Business Studies · May / June 2024 · Paper 12 · Question 2

0450

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GTB is a business which operates in the tertiary sector. It owns 5 cafs selling food and drinks. The business uses social media as its method of promotion. The Finance Manager, Moeen, is 2 analysing GTB’s financial statements. An extract is shown in Table 2.1. He is considering ways to improve GTB’s profit margin. Moeen knows there are other users that are interested in the accounts of a business. Table 2.1 Extract from GTB’s financial statements 2023 $600000 Revenue $150000 Profit $750000 Capital employed 25% Profit margin

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2(a)[2]
Define ‘tertiary sector’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Provides services to consumers/other sectors of industry [2]
OR Firms that supply a service to consumers/other businesses [2]
Partial definition e.g. business that provides services [1]
OR service sector business [1]
2 1st mark is for understanding it provides services. 2nd mark for reference to whom services are provided. Notes
2(b)[2]
Calculate GTB’s Return on Capital Employed (ROCE). Show your working. Award 2 marks for the correct answer. Award 1 mark for correct method but incorrect answer. Correct answer: 20% [2]
Correct method but incorrect answer e.g. Profit/capital employed × 100 [1]
OR 150 000 / 750 000 × 100 [1]
OR 20 [1]
If correct answer given with no working shown, award 2 marks. 2 Answer must be shown as a percentage (%) to gain both marks. Award only 1 mark if 20% is written as part of the answer but is not given as the final answer.
2(c)[4]
Outline two ways GTB could improve its profit margin. Award 1 mark for each relevant way (max 2). Award 1 mark for each relevant reference to this business (max 2). Points might include:
Increase price [k] of the food [app]
Lower/control fixed costs (or examples such as lower rent) [k] of its cafes [app]
Lower/control variable costs (or examples) [k] which could help increase the profit margin of 25% [app] Other appropriate responses should be credited. 4 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 are likely to be appropriate for this question:
Café
Selling food/drinks or examples such as coffee
5 (cafes)
25% (profit margin)
$ 600 000 (revenue)
$ 150 000 (profit)
$ 750 000 (capital employed)
Social media for promotion Other appropriate examples can be credited. Notes
2(d)[6]
Explain two advantages to GTB of using social media as its method of promotion. Award 1 mark for identification of each relevant advantage (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:
Can target specific groups of customers [k] which could help encourage brand loyalty [an] at each of the 5 locations [app]
Low-cost [k] so fewer cash outflows/lower expenses [an] which could help improve the profit margin of 25% [app]
Cover wide area/seen by many people [k] increasing sales/revenue/attract customers [an] for the cafe [app]
Quick to update [k] so can spend time on other tasks [an] such as analysing the financial statements [app]
Can reach groups that are difficult to reach any other way [k] Other appropriate responses should be credited. 6 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 are likely to be appropriate for this question:
Café
Selling food/drinks or examples such as coffee
5 (cafés)
25% (profit margin)
Improve profit margin
$ 600 000 (revenue)
$ 150 000 (profit)
$ 750 000 (capital employed)
Tertiary sector Other appropriate examples can be credited. Advantages must be to the business not the customer. Notes
2(e)[6]
Do you think banks are the main external users of the accounts of a business? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether banks are the main external users of the accounts of a business. Points might include: Banks:
Whether to give a bank loan [k] to see if a business can repay [an]
Whether a business can repay loans/overdraft [k] as this will influence the terms/interest rate/period of the loan [an]
To help decide the interest rate to set [k] to reflect the level of risk [an]
To decide the amount to lend [k]
Check interest payments can/are being made [k] Other users might include: Government [k]:
Want to check the profit [an] / to know the correct amount of tax has been paid/will be paid [an] Suppliers/Trade payables [k]:
Assess/shows liquidity position [an] to know whether the business is likely to be able to repay them [an]
See level of debt [an] Other appropriate responses should be credited. 6 This is a general question so there are no marks for application. Some points can be [k] or [an] but do not award the same point twice. [K] can be awarded for identifying what information the user is looking for, or how they would use the accounts. Some points can be awarded for different external users but only award once. Notes Justification might include: Banks will use the accounts to check whether a business can repay loans [k] as this is likely to influence the interest rate offered [an]. Suppliers [k] will want to know the liquidity position of a business [an]. Banks are likely to be the main external users of accounts because banks often lend large sums of money [eval], whereas suppliers may be less interested in the accounts if orders are small [eval]. Notes

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