Business Studies · Oct / Nov 2024 · Paper 12 · Question 3

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HRO manufactures children’s toys. It is a private limited company. The main objective of HRO’s shareholders is to increase profit. This might conflict with the objectives of other stakeholder groups, 3 including its 30 suppliers. HRO’s Managing Director knows that market research can help when making marketing decisions. The Finance Director is preparing HRO’s statement of financial position. An extract is shown in Table 3.1. Table 3.1 Extract from HRO’s statement of financial position at 30 June 2024 ($000s) 480 Non-current assets 250 Current assets 200 Current liabilities 300 Non-current liabilities

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3(a)[2]
Define ‘non-current assets’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Resources owned by a business which will be used for a period longer than one year [2]
OR Items owned by a business for more than one year [2]
Partial definition e.g. items owned/bought/possessed by the business [1]
OR Items in the business for more than one year [1]
2 For both marks must have idea of 'owned by a business' and held for 'more than 1 year'.
3(b)[2]
Calculate HRO’s current ratio. Show your working. Award 2 marks for a correct answer. Award 1 mark for correct method but incorrect answer. Correct answer 1.25:1 [2]
OR 1.25 [2]
Correct method but incorrect answer e.g. Current assets ÷ current liabilities [1]
OR 250/200 [1]
If correct answer given with no working shown, award 2 marks. 2 Award only 1 mark if 1.25 is written as part of the answer but is not given as the final answer. If answer incorrect, check for the correct working. Notes
3(c)[4]
State whether each of the following would be classified as a current asset or as a current liability. Award 1 mark per correct answer (max 2).
Trade receivables: Current asset
Trade payables: Current liability
Overdraft: Current liability
Inventory: Current asset 4 Only award the first response given for each answer. Notes
3(d)[6]
Explain one way the objective of HRO’s shareholders to increase profit might conflict with the objectives of each of the following stakeholder groups: 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: Customers:
Value for money/lower prices [k] but HRO might want to increase prices [an] of its toys [app]
HRO might want to increase the prices [k] of its toys [app] whereas customers want value for money/lower prices/refuse to buy / go to competitor [an]
Customers want good/better quality of products [k] which may increase (material) costs [an] of this private limited company [app]
Wider range of products [k] but this could increase HRO’s costs [an]
Reliable products/services [k] Suppliers:
Might want to increase prices [k] whereas HRO might want to lower prices [an], so HRO has more funds for market research [app]
HRO wants to pay lower prices [k] which lowers revenue/profit for suppliers [an]
Increased/regular number of orders [k] but HRO might want to place fewer orders [an] to reduce its $200 000 current liabilities [app]
To be treated fairly [k] Other appropriate responses should also 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:
(Children’s) toys
Private limited company
Market research
30 (suppliers)
$200 000 (current liabilities) Other appropriate examples can be credited. Knowledge can be awarded for identifying an objective of either the business (other than profit) or stakeholder. Analysis mark for explaining how this might conflict with the other party. Notes
3(e)[6]
Do you think the advantages to a business of using primary market research are greater than the disadvantages? 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 the advantages to a business of using primary market research are greater than the disadvantages. Points might include: Advantages:
Up to date/new (data) [k] which can help make better/informed decisions/able to satisfy customer demand [an] increasing sales [an]
Business specific/relevant data can be gathered [k] so should help the business find out only what it needs to know [an]
Only available to own business / not available to the competition [k] Disadvantages:
Expensive [k] as need to recruit experts to assist [an] which increase cash outflows/increase costs [an]
Time to collect [k] which could mean opportunities are missed [an] Other appropriate points should also be credited. Justification might include: It allows for business specific data to be gathered [k] helping the business find out exactly what it wants to know [an]. However, it does take time to collect [k] which may mean opportunities are missed [an]. 6 This is a general question so there are no marks for application. To access [eval], must discuss a valid advantage and a valid disadvantage. For analysis: Can explain the effect of the advantage/disadvantage Reason why the advantage/disadvantage arises Notes The advantages are greater because the time spent now to gather specific information is likely to help the business make better decisions [eval] which could save the business from wasting resources in the future [eval]. Notes

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