Cambridge IGCSE Business Studies 0450 — 2003 Oct/Nov Paper 1 · Variant 1

This document consists of 11 printed pages and 1 blank page. SP (AT) S37357/1 © CIE 2003 [Turn over CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education BUSINESS STUDIES 0450/01 Paper 1 October/November 2003 1 hour 45 minutes Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen in the spaces provided on the Question Paper. Do not use staples, paper clips, highlighters, glue or correction fluid. Answer all questions. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. The businesses described in this question paper are entirely fictitious. Centre Number Candidate Number Name If you have been given a label, look at the details. If any details are incorrect or missing, please fill in your correct details in the space given at the top of this page. Stick your personal label here, if provided. For Examiner’s Use 1 2 3 4 5 Total www.XtremePapers.com

2 0450/01/O/N/03 1 The directors of Hussain Ltd. are considering converting the business into a Public Limited Company. (a) (i) Explain the term limited liability. … … … …[2] (ii) Explain the term dividend. … … … …[2] (iii) Identify and explain one feature of private limited companies that makes them different from public limited companies. … … … …[2] (b) Shareholders invest in companies to make money. Explain why a public limited company’s share price might fall over time. … … … … … …[3] For Examiner’s Use

3 0450/01/O/N/03 [Turn over (c) Shareholders have a legal right to be informed about the performance of the company in which they hold shares. State and explain two ways used by the management of a company to communicate with shareholders. … … … … … … … … … … … …[6] (d) The management of a company is responsible to the shareholders. Should management have responsibilities to other groups in society? Explain your answer. … … … … … … … … … …[5] For Examiner’s Use

4 0450/01/O/N/03 2 Table 1 gives some financial data for Company A. Table 1 2003 2002 Sales Turnover ($m) 90 80 Capital ($m) 55 50 Net Profit ($m) 8 10 (a) (i) Calculate the change in the net profit margin between these two years. … … … …[3] (ii) Suggest two reasons that could explain this change. … … … …[2] (iii) Calculate the return on capital in 2003. … … … …[2] (iv) Explain what the return on capital ratio tells us about a company. … … … … … …[3] For Examiner’s Use

5 0450/01/O/N/03 [Turn over (v) State and explain two other pieces of information that would help you decide if 2003 had been a successful year for Company A. … … … … … … … …[4] (b) (i) Explain the term working capital. … … … …[2] (ii) How can a business make a profit and yet have a cash flow problem? … … … … … … … …[4] For Examiner’s Use

6 0450/01/O/N/03 3 (a) “Good communications are important in running a successful business.” Explain two barriers to effective internal business communication. … … … … … … … … … … … …[6] (b) The managing director of a company said recently “If wages increase our employees will definitely be better motivated”. Do you agree? … … … … … … … …[4] For Examiner’s Use

7 0450/01/O/N/03 [Turn over (c) A personnel department has decided to write a job description for each position in the business. (i) Explain what is included in a job description. … … … … … …[3] (ii) How might a job description help in the recruitment of new employees? … … … … … …[3] (iii) The personnel manager also decided to introduce induction training for all new staff. What benefits might the business gain from such training? … … … … … … … …[4] For Examiner’s Use

8 0450/01/O/N/03 4 (a) Table 2 gives some data about the cost structure of Company B, a fashion clothing manufacturer. Table 2 Cost Data for Company B Output per week (units) 100 200 300 Direct unit labour cost ($) 20 19 18 Direct unit material cost ($) 25 22 18 Weekly overheads ($) 2000 2000 2000 (i) Give an example of an overhead cost. … …[1] (ii) As output increases, the unit labour cost falls and the unit material cost falls. Explain possible reasons for this. … … … … … … … …[4] (iii) The company uses a cost plus method to determine the price that it charges for its products. It works out the unit total cost and adds on 75%. Calculate the unit selling price if 300 units are produced each week. … … … …[2] For Examiner’s Use

9 0450/01/O/N/03 [Turn over (iv) Is this cost plus pricing method always the best method to use? Explain your answer. … … … … … … … …[4] (b) Businesses use many methods to promote their products. State and explain two methods of promotion that could be used by this fashion clothing manufacturer. … … … … … … … … … … … …[6] (c) Explain one factor that this manufacturer should consider in deciding on the best channel of distribution for its products. … … … … … …[3] For Examiner’s Use

10 0450/01/O/N/03 5 A U.K. sports company sells a range of products. One of its best selling products is footballs. They are produced in India and imported into the U.K. (a) (i) Explain the likely reasons why the U.K. company buys footballs from India. … … … … … … … …[4] (ii) Identify and explain two problems that the U.K. company might have when importing its goods. … … … … … … … …[4] For Examiner’s Use

11 0450/01/O/N/03 (b) Consumers in the U.K. have complained about the company’s advertisements and prices. Should governments pass laws to protect consumers? Use examples to illustrate your answer. … … … … … … … …[4] (c) The management of Company C is buying new computers to modernise its stock control methods. Some of the workforce might be made redundant. (i) What is meant by “to be made redundant”? … … … …[2] (ii) In many countries employees can join a trade union to help protect their interests. Explain the advantages to an employee of joining a trade union. … … … … … … … … … … … …[6] For Examiner’s Use