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Question 1 Report
Fig. 1 shows the finance routes being considered by Nia, who owns a market stall selling repaired bicycles. Her business has made a profit of $6 000, but she needs $18 000 to buy a mobile repair van. Nia wants to keep control of the business and needs the cash for at least three years. She has asked her two employees to research the following options before she selects an answer.
(a) Define the term retained profit. [2]
(b) State one reason why the bank loan is an external source of finance. [1]
(c) Calculate the amount of finance still required if Nia uses all of the retained profit. [2]
(d) Analyse which one of the following options, a bank loan or a new partner, is likely to be better for Nia. [3]
(a) Retained profit is profit kept in the business rather than paid to the owner or shareholders. [2]
(b) A bank loan is external finance because the money comes from outside the business, specifically from a bank. [1]
(c)
\[\$18\,000-\$6\,000=\$12\,000\]
Finance still required is \(\$12\,000\). [2]
(d) A bank loan lets Nia retain ownership and control, which matches her objective. Repayments can be spread over the three years for which she needs finance. However, interest and repayments reduce cash flow. A new partner may provide funds without loan repayments, but the partner shares control and future profit. A supported choice of either source is acceptable; because control is important to Nia, a manageable bank loan is likely to fit better. [3]
(a) Retained profit is profit kept in the business rather than paid to the owner or shareholders. [2]
(b) A bank loan is external finance because the money comes from outside the business, specifically from a bank. [1]
(c)
\[\$18\,000-\$6\,000=\$12\,000\]
Finance still required is \(\$12\,000\). [2]
(d) A bank loan lets Nia retain ownership and control, which matches her objective. Repayments can be spread over the three years for which she needs finance. However, interest and repayments reduce cash flow. A new partner may provide funds without loan repayments, but the partner shares control and future profit. A supported choice of either source is acceptable; because control is important to Nia, a manageable bank loan is likely to fit better. [3]
Question 2 Report
The diagram shows two leisure businesses in the same town. Riverside Active is controlled by the elected city council and receives a grant funded by local taxes. Peak Fitness plc is owned by shareholders, who can buy and sell shares. Both businesses are near a Premier Inn and want to attract hotel guests as well as local customers. The council is deciding whether to keep Riverside Active in public-sector ownership or sell it to Peak Fitness.
In one year, Riverside Active receives £240 000 from the council and £360 000 from membership fees. Use this information to answer the following questions.
(a) State the classification of Riverside Active. [2]
(b) Define the term public limited company. [3]
(c) Calculate membership fees as a percentage of Riverside Active's total income. [3]
(d) Analyse one reason why the council may choose to keep Riverside Active in the public sector. [6]
(a) Riverside Active is a public-sector business. It is owned or controlled by local government, here the elected city council. [2]
(b) A public limited company is a business owned by shareholders. Its shares can be sold to the public, commonly through a stock exchange, and shareholders have limited liability. Limited liability means they normally risk only the money invested in shares. [3]
(c) Membership fees as a percentage of total income
\[\text{Total income}=£240\,000+£360\,000=£600\,000\]
\[\frac{£360\,000}{£600\,000}\times100=60\%\]
Membership fees are 60% of total income. [3]
(d) Why the council may keep Riverside Active public: public ownership allows the council to prioritise residents' access and community objectives rather than maximum profit. It may keep membership prices affordable for lower-income residents. Council funding can also support a leisure facility that a private owner might close if it was insufficiently profitable. Retaining ownership lets the council promote health and community participation; visitors staying at the nearby hotel may also spend money more widely in the town. A valid counterpoint is that the £240 000 grant could be used for other public services, or a private owner may operate more efficiently. Developed analysis earns up to [6].
(a) Riverside Active is a public-sector business. It is owned or controlled by local government, here the elected city council. [2]
(b) A public limited company is a business owned by shareholders. Its shares can be sold to the public, commonly through a stock exchange, and shareholders have limited liability. Limited liability means they normally risk only the money invested in shares. [3]
(c) Membership fees as a percentage of total income
\[\text{Total income}=£240\,000+£360\,000=£600\,000\]
\[\frac{£360\,000}{£600\,000}\times100=60\%\]
Membership fees are 60% of total income. [3]
(d) Why the council may keep Riverside Active public: public ownership allows the council to prioritise residents' access and community objectives rather than maximum profit. It may keep membership prices affordable for lower-income residents. Council funding can also support a leisure facility that a private owner might close if it was insufficiently profitable. Retaining ownership lets the council promote health and community participation; visitors staying at the nearby hotel may also spend money more widely in the town. A valid counterpoint is that the £240 000 grant could be used for other public services, or a private owner may operate more efficiently. Developed analysis earns up to [6].
Question 3 Report
Fig. 1 shows part of the organisation chart used by an independent business that operates city-centre hotels. The business is considering adding two new hotels because customers have increased. The Operations Manager wants employees to know who they report to and to reduce delays when customers make complaints. A manager at Premier Inn has suggested that the business should review its span of control before choosing this option.
(a) Define the term organisation chart. [2]
(b) State three reasons why the hotel business uses the chart in Fig. 1. [3]
(c) Calculate the span of control of each Hotel Manager shown in Fig. 1. [5]
(d) Analyse whether the Operations Manager should keep this hierarchical structure as the business opens the two new hotels. [10]
(a) An organisation chart is a diagram showing job positions in a business and the reporting relationships or levels of authority between them. [2]
(b) The chart shows employees who their immediate manager is, clarifies the chain of command and helps allocate duties. It can also identify vacant posts and help communication flow. Any three. [3]
(c) Each Hotel Manager directly supervises 6 reception employees and 4 cleaning employees.
\[6+4=10\]
Therefore, each Hotel Manager has a span of control of 10 employees. [5]
(d) Retaining hotel managers gives each new hotel clear leadership and accountability for customer service. Managers can make routine decisions locally, which may maintain consistent standards and reduce pressure on the Operations Manager.
However, opening two more hotels increases the Operations Manager's direct reports from three to five. This wider span may make monitoring harder. Communication can also be slower when messages pass through several levels. A wider structure may reduce management costs, but inexperienced employees may need closer support.
A sensible judgement is to retain hotel managers, but appoint an area manager if expansion makes direct control by the Operations Manager difficult. [10]
(a) An organisation chart is a diagram showing job positions in a business and the reporting relationships or levels of authority between them. [2]
(b) The chart shows employees who their immediate manager is, clarifies the chain of command and helps allocate duties. It can also identify vacant posts and help communication flow. Any three. [3]
(c) Each Hotel Manager directly supervises 6 reception employees and 4 cleaning employees.
\[6+4=10\]
Therefore, each Hotel Manager has a span of control of 10 employees. [5]
(d) Retaining hotel managers gives each new hotel clear leadership and accountability for customer service. Managers can make routine decisions locally, which may maintain consistent standards and reduce pressure on the Operations Manager.
However, opening two more hotels increases the Operations Manager's direct reports from three to five. This wider span may make monitoring harder. Communication can also be slower when messages pass through several levels. A wider structure may reduce management costs, but inexperienced employees may need closer support.
A sensible judgement is to retain hotel managers, but appoint an area manager if expansion makes direct control by the Operations Manager difficult. [10]
Question 4 Report
Fig. 1 shows how Kraft Heinz UK has summarised results for a trial range of premium sauces. The range was sold through selected supermarkets for one year. Managers use the diagram before deciding whether the option should be supplied to more stores. Amounts are in £000. The final box is blank because the accountant has not yet completed the profit loss account.
(a) Define the term loss. [3]
(b) Calculate the gross profit for the premium sauce range. [4]
(c) Calculate the final profit or loss for the range. Show your working. [4]
(d) State two reasons why sales revenue may be lower than managers expected during a trial. [3]
(e) Analyse whether Kraft Heinz should extend the range to all supermarkets. Use Fig. 1. [6]
(a) A loss is a negative financial result: relevant costs or expenses are greater than revenue, so the business does not make a profit. [3]
(b)
\[\text{Gross profit}=£72\,000-£44\,000=£28\,000\]
[4]
(c)
\[£28\,000-£33\,000=-£5\,000\]
The range makes a loss of \(£5\,000\). [4]
(d) Sales revenue in a trial may be lower than expected because customers do not know about the new sauces, the price is higher than competing sauces, limited stores reduce availability, or consumers prefer established products. Any two valid reasons gain credit. [3]
(e) Extending to more supermarkets could increase access and sales. Higher sales may spread operating expenses over more units. However, the trial makes a \(£5\,000\) loss: gross profit of \(£28\,000\) does not cover \(£33\,000\) operating expenses. A wider launch may also increase marketing and distribution costs.
Kraft Heinz should first improve sales volume or reduce costs, then extend only if forecasts show gross profit will cover all expenses. [6]
(a) A loss is a negative financial result: relevant costs or expenses are greater than revenue, so the business does not make a profit. [3]
(b)
\[\text{Gross profit}=£72\,000-£44\,000=£28\,000\]
[4]
(c)
\[£28\,000-£33\,000=-£5\,000\]
The range makes a loss of \(£5\,000\). [4]
(d) Sales revenue in a trial may be lower than expected because customers do not know about the new sauces, the price is higher than competing sauces, limited stores reduce availability, or consumers prefer established products. Any two valid reasons gain credit. [3]
(e) Extending to more supermarkets could increase access and sales. Higher sales may spread operating expenses over more units. However, the trial makes a \(£5\,000\) loss: gross profit of \(£28\,000\) does not cover \(£33\,000\) operating expenses. A wider launch may also increase marketing and distribution costs.
Kraft Heinz should first improve sales volume or reduce costs, then extend only if forecasts show gross profit will cover all expenses. [6]
Question 5 Report
Read the information below about a start-up business. A former Huawei technician is planning a service that collects unwanted phones from offices, erases data and sells reusable parts. He needs $9 000 for secure testing equipment. He can use a credit card, ask an investor for equity finance or wait until enough profit has been retained. The technician has no employees yet, but expects to recruit two staff if the business grows. He is considering which option best matches the risk of a new market.
(a) Define the term equity finance. [2]
(b) State one source of internal finance available to an established business. [1]
(c) Calculate the percentage of the $9 000 requirement covered by an investor providing $3 600. [2]
(d) Analyse one reason why waiting to use retained profit may limit the growth of this start-up. [3]
(a) Equity finance is finance raised by selling ownership or shares in a business to investors. [2]
(b) One internal source is retained profit. Sale of assets or owner's savings are also valid. [1]
(c)
\[\frac{\$3\,600}{\$9\,000}\times100=40\%\]
The investor covers \(40\%\) of the requirement. [2]
(d) Retained profit can be used only after the business has first made profit. Waiting therefore delays buying secure testing equipment and recruiting staff. Rivals may serve the market first, reducing possible revenue growth. [3]
(a) Equity finance is finance raised by selling ownership or shares in a business to investors. [2]
(b) One internal source is retained profit. Sale of assets or owner's savings are also valid. [1]
(c)
\[\frac{\$3\,600}{\$9\,000}\times100=40\%\]
The investor covers \(40\%\) of the requirement. [2]
(d) Retained profit can be used only after the business has first made profit. Waiting therefore delays buying secure testing equipment and recruiting staff. Rivals may serve the market first, reducing possible revenue growth. [3]
Question 6 Report
Fig. 1 shows the objectives selected by an IKEA-style independent furniture retailer after customers asked about its environmental impact. The company wants to improve long-term performance, but its managers are unsure how to balance profit with reducing delivery emissions. The following diagram is used at a meeting with employees. Managers will use the answer to decide whether delivery vehicles should be replaced this year.
The retailer currently produces 850 kg of delivery emissions each month and has set a reduction target of 12%.
(a) State two objectives shown in Fig. 1. [2]
(b) Define corporate social responsibility. [2]
(c) Calculate the monthly emissions level after the 12% reduction target is met. [3]
(d) State three reasons why reducing delivery emissions may help the retailer. [3]
(a) The objectives shown include customer satisfaction, increasing profit and reducing emissions. Any two gain credit. [2]
(b) Corporate social responsibility means a business taking responsibility for the effects of its decisions on society and the environment. [2]
(c) Calculate the reduction:
\[12\%\text{ of }850\text{ kg}=0.12\times850=102\text{ kg}\]
\[850\text{ kg}-102\text{ kg}=748\text{ kg}\]
Target emissions are 748 kg per month. [3]
(d) Reducing delivery emissions can improve environmental reputation, attract environmentally aware customers, reduce fuel use and costs, help meet environmental rules, and improve relationships with the local community. Any three gain credit. [3]
(a) The objectives shown include customer satisfaction, increasing profit and reducing emissions. Any two gain credit. [2]
(b) Corporate social responsibility means a business taking responsibility for the effects of its decisions on society and the environment. [2]
(c) Calculate the reduction:
\[12\%\text{ of }850\text{ kg}=0.12\times850=102\text{ kg}\]
\[850\text{ kg}-102\text{ kg}=748\text{ kg}\]
Target emissions are 748 kg per month. [3]
(d) Reducing delivery emissions can improve environmental reputation, attract environmentally aware customers, reduce fuel use and costs, help meet environmental rules, and improve relationships with the local community. Any three gain credit. [3]
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