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Business Studies · Oct / Nov 2022 · Paper 22 · Question 4

0450

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  • 4(a)[8]

    Explain four benefits to employees of being members of a trade union. Award 1 mark for each effect (max 4). Award a maximum of 1 additional mark for each explanation. There are no application marks for this question. Relevant effects might include:

    Possibly improved pay – trade union negotiations make wage demands for a pay rise more likely to be successful
    Improved working conditions – as trade union can put forward a case to the employer if conditions are not good
    Employee views are represented in grievances with managers – more likely to be listened to as strength in numbers
    Provides advice to members – such as if they feel they have been dismissed unfairly / unfairly treated, employees will know if they have a case against the business
    The communication between employers and employees is better – as there is a channel through which issues/points from employees can be raised
    Provides services to members – such as insurance or social facilities at reduced rates
    Improved job satisfaction – by encouraging training
    Improved job security – especially if it is a closed shop
    Influence government policy e.g. pressure to increase legal minimum wage For example: A trade union will give advice to employees (1)

    such as if they feel they have been unfairly treated then the trade union can represent them in meetings with employers (1).

  • 4(b)[12]

    Using Appendix 3 and other information, consider how the financial statements might be useful to the following three stakeholder groups. Which stakeholder group will find the financial information most useful? Justify your answer.

    NM’s shareholders
    CC’s managers
    CC’s bank manager Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of how two or more stakeholder groups could use the financial information. Well-justified conclusion. Candidates discussing in detail how all three stakeholder groups might use the financial information, in context and with well-justified conclusion including why the other stakeholder groups may find the financial information less useful should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of how at least one stakeholder group might use of the financial information. Judgement with some justification / some evaluation of choice made. Candidates discussing in detail how two or more stakeholder groups might use the financial information and applying them to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss how the stakeholder groups might use the financial information with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining how the three stakeholder groups might use of the financial information in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: NM’s shareholders
    CC’s profit is $42m which is higher than NM’s profit of $3.5m – may result in higher dividends paid if the takeover goes ahead – more likely to accept shares in CC
    ROCE is also higher by 10% for CC – which may lead to better returns for shareholders if NM is taken over
    NM’s liquidity is lower than CC’s as its current ratio is only 1 and this means current assets only just cover current liabilities – acid test is less than 1 which is a concern – may be better to support the takeover as CC has much better liquidity
    CC is much bigger by $170m than NM in terms of shareholders’ equity – more stable and safer company to own shares in CC’s managers
    CC is more efficient as they have a better control of their costs as profit margin is 25% and is higher by 10% – managers at CC may be able to help NM by using CC’s working practices at NM and to improve its efficiency
    Inventory is high and acid test is low at 0.33 for NM - CC’s managers may improve NM’s profit by keeping lower levels of inventory and lowering warehousing costs
    NM already based in country Z and so will be familiar with the market there – help CC to enter this new market and use NM’s distribution channels for CC’s brands leading to higher revenue for CC CC’s bank manager
    CC already has a loan of $10m and needs $35m to takeover NM – this is still small relative to the amount of shareholders’ equity of $200m
    Needs to know if CC can repay the bank loan – CC has profit of $42m and NM has profit of $3.5m - NM is a profitable company to take over – making it likely the loan to CC will be repaid, and the bank will be confident in granting the loan Conclusion
    NM’s shareholders will find the information most useful because they need to assess how they might benefit from the takeover. CC’s managers will use other information about the efficiency of NM or its sales figures before making decisions about NM. The bank manager is only interested in the ability of the business to repay a loan.
    CC’s managers will find the information most useful because they will be able to assess if CC is more efficient than NM and if so, they will need to make NM more efficient after the takeover.
    CC’s bank manager will find the information most useful because they need to assess whether to offer a loan for the takeover and judge if the loan is likely to be repaid.
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