Business Studies · Oct / Nov 2025 · Paper 12 · Question 2

0450

As printed in the paper

The question as text

OTK is a small jewellery shop in the centre of Main City. The business does not currently use ecommerce. OTK buys its jewellery from local suppliers. It pays for the jewellery 30 days later. The 2 shop manager is analysing OTKis cash flow forecast. She is concerned that the business might have a short-term cash flow problem.

Read automatically from the paper; the printed page above is exact.

Show the answer and mark scheme

2(a)[2]
Define ‘cash flow forecast’. Award 2 marks for a full definition. Award 1 mark for a partial definition.
Estimate of future cash inflows and outflows of a business (usually on a month-by-month basis) [2]. Partial definition e.g.
Shows the cash inflows and outflows of a business [1]. 2 First mark for understanding it refers to cash/money in(flows) and out(flows). Second mark is for idea that it is an estimate or future values [+1].
2(b)[2]
Identify two reasons why cash is important for a business. Award 1 mark per reason (max 2). Points might include: Examples of day-to-day costs/expenses include:
Pay employees/wages/salary
Pay suppliers/trade payables / raw materials / inventory
Pay rent
Pay insurance
Pay utilities e.g. heating/lighting/water/power
Pay advertising
Pay interest (on loans) / repay loan Other answers include:
For use in an emergency / to pay unexpected costs
Ensure survival / business may be forced to close if cannot pay its debts Other appropriate responses should be credited. 2 Only award the first two responses given. Can award pay expenses / short-term debts / day-to-day costs when no specific examples given.
2(c)[4]
Identify four functions of management. Award 1 mark per function (max 2). Four from:
Control
Coordinate
Plan
Organise
Command 4 Only award the first four responses given. Do not award alternative words.
2(d)[6]
Explain two ways OTK could overcome a short-term cash flow problem. 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:
Overdraft [k] as this would allow the business to spend more than it has in its current account [an] for this jewellery business [app]
Ask suppliers for longer to pay [k] which would delay/decrease cash outflows [an] for more than 30 days [app]
Short-term bank loan [k] for the shop [app] increasing cash inflows quickly [an]
Delay purchase of non-current assets [k] keeping more cash in the business [an]
Sell (non-current) assets [k] generates cash inflows [an]
Ask customers to pay sooner / offer discounts to customers to pay more quickly [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:
Small (business)
Jewellery
Shop
Centre of Main City
(No) ecommerce
30 days (later)
Local suppliers Other appropriate examples can be credited. Analysis must show effect of method on cash inflow/outflow. Can award:
Increase cash inflows as [k] or [an]
Decrease cash outflows as [k] or [an]
2(e)[6]
Explain two threats to a business of using ecommerce. Which threat is likely to be the most important? 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 which threat is likely to be most important to a business. Points might include:
Increased/more competition [k] so may have to set lower prices (to compete) / may have to spend more on advertising/promotion [an]
Need to design/build website [k] which increases costs [an]
Time/cost for maintenance/updating of the website [k] so may need to employ someone to do this [an]
No face-to-face contact with customer / suppliers / lack of personal service [k] so difficult to gain feedback [an] AND/OR may be difficult to build customer loyalty / supplier relationships / [an]
Need to deliver the products to customers [k] increasing transport/postage costs [an] leading to lower profit margin [an]
Technical problems/no power [k] so may lose potential sales [an]
Security threats / risk of hacking / computer viruses / data theft/fraud / scams [k] which could damage its reputation [an] AND/OR reduce customer loyalty [an]
Risk of bad reviews [k] lowering sales AND/OR revenue [an]
High level of returns [k] Other appropriate responses should be credited. Justification might include: One threat is an increase in competition [k] so may have to set lower prices (to compete) [an]. Another threat is technical problems [k] so the business may lose potential sales [an]. Technical problems are likely to be the most important threat because if customers cannot access the website setting a lower price may be ineffective [eval] so gaining any revenue could be difficult to achieve. [eval]. 6 This is a general question so there are no marks for application. To access evaluation must discuss two valid threats. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Some points can be [k] or [an] but only award once e.g. high transport costs. Some analysis could be awarded for different threats, but only award once. Points must focus on the impact on business and not on customers.

Practise this paper →

Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.