Business

1. 1.

   Fictional case: Amal runs a bakery as a sole trader. Explain unlimited liability and one implication for her personal assets.

   [2 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. There is no limited-liability shield separating Amal's exposure from the bakery's debts in this ownership model. Profit ownership therefore comes with personal financial risk.

   Marking points

   • The owner is personally responsible for business debts.
   • If business assets cannot cover debts, personal assets may be at risk, subject to applicable law.

   Examiner tip: Explain liability for debts, not simply that the owner works alone.

2. 2.

   Fictional case: a social enterprise sells refurbished computers and reinvests surpluses in affordable training. Distinguish its social objective from its financial objective.

   [3 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. The enterprise can prioritise skills access rather than maximum shareholder return while still needing a viable trading model. Social purpose and financial survival are complementary constraints.

   Marking points

   • Affordable training supports a social objective such as improving access to skills.
   • Sales and sustainable surpluses are financial means needed to keep operating.
   • A social objective does not remove the need to control costs and cash.

   Examiner tip: Do not equate a social enterprise with an organisation that cannot earn a surplus.

3. 3.

   Fictional case: a manufacturer closes a costly local plant to protect profits. Analyse a conflict between shareholders and employees and one possible compromise.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Identify what each group stands to gain or lose. A redeployment plan can reconcile some interests, but it will not solve the conflict if the firm has no viable positions elsewhere.

   Marking points

   • Shareholders may favour cost reductions to sustain returns.
   • Employees risk lost earnings and job security.
   • Redeployment or retraining can reduce worker harm while allowing restructuring.
   • The compromise has costs and depends on suitable alternative jobs.

   Examiner tip: Apply stakeholder interests to the actual closure decision.

4. 4.

   Fictional case: a family firm becomes a company with outside shareholders. Analyse how this can alter finance and control without assuming the shares are publicly traded.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. New equity changes who bears risk and who participates in governance. Evaluate the voting arrangement and investor expectations separately from whether a public market exists.

   Marking points

   • Share subscriptions can supply equity finance without scheduled loan repayments.
   • New voting shareholders can dilute the family's control.
   • Shareholders may demand reporting or influence dividend policy.
   • Private share ownership need not imply a stock-market listing.

   Examiner tip: Incorporation, outside investment and stock-market listing are not synonyms.

5. 5.

   Fictional case: a growing café offers franchise rights. Evaluate franchising rather than opening company-owned branches.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. Franchising can speed expansion when finance is scarce, but a service-sensitive café needs training and enforceable quality rules. Company ownership may suit a concept that cannot yet be reliably replicated.

   Marking points

   • Indicative: franchisees provide capital and local managerial effort.
   • The franchisor sacrifices some direct control and shares returns.
   • Inconsistent service can damage the shared brand, requiring standards and monitoring.
   • A justified choice depends on replicability, finance and quality-control capacity.

   Examiner tip: Evaluate the franchisor's decision, not only the franchisee's benefits.

6. 6.

   Fictional case: a listed retailer links managers' bonuses solely to annual profit. Evaluate whether this aligns decisions with shareholders' long-term interests.

   [4 marks] · no calculator

   Answer explanation

   Draft walkthroughs are based on marking guidance, not independently verified derivations.

   1. A single annual measure can reward decisions whose costs emerge later. Deferred rewards tied to sustainable cash generation and service quality may improve alignment, though more measures can complicate incentives.

   Marking points

   • Indicative: profit targets can focus managers on financial performance.
   • Short-term targets can encourage cuts to training or maintenance that harm future returns.
   • Accounting profit may be influenced by timing and does not capture all business risks.
   • A justified judgement considers deferred incentives and financial plus non-financial measures.

   Examiner tip: Shareholder interest is not necessarily maximum profit this year.

Original, unofficial practice questions from SubjectScout — not official past-paper questions.