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Business Studies · May / June 2016 · Paper 22 · Question 3

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  • 3(a)[8]

    Identify four stakeholder groups who would want to see FF’s accounts and explain why each group would want to see them. [8]

    Application [4 × 1] award one application mark for each relevant stakeholder group (maximum of 4) Analysis [4 × 1] for explaining why each stakeholder group would want to see the accounts Award one mark for each relevant stakeholder group (maximum of four), such as:

    Owners/shareholders
    Bank manager
    Potential investors
    Government
    Employees
    Managers
    Creditors/suppliers
    Competitors
    Trade Union. Award a maximum of one additional mark for each explanation of why they will want to see the accounts. Indicative response: Bank manager (ap) because the bank will want to be certain that if it gives a loan to FF that the company will be able to pay it back (an).

  • 3(b)[12]

    Consider the income statement extracts for the two businesses in Appendix 3. Include profitability ratio calculations in your answer. Recommend which business FF should take over. Justify your answer. [12]

    Relevant points might include: Business A 2 years old $250 000 to take over Same market segment/competitor plus additional market segment/growing market

    Less sales revenue than Business B
    Gpm = 50%
    Npm = 25% Business B 20 years old $500 000 to take over Same market segment/competitor
    5 × times higher sales revenue
    Gpm = 75%
    Npm = 25% Knowledge/Analysis/Evaluation – award up to ten marks using the levels-based mark scheme below. Knowledge/Analysis/Evaluation Level 3 At least 2 × Level 2+ 9–10 marks for well justified recommendation as to the best company to take over and why not the other company. 7–8 marks for some limited judgement shown in recommendation as to the best company to take over. Level 2 4–6 marks Correct profitability ratios calculated. Level 1 1–3 marks Outline of differences in the figures or comments on the differences between the two businesses. Level 1 One mark for each L1 statement (max of three marks) e.g. Business A has lower sales revenue than Business B. Level 2 One L2 explanation can gain four marks and a further mark can be awarded for each additional L2 explanation (max six marks) e.g. The gpm for Business A is 50% (four marks for L2 answer). Level 3 For L3 to be awarded there needs to be at least two correct L2 calculations and then a recommendation which justifies which is the best business to choose. Award up to two additional marks for relevant application. Possible application marks: Company A – $250 000 to take over – 2 years old – same market segment/competitors plus additional market segment – growing market – for photographs of families, children and pets;

    Company B – $500 000 to take over – 20 years old/well-established business – same market segment/competitor;

    private limited company;

    photographs;

    photographers;

    photography;

    getting married;

    weddings, birthdays, family photographs;

    business customers as well as private individuals;

    sales revenue for 2015 – $500 000;

    profit for 2015 - $125 000;

    growing externally rather than internally. There may be other examples in context which have not been included here.

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