Business Studies · May / June 2022 · Paper 11 · Question 3
0450
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VCG manufactures high-quality briefcases and travel bags. VCG has 50 skilled production workers in its factory. VCG is planning to expand by building a second factory. Different locations are being 3 considered. The Managing Director is reviewing VCG’s financial statements. An extract is shown in Table 3.1. Both internal and external stakeholder groups of VCG are interested in this information. Table 3.1 Extract from VCG’s 2021 financial statements ($) 2000000 Revenue 300000 Current assets 250000 Current liabilities 800000 Shareholders’ equity (funds)
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3(a)[2]
Define ‘shareholders’ equity’. Award 2 marks for a full definition. Award 1 mark for a partial definition. (Total sum of) money invested into the business by the owners of the company [2]
OR Share capital plus reserves [2]
OR Total assets minus total liabilities [2]
Partial definition e.g. money raised from selling shares [1]
2
3(b)[2]
Identify two financial statements a public limited company is legally required to publish each year. Award 1 mark for each financial statement. Two from:
Income statement (Profit and loss)Statement of financial position (Balance sheet)Cash-flow statement/statement of cash flowsStatement of changes in equity 2 Only award the first two responses given. Do not award cash-flow forecast.3(c)[4]
State whether each of the following are classified as a current asset or a current liability. Award 1 mark for each correct answer. Overdraft−current liability Trade receivables−current asset Trade payables−current liability Cash in bank−current asset
3(d)[6]
Explain one way each of the following stakeholder groups might use VCG’s accounts:
Award 1 mark for identification of each relevant way (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
Shareholders:
Help assess business performance / profits [k] to see whether they will receive a dividend / return on their investment [an] from this bag manufacturer [app]Help decide whether to continue to invest [k] as the business is looking to open a second factory [app] which could mean less dividends paid [an]Assess the liquidity [k] they do not want to invest in a business with serious cash or liquidity problems [an]To compare performance over time [k] and how much the $800 000 in equity increases [app] to decide whether they should take their money and invest elsewhere [an]Compare performance between different businesses [k] to decide whether it is a good investment [an]Suppliers:
Can see the total value / level of debt [k] current liabilities $250 000 [app] to help decide whether they should offer (more) credit [an]Assess whether the business has sufficient cash [k] within current assets of $300 000 [app] for the business to be able to repay them when debts become due [an]Assess profitability / level of sales [k] successful business may need more materials so maintains or increase revenue for the supplier [an] especially as make high-quality products [app]Other appropriate responses should also be credited.
3(e)[6]
Do you think access to labour is the most important factor for a
manufacturing business to consider when deciding where to locate a new factory? 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 access to labour is the most important factor for a manufacturing business to consider when deciding where to locate a new factory.
Points might include:
Access to labour:
Skilled labour may be difficult to find/recruit [k] which could increase recruitment/labour costs [an] but can use machinery to reduce the need for labour [an]Labour intensive production requires access to labour [k] without labour they cannot operate[an]Can depend on type of workers required (k) unskilled workers may be easy to find [an]Other factors might include:
Good transport links [k] to ensure products arrive / sent when needed [an]Proximity to market [k] to ensure sales / revenue can be made [an]Type of product [k] a fragile / heavy product may need to be closer to customers to reduce risk of damage / cost [an]Access to raw materials / components [k] so production is not delayed[an]Availability/cost of suitable land [k] which could restrict size of factory / limit output / increases fixed costs [an]Government influence or examples e.g. government grants [k] can help reduce costs [an] whereas legal controls could prevent the business from locating in certain areas [an]Other appropriate responses should also be credited.
Justification might include:
Skilled labour may be difficult to find [k] which could increase recruitment costs [an] Factory machinery can replace some labour [k] reducing the importance of labour in the location decision [an]. Labour is the most important factor if the business is labour intensive because without labour the new factory cannot produce output [eval] however, other factors would be of greater importance in a new capital-intensive factory. [eval]
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