  Correct calculation of the maximum stock level OR  Correct calculation of the minimum stock level To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be  One Question Answer Marks 1(b)(ii) Explain one cost for SW of holding inventory. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding  Knowledge of an appropriate cost of holding a high level of inventory: opportunity cost, storage costs, risk of wastage and obsolescence  Costs involved with storing the inventory before it is sold AO2 Application Explanation of a cost of holding inventory  A specific cost of holding a high level of inventory, e.g. increased insurance costs to insure the inventory, security, insuring the inventory, rent of warehouse, salaries/wages of warehouse employees  Other uses for the space used to store the inventory, e.g. additional production, retail space 3 Question Answer Marks 1(b)(ii) Context applied to SW of a cost of holding inventory  Having 500 units in stock means less working capital to spend on marketing at trade shows  Potential to have 800 units of stock if sales are poor means potential additional cost of storage space  Technology changes so the whiteboards are obsolete before they are sold  Quoting data from Fig. 1.1 (SW inventory control chart 2023)  Developing mass production facility that will increase output Application must be made to SW and cannot be generic Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of a cost of holding inventory 1 mark Explanation Explanation of a cost of holding inventory 1 mark Context Applied to a business context/business environment 1 mark Question Answer Marks 1(c) Analyse two barriers to entrepreneurship that Samira may have faced when starting up SW. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 marks 2 3–4 marks Developed analysis  Developed analysis that identifies connections between causes, impacts and/or consequences of two points.  Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 8 Question Answer Marks 1(c) Indicative content AO1 Knowledge and understanding Knowledge of barriers to entrepreneurship (max 2 marks – annotate first barrier on left and second barrier on right) including:  Lack of business opportunity/lack of differentiation  Knowledge of the market  Ability to obtain sufficient capital/finance  Cost of good locations  Lack of connections/network/guidance and advice  Competition  Lack of a customer base/marketing  Entrepreneur’s skills and qualities/inexperience of running a business AO2 Application Context applied to a barrier to entrepreneurship (max 2 marks), including:  Samira had a small amount of savings  First to market  Link to own website, trade shows and small independent retailers  Link to specific competition, such as other office stationary suppliers  Link to a lack of working capital due to high production costs  Lack of a customer base / poor marketing as only 400 sales in May. Question Answer Marks 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Impacts may include:  Poor marketing/knowledge of marketing; low working capital and/or low turnover – may limit the marketing opportunities which in turn may affect the ability to attract new custom and increase purchasing opportunities of scale  Lack of technical knowledge in developing the website may make the buying process difficult which may in turn reduce the number of purchasers  The cost of premium stands at trade shows may reduce working capital as high initial investment costs may mean she has a poor location which may reduce footfall and sales  A small customer base of 400 sales in May could lead to small profits which could in turn mean that banks are reluctant to invest if she asks for a bank loan.  A 2-week lead time means SW could run out of inventory, especially if she has many trade shows scheduled which could decrease the amount of sales and therefore profit. Accept all valid responses. Question Answer Marks 1(d) Evaluate whether Samira should accept Lara's offer to invest venture capital. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 12 Question Answer Marks 1(d) Indicative content Responses may include: AO1 Knowledge and understanding Knowledge of the features of accepting the venture capital offer (max 2 marks), including:  Venture capitalist will invest equity finance in the business/own a share of the business  Long-term source of finance  Venture capitalist can offer guidance/advice  The impact of venture capital on a business ability to grow  The relationship between sources of finance and business decisions/growth  The need to choose the correct source of finance for the short and long term business aims/growth potential  The impact of funding decisions on stakeholders and their reactions AO2 Application Context applied to features of accepting the venture capital offer (max 2 marks), including:  Little working capital  Two-week lead time for a minimum order of 500 units.  Own website, trade shows and independent retailers  She has been trading for seven months.  She has good cashflow but little working capital as production costs are high.  $100 000 VC investment into a mass production facility  A 40% share of the business Question Answer Marks 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Advantages of venture capital to SW may include:  SW will have an experienced partner to find solutions to potential problems which may be cheaper than hiring external business consultants, lowering variable costs and increasing efficiency  SW will have a fixed asset that will be able to accommodate the OS order if the product is successful, which may lower the unit cost and increase future profits Disadvantages of venture capital to SW may include:  Reduce net profits in the short term and reduces ownership stake, lead to a reduction in dividend/financial returns  The mass production facility will need to be built, which will take time; May lose first mover advantage  Contribution of the venture capitalists to decision making AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context.  A judgement about whether Samira should accept Lara’s offer to invest  What the judgement might depend upon; the timeframe that SW must satisfy their order, Samira’s appetite for financial risk, the likelihood of the product being successful in the long term,  Weighing up the arguments for organic growth vs. investment Accept all valid responses. Question Answer Marks 1(d) Exemplars for awarding evaluation L1 (limited supporting evidence) L2 (developed supporting evidence) L3 (developed supporting evidence with context) Samira should accept Lara’s offer Samira should accept Lara’s offer because it means she will have more capital Samira should accept Lara’s offer because it means she will have more capital to build the local mass production facility No investing venture capital is a bad idea No investing venture capital is a bad idea because Samira will no longer have sole responsibility for decisions No investing venture capital is a bad idea because Samira will no longer have sole responsibility for decisions such as whether to continue to sell the whiteboards on her website In the short-term accepting the venture capital will be unwise. In the short-term accepting the venture capital will be unwise as Samira will give up part of the ownership of the business. In the short-term accepting the venture capital will be unwise as Samira will give up 40% of the ownership of the business.

Question 16

Solar Farms (SF) SF is a private limited company that develops and maintains large-scale solar farms in country X. SF operates as a capital…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one quality an entrepreneur needs for success. 1 Indicative content Identification of a quality may include: • Ambitious / inner drive • Risk taker • Confident • Inquisitive • Adaptability / flexible • Resilience / persistence / determination • Innovative / creative • Communication • Leadership • Decision making • Builds trust If more than one answer is given, only mark the first, reading from top left to bottom right. Accept all valid responses. 1(a)(ii) Explain the term working capital. AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of working capital will include (max 1 mark): • Current assets minus current liabilities • Money / cash / funds / finance (to run the business) • Ability to run the business • Day-to-day / general operations / current / short-term / immediate / trading 1(a)(ii) AO2 Application Limited application applies knowledge of working capital to a business context. Developed application + applies knowledge of working capital to a business context. • Examples of short-term financial commitments, e.g. stock, salaries, utilities, suppliers, debts, financial obligations, bills etc. • Reference to current ratio and/or acid test ratio (ideals of 2:1 or 1:1) • Benefit of maintaining sufficient working capital, e.g. survival, avoid liquidation • Ways to improve working capital, e.g. use of a bank overdraft • Managing trade receivables, e.g. stopping/reducing trade credit to customers, debt factoring • Managing trade payables, e.g. taking/prolonging trade credit from suppliers • Example from a business concept Accept all valid responses. Exemplar and annotations Mark Rationale The ability to pay short-term financial obligations such as 3 An answer which starts with the knowledge high interest on bank loans and avoid liquidation and then applies it to SF (case mentions high-interest bank loans). Avoid liquidation (survival) is the second application. Cash needed to fund the day-to-day operations such 3 Again, knowledge first, followed by application to business operations (day to as paying staff salaries . day) and includes an example (salaries). Current assets minus current liabilities to measure the 2 Knowledge and explanation for one ability to pay day-to-day bills application mark. It is a measure of the cash needed to operate . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. The capital the business needs to work. 0 No knowledge of working capital. Tautological. 1(b)(i) Refer to Table 1.1. Calculate the profit variance for SF in 2024. State whether the variance is favourable or adverse. 3 Indicative content Profit variance = actual profit–budgeted profit (1 mark – formula only) Profit variance = 250 000–2 000 000 (1 mark – use of correct figures in formula) Profit variance = ($) 1 750 000 adverse variance (1 mark – correct answer (must include adverse)) Answer = ($) 1 750 000 adverse variance / 1.75 m adverse variance (3 marks – correct answer no working or $ needed) must include adverse OFR applies 1(b)(i) Exemplar and annotations Marks 3 marks Correct answer (3) Working and $ and m do not matter. ($)1 750 000 adverse or ($)1.75 m adverse Ignore + or - • Must be three to denote the three marks. 2 marks EITHER To award two marks, there must be • Correct formula AND • Two and a • Correct identification of figures OR OR • One , one and one • An incorrect answer with one mistake allowing OFR for final stage. Must have the correct variance stated for the answer given. OR • A correct variance (1.75 m) with no adverse (or incorrectly states favourable) 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct identification of figures in an incorrect formula 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one drawback to SF of using budgets. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a drawback of budgets (max. 1 mark), including: • Only as good as the figures used • Do not take into account actual market conditions / external factors • Ignores qualitative factors • Can be manipulated to show desired rather than realistic outcomes / bias • Time consuming to research / predict data • Can hinder flexibility / innovation • Less accurate in unstable times / long-term predictions • Risk of internal conflict / managers competing for resources 1(b)(ii) AO2 Application Explanation of a drawback of budgets (max 1 mark), including: • Only as good as the figures used–inaccurate data may lead to poor decision making • Do not take into account actual market conditions–competitiveness • Ignores qualitative factors–such as new managers/leaders/competitors • Can be manipulated to show desired rather than realistic outcomes – biased • Time consuming to research / predict data–opportunity cost of lost time which could be spent on more profitable tasks • Can hinder flexibility–missed opportunities to increase market share / differentiate • Less accurate in unstable times / long-term predictions–more suited to the short-term • Risk of internal conflict / managers competing for resources–hindering teamworking Context applied to SF (max 1 mark), including: • Private limited company • Capital intensive business • Bob is majority shareholder of SF • Used internal (organic) growth • The use of high interest loans to cover initial cashflow problems • Rents fields from farmers • Cost of maintenance team / 7 engineers salaries • Data from Table 1.1 • Can increase revenue by using batteries to store electricity generated by solar panels • Can sell electricity at peak times for premium prices • Needs investment into battery technology • Bob wants to retain control of SF • Cost of renting new farmland and purchasing solar panels increased significantly in 2024 • ZB is a multinational battery manufacturer • ZB wants to start a joint venture with SF • ZB will insist that SF uses ZB batteries in all future solar farms if joint venture goes ahead Accept all valid responses. 1(b)(ii) Exemplar and annotations Mark Rationale A drawback is that the use of a budget is only as good as the 3 Accurate of data is a reasonable figures used , which could lead to inappropriate decisions drawback, explained in the specific regarding SF’s five solar farms . context of SF by using data from the context. Budgeted figures are less accurate in the long-term , as 3 Reduction in accuracy over the long conditions are more likely to change which could affect SF’s plans term which could affect the business’s plans . This answer is to form a joint venture . then applied to SF for three marks in total. Future opportunities may be missed as budgets may hinder 3 Although the appears first, it cannot flexibility such as using batteries to store electricity . be awarded until the has been found. However, there is obvious , so you can go back and award the . The budget ignores qualitative factors such as new 2 Ignoring qualitative factors is . The answer includes a relevant example competitors who may affect future sales . which is used to explain the drawback , but only one mark as no application to SF’s context. It is time consuming to forecast data to produce the budget . 1 Time consuming is a relevant drawback for , but it hasn’t been explained. SF has taken out high-interest bank loans to cover initial cash flow 0 Although there is some relevant context, problems and so needs to use budgets . there is no knowledge of a drawback to SF of using budgets, so no marks can be awarded. 1(c) Analyse two limitations to SF of operating as a capital-intensive business. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Limitation 1 in the left-hand side column, Limitation 2 in the right-hand side column 1(c) Indicative content AO1 Knowledge and understanding Knowledge of limitations of investing into capital intensive operations (max 2 s), including: • High cost / expensive • Cost of financing • High maintenance costs • The need for skilled workers for maintenance • Need to train workers to use / maintain the capital equipment • The quick pace of technological change • Obsolescence of equipment • Reliance on machines that might break-down • Reduced employee motivation due to repetitive work • Lack of flexibility AO2 Application Max one for application in the first limitation and max one for application in the second limitation Application of the limitation of investing into capital intensive operations for SF (max 2 s), including: • Private limited company • Bob is majority shareholder of SF • Used internal (organic) growth • The use of high interest loans to cover initial cashflow problems • Rents fields from farmers • Cost of maintenance team / 7 engineers salaries • Data from Table 1.1 • Can increase revenue by using batteries to store electricity generated by solar panels • Can sell electricity at peak times for premium prices • Needs investment into battery technology • Bob wants to retain control of SF • Cost of renting new farmland and purchasing solar panels increased significantly in 2024 • ZB is a multinational battery manufacturer • ZB wants to start a joint venture with SF • ZB will insist that SF uses ZB batteries in all future solar farms if joint venture goes ahead 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Limitations • High fixed costs–[the 25% increase in solar panels] may require unplanned sources of possibly expensive finance–may reduce capital for future investment • Cost of financing the equipment–high interest payments will increase expenses–reducing profits • High maintenance costs–increase cash outflows–threaten liquidity/survival • Need for skilled maintenance staff–[7 engineers] may require above average wages to travel across country X–add to fixed costs and reduce profitability • Solar panels may be inefficient in 10 years compared to newest products–higher costs of operation in comparison to competition – make SF less competitive • Need to train workers to use the machinery / capital equipment–cost of training–reduced profits • The quick pace of technological change–need to purchase upgraded machinery to maintain competitiveness–high cost • Obsolescence of equipment–competitors may have newer equipment giving them a competitive advantage–reduced market share • Reliance on machines that might break down–disruption / delays to production–dissatisfied customers • Reduced employee motivation due to repetitive work–reducing efficiency–reducing profitability • Lack of flexibility–production stopped whilst machines are reset to produce different products–inefficiency Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis The high costs of initial investment Which could hinder Bob’s wish to As decisions will need to be shared as retain control part of the joint venture but it is a way of generating the additional finance needed . Obsolescence of fixed assets Which could lead to profit reducing to May lead to increased costs each below $0.25 m year to update the fixed assets and make SF less profitable . 1(d) Evaluate whether a joint venture is the most appropriate way for SF to grow. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed analysis Developed evaluation knowledge of application of that identifies • A developed judgement/conclusion relevant key term(s) relevant point(s) to connections is made. and/or factor(s) is the business between causes, • Developed evaluative comments used to answer the context. impacts and/or which balance some key arguments. question. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or • An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of joint ventures (max 2 s), may include: • Two (or more) parties • Work towards a shared task/objective • Maintain distinct identities • Can be equity or non-equity based • Shared profits/losses/responsibilities • Pool resources/skills/experience/capabilities AO2 Application Limited application applies knowledge of growth to SF once Developed application + applies knowledge of growth to SF twice. • Private limited company • Capital intensive business • Bob is majority shareholder of SF • Used internal (organic) growth • The use of high interest loans to cover initial cashflow problems • Rents fields from farmers • Cost of maintenance team / 7 engineers salaries • Data from Table 1.1 • Can increase revenue by using batteries to store electricity generated by solar panels • Can sell electricity at peak times for premium prices • Needs investment into battery technology • Bob wants to retain control of SF • Cost of renting new farmland and purchasing solar panels increased significantly in 2024 • ZB is a multinational battery manufacturer • ZB will insist that SF uses ZB batteries in all future solar farms if joint venture goes ahead 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Is appropriate • Pool resources/skills/experience/capabilities–increased efficiency–improving overall profitability • Fast growth–generates more finance–less risk/cost of borrowing / interest • Maintain distinct identities–maintain brand/business name and reputation–support future growth Is not appropriate • Share profit/losses–lower profit than if worked on project alone–reduced funds for future growth • Loss of control of operations–may have to change aims and objectives–affecting decision making • Condition of joint venture if that SF uses ZB batteries–may not be the most appropriate type of battery–increase long term costs / decrease long term profit potential AO4 Evaluation Limited evaluation – an unsupported judgement and/or weak attempt at an evaluative comment Developed evaluation–supported judgement and/or reasonable evaluative comment Developed evaluation in context–supported judgement in context and/or reasonable evaluative comment in context . • Relative importance of control–are other issues more important, e.g. market share, economies of scale, specific industry/technology experience, ability to source batteries by SF • Choice depends on SF/Bob’s long-term goals. Does he want to remain in sole control, does Bob want a partner to share the workload/risk. • Comparison with other ways to grow, e.g. merger. • The impact of external influences • Choice of partner • A judgement on whether a joint venture is the most appropriate way for SF to grow Accept all valid responses. 1(d) Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) A joint venture is the best way for SF A joint venture is the best way for SF A joint venture is the best way for SF to grow. to grow. It will help Bob to quickly to grow. It will help Bob to quickly generate the extra capital needed to generate the extra capital needed to buy the battery technology. buy the battery technology, and increase profitability by selling electricity at peak times for premium prices. A joint venture is not the best way for A joint venture is not the best way for A joint venture is not the best way for SF to grow. SF to grow. Bob will lose the ability to SF to grow. Bob will lose the ability to make the key decisions. make the key decisions. Bob can retain control of SF as he wishes.

Question 17

Popular Drinks (PD) PD is a mass market fizzy drinks manufacturer in country Z. The fizzy drinks market in country Z is dominated by a few …

Accepted Answer

2(a)(i) Identify one recruitment method. 1 Indicative content Identification of a method may include: • job advertisements • employment agencies • online recruitment • internal / external recruitment • job description • person specification • headhunting • advertising media for recruitment, e.g. newspapers, websites, word of mouth, internal noticeboard, intranet Do not allow selection methods, e.g. curriculum vitae, résumé, application forms, interviews, references, testing, assessment centres. If more than one answer is given, only mark the first, reading from top left to bottom right. Accept all valid responses. 2(a)(ii) Explain the term cash flow. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. AO1 Knowledge and understanding Knowledge of cash flow may include: • The sum of cash payments into a business less the sum of cash payments out of a business • Inflows and outflows • Into and out of the business • Receipts and payments • Money / notes / coins / funds / finance 2(a)(ii) AO2 Application Limited application applies knowledge of cashflow to a business context. Developed application + applies knowledge of cashflow to a business context. • Who the cash flow is from / to, e.g. customers, suppliers, lenders • Liquidity / solvency • Working capital • Prediction / forecast • Opening / closing balance • Different to profit • Benefits of producing a cash flow forecast, e.g. take preventative action • Uses of a cash flow forecast, e.g. predict shortfalls, apply for finance, business plans • Examples of what cash may be used for, e.g. bills, staff wages, electricity, pay debts • Example from a business context Accept all valid responses. Exemplar and annotations Mark Rationale Cash in and out measures the business’s ability to 3 The answer shows knowledge by the reference to pay debts and the solvency of the business . cash in and out. There is an explanation of how it measures the ability to pay debts which is developed by the reference to solvency. Money into and out of the business. It measures the 2 Two marks. The first for knowledge and the second liquidity of the business. mark for application to liquidity. The flow of cash receipts and payments 1 A reasonable definition The flow of cash 0 Tautological 2(b)(i) Refer to Fig 2.1. Calculate the percentage of PD’s customers with positive feedback Formula to calculate percentage: Positive feedback Positive Respondents =  100 (1 mark – formula only) Total feedback 80 + 40 Positive Respondents =  100 (1 mark – use of correct figures) 800 Positive Respondents = 15 (%) (1 mark – correct answer (no % necessary) Answer = 15 (%) (3 marks – correct answer (no working or % necessary) 2(b)(i) Exemplar and annotations Marks Answer Rationale 3 marks Correct answer Working and % do not matter. 15% Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following: To award two marks, there must be • Correct calculation of total respondents • Two and a (800) OR • Correct calculation of positive • One , one and one respondents (120) OR • An incorrect answer with one mistake allowing OFR for final stage. OR • A correct answer from an inverted formula (6.67 – OFR) 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct calculation of total respondents (800) • Correct calculation of positive respondents (120) 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Refer to Fig. 2.1 and other information. Explain one reason why this data collected for PD may not be reliable. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of one reason for data not being reliable (max 1 mark), including: • Human error • Lack of data standards • Incomplete / outdated data • Poor questionnaire design / poorly written questions / question construction • Incorrect sampling • Data collection issues • Low response rates 2(b)(ii) AO2 Application Explanation of one reason for data not being reliable (max 1 mark), including: • Human error–untrained employees enter the data incorrectly / different teams with inconsistent methods • Lack of data standards–no rules of formatting / classifying data • Incomplete / outdated data–data no longer reflects current opinions • Poor questionnaire design / poorly written questions–leading questions / confusion • Incorrect sampling–sample doesn’t represent target customers • Data collection issues–timing • Low response rates–bias / length of questionnaire Context applied to PD (max 1 mark), including: • Mass market • Market dominated by a few well-known brands • Total market value is $5.3bn • 17% share of market • Pablo became Marketing Director in 2022 • Launched promotional campaign based on trending music on social media • Used social media influencers • Poor online feedback • Sales volume decreased by 20% in a week and continued to fall • Excess inventory in warehouses • Drop in PD’s share price • Negative impact on cashflow • Questionnaire completed by previous PD customers • Data from Fig. 2.1 • 800 respondents 2(b)(ii) Exemplar and annotations Mark Rationale Low response rates may lead to biased data affecting 3 Low response rates , with further decisions to repair the damage to PD’s brand . explanation to how it may affect the data The third mark is for reference to the context . An incorrect sample size of 800 customers . 2 Knowledge of a use and applied to the number of customers who completed the questionnaire. Problems collecting the data 1 Knowledge of a reason with no application 0 No reason why the data collected may not The data will be inaccurate, incomplete and misleading be reliable. This answer is a description of . unreliable data and does not answer the question Accept all valid responses. 2(c) Analyse two possible costs to PD of holding inventory. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two Limited analysis relevant points is relevant points to a • Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. • Application of one two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. First cost in the left-hand side column, second cost in the right-hand side column 2(c) Indicative content AO1 Knowledge and understanding Knowledge of possible costs of holding inventory (max 2 s), may include: • Opportunity cost of holding stock • Impact on working capital • Labour cost • Storage costs • Risk of wastage / damage • Depreciation • Insurance AO2 Application Application of cost to PD , including: • Mass market • Market dominated by a few well-known brands • Total market value is $5.3bn • 17% share of market • Pablo became Marketing Director in 2022 • Launched promotional campaign based on trending music on social media • Used social media influencers • Poor online feedback • Sales volume decreased by 20% in a week and continued to fall • Excess inventory in warehouses • Drop in PD’s share price • Negative impact on cashflow • Data from Fig. 2.1 • 800 respondents AO3 Analysis Limited analysis of cost of holding inventory – candidate shows one link in the chain of analysis. Developed analysis of cost of holding inventory candidate shows two or more links in the chain of analysis or a two- sided analysis. 2(c) Analysis may include: • Opportunity cost of holding stock–space used to store stock could be used for production reducing potential output– lower revenue • Impact on working capital–money / cash will be tied up in the stock–cannot pay suppliers • Labour cost–reduced profit–lower shareholder dividends • Increase storage costs–reduction in profit margins–reduction in share price • Increase risk of wastage–spend time disposing of the waste–inefficiency • Depreciation–reduces profits to reinvest–less future growth • Insurance–increased expenses–reduced working capital Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar for one cost of Insurance To reduce risk of disruption Insurance will compensate holding inventory to operations to maintain PD if an incident destroys Annotations for the first PD’s 17% market share . stock so it can maintain cost should be placed in sales satisfying the left-hand margin. customers . Exemplar of a second cost Risk of wastage Of the unsold mass market Could lead to a reduction in of holding inventory fizzy drinks . profit and future Annotations for the expansion . second cost should be placed in the right-hand margin. 2(d) Evaluate the importance of branding to the future success of PD. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed analysis Developed evaluation knowledge of application of that identifies • A developed relevant key term(s) relevant point(s) to the connections between judgement/conclusion is made. and/or factor(s) is business context. causes, impacts • Developed evaluative comments used to answer the and/or consequences. which balance some key question. arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to that identifies • A judgement/conclusion is made and/or factor(s) is the business context. connections between with limited supporting used to answer the causes, impacts comment/evidence. question. and/or consequences. • An attempt is made to balance the arguments. • 2(d) 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. Indicative content AO1 Knowledge and understanding Knowledge of branding (max 2 s), including: • Creating a distinct identity / image • Brand values • A company's name and logo, visual design, slogan, jingle • Making consumers feel good about supporting a company and establishing an emotional connection. • Differentiates from competitors • Influence purchasing decisions • Customers identify with business / brand • Brand personality • Build trust / relationships 2(d) AO2 Application Application of branding to PD , including: • Mass market • Market dominated by a few well-known brands • Total market value is $5.3 bn • 17% share of market • Pablo became Marketing Director in 2022 • Launched promotional campaign based on trending music on social media • Used social media influencers • Poor online feedback • Sales volume decreased by 20% in a week and continued to fall • Excess inventory in warehouses • Drop in PD’s share price • Negative impact on cashflow • Data from Fig. 2.1 • 800 respondents • Need to repair damaged PD brand from promotional campaign AO3 Analysis Limited analysis of the importance of branding to PD – candidate shows one link in the chain of analysis. Developed analysis of the importance of branding to PD – candidate shows two or more links in the chain of analysis. • Create distinct identity/image – maintaining customer base and repeat sales/loyalty–long term profitability • Name and logo conjure brand values–can attract/deter new customers–increase/decrease market share • Customers buy the brand regardless of quality–repeat customers–increased market share • Differentiates from competitors–attracts customers–increased market dominance • Influence purchasing decisions–increase revenue–increased profits • Customers identify with business / brand–building brand loyalty–long-term profitability • Brand personality–helps to differentiate and create a USP–customers pay a higher price • Build trust / relationships–increased reputation–increased market share 2(d) AO4 Evaluation Limited evaluation – an unsupported judgement and/or weak attempt at an evaluative comment Developed evaluation–supported judgement and/or reasonable evaluative comment Developed evaluation in context–supported judgement in context and/or reasonable evaluative comment in context . • The external impacts that affect the future brand image, e.g. new competitors or social trends • The relative importance of other elements of the marketing mix • Other factors that affect future success, e.g. financial management, competition, social trends • An evaluation on whether branding is important to PD’s future success. Accept all valid responses. Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Branding is important to support PD’s Branding is important to support PD’s Branding is important to support PD’s future success. future success. Branding helps future success. Branding helps customer recognise PD’s drinks customer recognise PD’s drinks amongst competing brands. amongst competing brands and therefore maintain a 17% share of the market. Branding is not important to the future Branding is not important to the future Branding is not important to the future success of PD. success of PD. The taste of the drink success of PD. The taste of the drink is more important because customers is more important because customers will not buy a drink that they dislike will not buy a drink that they dislike the taste of, even if attractively the taste of, even if attractively branded. branded in the mass market.

Question	Answer	Marks	From
1	see sheet	30	9609/21 Oct/Nov 2017
2	see sheet	30	9609/22 Feb/March 2018
3	see sheet	30	9609/21 May/June 2018
4	see sheet	30	9609/21 May/June 2019
5	see sheet	30	9609/22 May/June 2019
6	see sheet	30	9609/23 May/June 2019
7	see sheet	30	9609/22 Oct/Nov 2020
8	see sheet	30	9609/21 Oct/Nov 2021
9	see sheet	30	9609/23 Oct/Nov 2021
10	see sheet	30	9609/21 May/June 2022
11	see sheet	30	9609/21 Oct/Nov 2022
12	see sheet	30	9609/22 May/June 2023
13	see sheet	30	9609/23 May/June 2023
14	see sheet	30	9609/23 Oct/Nov 2023
15	see sheet	30	9609/21 May/June 2024
16	see sheet	30	9609/23 Oct/Nov 2025
17	see sheet	30	9609/23 Oct/Nov 2025

Forecasting and managing cash flows — Paper 2 · A Level Business (for first examination in 2016) 9609

Questions19 pages

Mark scheme17 answers

Another paper, or another topic

Questions as text

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Q3 · Clifford’s Supermarkets (CS) CS owns 28 supermarkets which sell food and non-food products 9609/21 May/June 2018

Q4 · Wood’s Logs (WL) WL was set up by Robert Wood 50 years ago 9609/21 May/June 2019

Q5 · Too Tasty (TT) TT is a brand of vegetable chips (crisps) owned by a large public limited… 9609/22 May/June 2019

Q6 · First Nature (FN) FN is a co-operative farm producing milk, beef and vegetables 9609/23 May/June 2019

Q7 · Gemini Theatre (GT) GT is a private limited company fully owned by the Gemini family 9609/22 Oct/Nov 2020

Q8 · Tin Mines (TM) TM is a private limited company in the primary sector 9609/21 Oct/Nov 2021

Q9 · Van Man (VM) Obi is a sole trader who operates a van service 9609/23 Oct/Nov 2021

Q10 · Priya’s Bookshop (PB) Priya lives in town R which is situated in beautiful countryside… 9609/21 May/June 2022

Q11 · Move Well (MW) MW is a business that organises the transportation of people’s possessions… 9609/21 Oct/Nov 2022

Q12 · Office Furniture Designs (OFD) Markus is an entrepreneur and is planning to set up a… 9609/22 May/June 2023

Q13 · Great Desks (GD) GD is a co-operative owned by all of its employees 9609/23 May/June 2023

Q14 · Jake’s Cakes (JC) Jake started baking cakes while at university 9609/23 Oct/Nov 2023

Q15 · Samira’s Whiteboards (SW) Samira left school at the age of 18 in country H 9609/21 May/June 2024

Q16 · Solar Farms (SF) SF is a private limited company that develops and maintains large-scale… 9609/23 Oct/Nov 2025

Q17 · Popular Drinks (PD) PD is a mass market fizzy drinks manufacturer in country Z 9609/23 Oct/Nov 2025