Business Studies · May / June 2026 · Paper 12 · Question 3

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BTVqs 16 factories use flow production to manufacture cars. Maintaining quality is important. The managing director is reviewing BTV’s financial data including profit. An extract is shown in Table 3.1. She knows there are many external users of accounts who are interested in this data. Table 3.1 Extract from BTVqs financial data - December 2025 ($ million) 3 700 non-current assets 90 current assets 120 current liabilities 300 non-current liabilities 900 profit

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3(a)[2]
Calculate BTV’s current ratio. Show your working. Award 2 marks for a correct answer. Award 1 mark for correct method but incorrect answer. Correct answer:
0.75 : 1 [2]
0.75 [2]
Correct method but incorrect final answer e.g.
Current assets: current liabilities [1]
CA divided by CL or CA : CL [1]
90 : 120 [1]
0.8 [1]
3 : 4 [1]
2 If correct answer given with no working shown, award 2 marks. Award only 1 mark if 0.75 : 1 or 0.75 is written as part of the answer but is not given as the final answer.
3(b)[2]
Identify two external users of accounts. Award 1 mark per external user (max 2). Points might include:
Customers / debtors / trade receivables
Lenders/banks
Suppliers / trade payables / creditors
Local community
Government
Potential investors/shareholders/owners
Competitors / other businesses e.g. accountants / research organisations Other appropriate responses should be credited. 2 Only award the first two responses given. Must name the stakeholder, not simply describe them.
3(c)[4]
Identify four reasons why quality might be important for a business. Award 1 mark for each relevant reason (max 4). Points might include:
Better/maintain reputation/brand image/get good reviews/avoid bad reviews/goodwill
Maintain customer/brand loyalty / customers will buy again
Increase/higher sales/customers/revenue/ gain/protect market share
Improve/good customer relationships
Less rework / no need to replace faulty products / fewer/no returns / less wastage /
To reduce customer complaints
Gain competitive advantage / remain/be competitive / differentiate from competitors
Increase/higher prices
Increase added value Other appropriate responses should be credited. 4 Only award the first four responses given. Do not award:
Profit
To meet legal requirement/avoid fines
Increase motivation
Ethical reasons
Fewer errors/mistakes
3(d)[6]
Explain two disadvantages to BTV of using flow production. Award 1 mark for identification of each relevant disadvantage (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:
Inflexible / lack of customization /variety [k] so less able to respond to changes in the market /could lower demand [an] for cars [app]
Lower motivation [k] so employees are less efficient / lower output / high labour turnover / fewer quality products [an] at its factories [app]
High levels of inventory / large (storage) space needed [k] increasing (storage/warehouse/rent) costs [an] at the 16 locations [app]
If one machine breaks down whole production line/process stops/delays production [k] which reduces output / lower efficiency / may not be able to meet orders [an]
High set up/machinery costs / high/large capital expenditure [k] leading to large cash outflows / lower profit margin/ has an opportunity cost [an] 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:
Cars
Factories
16 (locations)
$700 million (non-current assets)
$90 million (current assets)
$120 million (current liabilities)
$300 million (non-current liabilities)
$900 million (profit)
(Maintain) quality Other appropriate examples can be credited. Notes:
Points must refer to effect on business rather than employees e.g. boring / no variety for employees
Quality is [app] or [an] but only award once.
Some [an] can be used for different points but only award once.
Less output and lower productivity/ efficiency are different [an] points
High storage/inventory costs is [an] only Do not award:
Effects on employees e.g. boring / no variety for employees
Confusion with other methods e.g. one fault and whole batch is scrapped
3(e)[6]
Explain two reasons why profit might be important to a business. Which reason 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 justified decision about which reason is likely to be the most important. Points might include:
Use as a source of funds / reinvest back into the business [k] as there is no interest to pay [an] AND/OR allowing the business to expand [an]
Measure of success [k] as low profit could suggest the business is not worth continuing/starting [an] OR which could help attract investors [an]
Reward for risk-taking/return on shareholder/owner’s investment / pay dividends [k] as otherwise they could invest elsewhere [an] OR so keep/ not sell shares / buy more shares [an] AND/OR motivate them to work harder/carry on/earn more [an]
Help attract investors [k] as may invest their money in hope of making a return on investment [an] OR allowing the business to grow/expand [an]
Allow business to share profit with employees [k] which could increase motivation [an]
Help decide whether to continue making/selling a product [k] Other appropriate responses should be credited. 6 This is a generic question so there are no marks for application. To access evaluation must refer to two reasons. Notes:
Some points can be [k] or [an] but only award once e.g. attract investors.
Some analysis could be used for different points but only award once.
Points about motivation is [an] only. Do not award:
Definition of profit
Pay expenses/day-to-day costs
Ways to expand e.g. develop new products/open more factories
Motivate employees / provides job security / bonus
Ensure survival of business
Increase value of business
More recognition/status/reputation
Show business performance Guidance Justification might include: It can act as a measure of success [k] as low profit could suggest the business is not worth continuing [an]. It can be used as a source of funds [k] as there is no interest to pay [an]. Providing a source of funds is likely to be the most important reason because by being able to expand it could result in increased profit in the future [eval] which may help ensure there are positive returns for the owners [eval].

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