Cambridge IGCSE Business Studies 0450 — 2008 May/June Paper 1 · Variant 1

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This document consists of 11 printed pages and 1 blank page. SPA (SJF4737) T47201/4 © UCLES 2008 [Turn over UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education 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. Do not use staples, paper clips, highlighters, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. The businesses described in this question paper are entirely fictitious. 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. * 6 2 2 5 8 6 7 0 2 0 * BUSINESS STUDIES 0450/11 Paper 1 May/June 2008 1 hour 45 minutes Candidates answer on the Question Paper. No Additional Materials are required. For Examiner’s Use 1 2 3 4 5 Total First Variant Question Paper

2 0450/11/M/J/08 For Examiner’s Use © UCLES 2008 1 Lloyd Samuel owns a meat wholesale business. He buys his supplies from local farmers and sells to private customers and retail shops. He pays for his supplies when they are delivered but sells to the retailers on one month’s credit. Table 1 is an incomplete cash flow forecast for the last three months of 2008. Table 1: Cash flow forecast ($000’s) Oct. Nov. Dec. Opening balance 5 ? 10 Cash In Cash from sales to private customers 8 8 13 Cash from debtors 10 11 11 Cash Out Purchases 5 9 19 Wages 6 6 6 Overheads 3 3 3 Monthly Net Cash Flow 4 1 ? Closing Balance 9 ? 6 (a) Calculate the following values: (i) Opening balance in November: …[1] (ii) Closing balance in November: …[1] (iii) Monthly net cash flow in December: …[1] (b) Explain one reason why Lloyd gives credit terms to the retail shops. … … … … … …[3] (c) Why might a cash flow forecast be of use to Lloyd in managing his business? … … … … … …[4]

3 0450/11/M/J/08 [Turn over For Examiner’s Use © UCLES 2008 (d) Lloyd needs to raise capital to expand his business. He is thinking of forming a business partnership with a friend. (i) Identify and explain two advantages of forming a business partnership. Advantage 1: … … … … Advantage 2: … … … …[4] (ii) Explain one problem Lloyd might face in having a business partner. … … … … … …[3] (iii) Apart from forming a partnership, explain one other source of finance that Lloyd might use to expand his business. … … … … … …[3]

4 0450/11/M/J/08 For Examiner’s Use © UCLES 2008 2 Rose Tuilagi had always wanted to run her own business. She decided to open a Thai restaurant. She knew that competition in the catering industry was strong and that her profit margins might be low. However she believed that her business could make high profits. (a) (i) What is meant by a ‘low profit margin’? … … … …[2] (ii) How could her business make high profits if profit margins were low? … … … … … …[3] (b) Outline three factors that Rose should consider when deciding where to locate her new restaurant. Factor 1: … … … … Factor 2: … … … … Factor 3: … … … …[6]

5 0450/11/M/J/08 [Turn over For Examiner’s Use © UCLES 2008 (c) In order to increase sales, Rose thought it would be a good idea to sponsor the shirts of her local football team. (i) Why might such sponsorship help increase sales? … … … … … …[3] (ii) A friend suggested that she might use other forms of promotion instead. State and explain two other types of promotion that you think would be appropriate for Rose to use. Justify your suggestions. Promotion type 1: … … … … … … Promotion type 2: … … … … … …[6]

6 0450/11/M/J/08 For Examiner’s Use © UCLES 2008 3 ‘Managing a large company is not easy’ said Neelie Kroner, Chief Executive of Kruger Enterprises, a major electronics manufacturing business. ‘There is never just one way to organise a business, just different ways.’ He made these remarks to Joshua, his deputy at Kruger Enterprises. Mr Kroner was looking at the organisational charts of two of his competitors [A and B] shown in Fig. 1. Company A Company B C D C E F G H I J K L D E F G H I J K L Fig. 1 (a) Identify and explain two differences in the way that these two companies are organised. Difference 1: … … … Difference 2: … … …[4] As a large Public Limited Company, Kruger Enterprises needs to communicate effectively both internally and externally. (b) How do Public Limited Companies communicate with their shareholders? … … … … … …[4]

7 0450/11/M/J/08 [Turn over For Examiner’s Use © UCLES 2008 (c) (i) What is meant by ‘internal communication’? … … … …[2] (ii) Why does good internal communication help business efficiency? … … … … … … … …[4] (d) The management of Kruger Enterprises believes that their business would benefit from taking over company A. Do you think that this would be a good idea for Kruger Enterprises? Explain your answer. … … … … … … … … … … … …[6]

8 0450/11/M/J/08 For Examiner’s Use © UCLES 2008 4 Most governments throughout the world are encouraging business to be more aware of environmental responsibilities. (a) (i) Using an example, show how a business decision could damage the environment. … … … … … … … …[4] (ii) How do you think governments can control business activity that damages the environment? … … … … … … … …[4] (b) The government of country W recently increased interest rates in their country. Explain how this change might affect the following two businesses based in country W. (i) A bakery: … … … … … …

9 0450/11/M/J/08 [Turn over For Examiner’s Use © UCLES 2008 (ii) A car manufacturer: … … … … … …[6] (c) The government of country W has also been increasing the size of the public sector. (i) What is meant by the ‘public sector’? … … … …[2] (ii) State and explain two objectives that enterprises in the public sector usually have. Objective 1: … … … … Objective 2: … … … …[4]

10 0450/11/M/J/08 For Examiner’s Use © UCLES 2008 5 Kim Chan has recently been on a management training course. He has learnt that ‘work helps to satisfy human needs’. Kim went back to his father’s business and told his father, Wu, all about the course. His father laughed and said ‘Nonsense, money satisfies human needs. People only work to earn money’. (a) (i) Explain what is meant by ‘work helps to satisfy human needs’. … … … … … … … …[4] (ii) Do you think that Kim’s father is correct in stating that people only work for money? Explain your answer. … … … … … … … …[4] Wu Chan has recently reduced the number of employees in his business by 40%. Despite this, sales and output have not fallen. (b) (i) How can the output in Mr Chan’s company stay the same if the number of employees has fallen by 40%? … … … …[2]

11 0450/11/M/J/08 For Examiner’s Use © UCLES 2008 (ii) Do you think that reducing the number of employees will benefit Mr Chan’s business? … … … … … … … … …[4] (c) In most countries workers have an employment contract. (i) State two pieces of information usually contained in an employment contract. Information 1: … … Information 2: … …[2] (ii) Explain why such contracts might be of benefit to both employer and employee. Benefit to employer: … … … … Benefit to employee: … … … …[4]

12 0450/11/M/J/08 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

This document consists of 11 printed pages and 1 blank page. SP (NF/SLM) T59153/2 © UCLES 2008 [Turn over UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education 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. Do not use staples, paper clips, highlighters, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. The businesses described in this question paper are entirely fictitious. 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. * 6 5 0 5 3 7 0 4 1 9 * BUSINESS STUDIES 0450/12 Paper 1 May/June 2008 1 hour 45 minutes Candidates answer on the Question Paper. No Additional Materials are required. For Examiner’s Use 1 2 3 4 5 Total Second Variant Question Paper

2 0450/12/M/J/08 © UCLES 2008 For Examiner’s Use 1 Table 1 shows the incomplete balance sheet for Goldright, a large jewellery manufacturer which is a private limited company. Table 1 Goldright as at April 30 2008 $000’s Fixed Assets Buildings 150 Machinery 100 250 Current Assets Stock ? Debtors 85 Cash 10 140 less Current Liabilities Creditors 60 Bank overdraft 0 60 Net Current Assets ? Net Assets 330 Financed by Shareholders Funds 200 Long term Liabilities ? Capital Employed 330 (a) Calculate the value of the following as at 30th April 2008. (i) Stock … (ii) Net Current Assets … (iii) Long term Liabilities …[3] (b) Explain one reason why Goldright might make use of creditors. … … … … … …[3]

3 0450/12/M/J/08 © UCLES 2008 [Turn over For Examiner’s Use (c) What use is a balance sheet to any two of the stakeholders in Goldright? … … … … … … … …[4] (d) When would Goldright find it better to use a bank loan than an overdraft to finance its activities? Explain your answer. … … … … … …[4] (e) The accounts of Goldright showed that the business paid dividends of $40 000. (i) Explain what is meant by ‘dividends’. … … … …[2] (ii) Do you think that companies should declare high dividends? Explain your answer. … … … … … …[4]

4 0450/12/M/J/08 © UCLES 2008 For Examiner’s Use 2 Rose Tuilagi had always wanted to run her own business. She decided to open a Thai restaurant. She knew that competition in the catering industry was strong and that her profit margins might be low. However she believed that her business could make high profits. (a) (i) What is meant by a ‘low profit margin’? … … … …[2] (ii) How could her business make high profits if profit margins were low? … … … … … …[3] (b) Outline three factors that Rose should consider when deciding where to locate her new restaurant. Factor 1: … … … … Factor 2: … … … … Factor 3: … … … …[6]

5 0450/12/M/J/08 © UCLES 2008 [Turn over For Examiner’s Use (c) In order to increase sales, Rose thought it would be a good idea to sponsor the shirts of her local football team. (i) Why might such sponsorship help increase sales? … … … … … …[3] (ii) A friend suggested that she might use other forms of promotion instead. State and explain two other types of promotion that you think would be appropriate for Rose to use. Justify your suggestions. Promotion type 1: … … … … … … Promotion type 2: … … … … … …[6]

6 0450/12/M/J/08 © UCLES 2008 For Examiner’s Use 3 Fig. 1 and Fig. 2 show an outline of the organisational charts of two large multinational companies A and B. (The letters M.D. mean ‘Managing Director’.) Fig. 1 Fig. 2 Company A Chief Executive M.D. European Division M.D. African Division Finance Director Production Director Marketing Director M.D. Asian Division M.D. American Division Company B Chief Executive M.D. Product X M.D. Product Y Marketing Director Product Y Finance Director Product Y Production Director Product Y M.D. Product Z (a) Identify and explain two differences in the way the two companies are organised. Difference 1: … … … … Difference 2: … … … …[4] (b) Both companies are Public Limited Companies. Explain two main features of a public limited company. Feature 1: … … … … Feature 2: … … … …[4]

7 0450/12/M/J/08 © UCLES 2008 [Turn over For Examiner’s Use (c) Last week the management of company B stated that the company was experiencing difficulties and that it was going to stop trading immediately. (i) Identify and explain two reasons why a company might experience difficulties which cause it to stop trading. Reason 1: … … … … Reason 2: … … … …[4] (ii) What money, if any, would the shareholders of company B lose when the company ceases to trade? … … … … … … … …[4] (iii) Do you think governments should give financial aid to failing companies? Justify your answer. … … … … … … … …[4]

8 0450/12/M/J/08 © UCLES 2008 For Examiner’s Use 4 Most governments throughout the world are encouraging business to be more aware of environmental responsibilities. (a) (i) Using an example, show how a business decision could damage the environment. … … … … … … … …[4] (ii) How do you think governments can control business activity that damages the environment? … … … … … … … …[4] (b) The government of country W recently increased interest rates in their country. Explain how this change might affect the following two businesses based in country W. (i) A bakery: … … … … … …

9 0450/12/M/J/08 © UCLES 2008 [Turn over For Examiner’s Use (ii) A car manufacturer: … … … … … …[6] (c) The government of country W has also been increasing the size of the public sector. (i) What is meant by the ‘public sector’? … … … …[2] (ii) State and explain two objectives that enterprises in the public sector usually have. Objective 1: … … … … Objective 2: … … … …[4]

10 0450/12/M/J/08 © UCLES 2008 For Examiner’s Use 5 Kim Chan has recently been on a management training course. He has learnt that ‘work helps to satisfy human needs’. Kim went back to his father’s business and told his father, Wu, all about the course. His father laughed and said ‘Nonsense, money satisfies human needs. People only work to earn money’. (a) (i) Explain what is meant by ‘work helps to satisfy human needs’. … … … … … … … …[4] (ii) Do you think that Kim’s father is correct in stating that people only work for money? Explain your answer. … … … … … … … …[4] Wu Chan has recently reduced the number of employees in his business by 40%. Despite this, sales and output have not fallen. (b) (i) How can the output in Mr Chan’s company stay the same if the number of employees has fallen by 40%? … … … …[2]

11 0450/12/M/J/08 © UCLES 2008 For Examiner’s Use (ii) Do you think that reducing the number of employees will benefit Mr Chan’s business? … … … … … … … … …[4] (c) In most countries workers have an employment contract. (i) State two pieces of information usually contained in an employment contract. Information 1: … … Information 2: … …[2] (ii) Explain why such contracts might be of benefit to both employer and employee. Benefit to employer: … … … … Benefit to employee: … … … …[4]

12 0450/12/M/J/08 Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. BLANK PAGE