Business Studies · Oct / Nov 2021 · Paper 12 · Question 3

0450

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Aurelie is a sole trader. She started her small hotel 1 year ago using government support. Aurelie knew it would be important to build good customer relationships. Aurelie wants to analyse her 3 financial statements using ratio analysis. An extract is shown in Table 3.1. She is worried about how the Government’s plan to introduce a new tourist tax of $1 per tourist per night might affect her business. Table 3.1 Extract of Aurelie’s Income statement for 2020 ($) 5600 Revenue 1800 Cost of sales X Gross profit 2400 Expenses Y Profit

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3(a)[2]
Identify two ways a government can support new business start- ups. Award 1 mark per way. Points might include:
Offer grants
Loans for small businesses
Low tax rates / tax relief / tax breaks
Offer advice / support / information / mentors
Provide (free / low-cost) training
Low cost / rent-free premises
Organise business fairs Other appropriate responses should also be credited. 2 Only award the first two responses given.
3(b)[2]
Calculate X and Y. Award 1 mark for each correct calculation. X $3800 or 3800 Y $1400 or 1400 2 No $ sign required. Notes
3(c)[4]
State four financial ratios a business can use. Award 1 mark per financial ratio. Four from:
Profit margin
Gross profit margin
Return on capital employed / ROCE
Current (ratio)
Acid test (ratio) Other appropriate responses should also be credited. 4 Only award the first four answers given.
3(d)[6]
Explain two ways that the introduction of a new tourist tax might affect Aurelie’s business. Award 1 mark for identification of each relevant way (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include:
Increase price [k] at her hotel [app] leading to lower demand [an]
Lower demand/sales [k] leading to less revenue [an] than $5600 [app]
Increase administration costs [k] for this sole trader [app] reduce her profit margin [an]
May have to lower prices [k] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words may be appropriate for this question:
(Small) hotel or related words such as room
$1 / (price) per night
Sole trader
$5600 (revenue)
$2400 (expenses) Other appropriate examples in context can still be credited. Notes
3(e)[6]
Do you think offering good customer service is the best way for a small business to build customer relationships? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether offering good customer service is the best way for a small business to build customer relationships. Points might include: Offer good customer service:
Makes customers feel valued / builds trust [k] so improves customer loyalty [an] which can help maintain / increase revenue [an]
Can help build reputation / brand image [k]
May need to train/recruit employees [k] which increases costs [an] Other options include:
Loyalty (reward) scheme [k] which can encourage customers to keep returning [an] but there is time / cost of setting up / monitoring scheme [an]
Market research [k]
Maintain good communications [k]
Respond to complaints / offer refunds quickly [k] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. Notes Justification might include: Good customer service can make customers feel valued [k] so customers may be willing to buy additional products [an]. However, it may mean the business has to train its employees [k] which increases costs [an]. But I think it is still the best way as it can also help attract additional customers to the business increasing revenue [eval] which can offset / cover the additional cost of training. [eval]. Notes

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