IB · BM HL

Business Management HL

Finance and accounts (HL): ratios and investment appraisal — Unit 4 HL

Name: ____________________Date: October 2, 2026

1.
A company reports gross profit of $400,000 and sales revenue of $1,000,000 for the year. Calculate the gross profit margin.
[2 marks]
Marking points
- Uses the formula: gross profit margin = (gross profit / sales revenue) × 100.
- Substitutes to obtain (400,000/1,000,000) × 100 = 40%.
Examiner tip: Gross profit margin reflects only the direct cost of producing/buying the goods sold (cost of sales) — it does not yet account for overheads such as rent, marketing, or administration.
2.
Marking analysis: A learner attempts the following task: “A company reports gross profit of $400,000 and sales revenue of $1,000,000 for the year. Calculate the gross profit margin.” Their response addresses only this point: “Uses the formula: gross profit margin = (gross profit / sales revenue) × 100.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks]
Marking points
- Recognises credit for the stated point: Uses the formula: gross profit margin = (gross profit / sales revenue) × 100.
- Identifies the missing requirement: Substitutes to obtain (400,000/1,000,000) × 100 = 40%.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
3.
Using the same company (sales revenue $1,000,000), net profit for the year is $150,000. (a) Calculate the net profit margin. (b) Given that gross profit margin was 40% (from the previous question), explain what the difference between the gross and net margins suggests about the size of the company's operating expenses relative to revenue.
[4 marks]
Marking points
- Uses the formula: net profit margin = (net profit / sales revenue) × 100.
- Substitutes to obtain (150,000/1,000,000) × 100 = 15%.
- Calculates the gap between the two margins as 40% − 15% = 25 percentage points.
- Explains that this 25 percentage point gap represents operating expenses (such as wages, rent, marketing, and administration) equal to 25% of sales revenue, suggesting a relatively large overhead burden on the company.
Examiner tip: The gap between gross and net profit margin is always explained by operating expenses and other non-cost-of-sales deductions — a large gap signals high overheads relative to revenue, not necessarily poor performance on its own.
4.
Marking analysis: A learner attempts the following task: “Using the same company (sales revenue $1,000,000), net profit for the year is $150,000. (a) Calculate the net profit margin. (b) Given that gross profit margin was 40% (from the previous question), explain what the difference between the gross and net margins suggests about the size of the company's operating expenses relative to revenue.” Their response addresses only this point: “Uses the formula: net profit margin = (net profit / sales revenue) × 100.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[4 marks]
Marking points
- Recognises credit for the stated point: Uses the formula: net profit margin = (net profit / sales revenue) × 100.
- Identifies the missing requirement: Substitutes to obtain (150,000/1,000,000) × 100 = 15%.
- Identifies the missing requirement: Calculates the gap between the two margins as 40% − 15% = 25 percentage points.
- Identifies the missing requirement: Explains that this 25 percentage point gap represents operating expenses (such as wages, rent, marketing, and administration) equal to 25% of sales revenue, suggesting a relatively large overhead burden on the company.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
5.
A company has operating profit of $200,000 and capital employed of $1,000,000. Calculate the return on capital employed (ROCE), and explain what this ratio measures.
[3 marks]
Marking points
- Uses the formula: ROCE = (operating profit / capital employed) × 100.
- Substitutes to obtain (200,000/1,000,000) × 100 = 20%.
- Explains that ROCE measures how efficiently a company generates profit from the total long-term capital (both debt and equity) invested in the business.
Examiner tip: ROCE is one of the most important ratios for comparing how efficiently different companies use their capital, regardless of how that capital is split between debt and equity financing.
6.
Marking analysis: A learner attempts the following task: “A company has operating profit of $200,000 and capital employed of $1,000,000. Calculate the return on capital employed (ROCE), and explain what this ratio measures.” Their response addresses only this point: “Uses the formula: ROCE = (operating profit / capital employed) × 100.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks]
Marking points
- Recognises credit for the stated point: Uses the formula: ROCE = (operating profit / capital employed) × 100.
- Identifies the missing requirement: Substitutes to obtain (200,000/1,000,000) × 100 = 20%.
- Identifies the missing requirement: Explains that ROCE measures how efficiently a company generates profit from the total long-term capital (both debt and equity) invested in the business.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
7.
A company has current assets of $300,000 (including $100,000 of inventory) and current liabilities of $150,000. (a) Calculate the current ratio. (b) Calculate the acid test (quick) ratio. (c) Explain why the acid test ratio is generally considered a more cautious measure of liquidity than the current ratio.
[5 marks]
Marking points
- Uses the formula: current ratio = current assets / current liabilities.
- Substitutes to obtain 300,000/150,000 = 2.0.
- Uses the formula: acid test ratio = (current assets − inventory) / current liabilities.
- Substitutes to obtain (300,000 − 100,000)/150,000 ≈ 1.33.
- Explains that the acid test excludes inventory because inventory is the least liquid current asset, often taking the longest time to convert into cash, so the acid test gives a more cautious view of a company's ability to meet short-term liabilities immediately.
Examiner tip: Removing inventory is the single difference between the current ratio and acid test ratio — this is why the acid test is always equal to or lower than the current ratio for the same company.
8.
Marking analysis: A learner attempts the following task: “A company has current assets of $300,000 (including $100,000 of inventory) and current liabilities of $150,000. (a) Calculate the current ratio. (b) Calculate the acid test (quick) ratio. (c) Explain why the acid test ratio is generally considered a more cautious measure of liquidity than the current ratio.” Their response addresses only this point: “Uses the formula: current ratio = current assets / current liabilities.” Evaluate the response against the complete 5-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[5 marks]
Marking points
- Recognises credit for the stated point: Uses the formula: current ratio = current assets / current liabilities.
- Identifies the missing requirement: Substitutes to obtain 300,000/150,000 = 2.0.
- Identifies the missing requirement: Uses the formula: acid test ratio = (current assets − inventory) / current liabilities.
- Identifies the missing requirement: Substitutes to obtain (300,000 − 100,000)/150,000 ≈ 1.33.
- Identifies the missing requirement: Explains that the acid test excludes inventory because inventory is the least liquid current asset, often taking the longest time to convert into cash, so the acid test gives a more cautious view of a company's ability to meet short-term liabilities immediately.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
9.
A company has non-current (long-term) liabilities of $400,000 and capital employed of $1,000,000. (a) Calculate the gearing ratio. (b) State whether this company would generally be considered highly geared or lowly geared, and explain one risk of being highly geared.
[4 marks]
Marking points
- Uses the formula: gearing ratio = (non-current liabilities / capital employed) × 100.
- Substitutes to obtain (400,000/1,000,000) × 100 = 40%.
- States that a gearing ratio around 40-50% is often considered a borderline/moderately high level, with above 50% typically considered highly geared.
- Explains a valid risk of high gearing, such as higher fixed interest payments that must be paid regardless of profit, increasing financial risk during periods of low profitability or rising interest rates.
Examiner tip: Gearing specifically measures reliance on long-term debt finance, distinct from the current ratio and acid test, which measure short-term liquidity — do not confuse long-term financial risk with short-term liquidity risk.
10.
Marking analysis: A learner attempts the following task: “A company has non-current (long-term) liabilities of $400,000 and capital employed of $1,000,000. (a) Calculate the gearing ratio. (b) State whether this company would generally be considered highly geared or lowly geared, and explain one risk of being highly geared.” Their response addresses only this point: “Uses the formula: gearing ratio = (non-current liabilities / capital employed) × 100.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[4 marks]
Marking points
- Recognises credit for the stated point: Uses the formula: gearing ratio = (non-current liabilities / capital employed) × 100.
- Identifies the missing requirement: Substitutes to obtain (400,000/1,000,000) × 100 = 40%.
- Identifies the missing requirement: States that a gearing ratio around 40-50% is often considered a borderline/moderately high level, with above 50% typically considered highly geared.
- Identifies the missing requirement: Explains a valid risk of high gearing, such as higher fixed interest payments that must be paid regardless of profit, increasing financial risk during periods of low profitability or rising interest rates.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
11.
A company is considering a project requiring an initial investment of $50,000, which is expected to generate net cash inflows of $20,000 per year for 4 years. Calculate the payback period for this project, to one decimal place of a year.
[4 marks]
Marking points
- Calculates cumulative cash flow after year 1: $20,000; after year 2: $40,000.
- Identifies that the $50,000 investment is recovered partway through year 3, since cumulative cash flow reaches $60,000 by the end of year 3.
- Calculates the remaining amount needed at the start of year 3 as $50,000 − $40,000 = $10,000.
- Divides this by the year 3 cash inflow: 10,000/20,000 = 0.5, giving a payback period of 2.5 years.
Examiner tip: Payback period only tells you how quickly the initial investment is recovered — it says nothing about the project's overall profitability or any cash flows occurring after the payback point, which is its main limitation.
12.
Marking analysis: A learner attempts the following task: “A company is considering a project requiring an initial investment of $50,000, which is expected to generate net cash inflows of $20,000 per year for 4 years. Calculate the payback period for this project, to one decimal place of a year.” Their response addresses only this point: “Calculates cumulative cash flow after year 1: $20,000; after year 2: $40,000.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[4 marks]
Marking points
- Recognises credit for the stated point: Calculates cumulative cash flow after year 1: $20,000; after year 2: $40,000.
- Identifies the missing requirement: Identifies that the $50,000 investment is recovered partway through year 3, since cumulative cash flow reaches $60,000 by the end of year 3.
- Identifies the missing requirement: Calculates the remaining amount needed at the start of year 3 as $50,000 − $40,000 = $10,000.
- Identifies the missing requirement: Divides this by the year 3 cash inflow: 10,000/20,000 = 0.5, giving a payback period of 2.5 years.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
13.
Using the same project (initial investment $50,000, net cash inflow $20,000 per year for 4 years), calculate the average rate of return (ARR).
[5 marks]
Marking points
- Calculates total cash inflow over the project's life: 20,000 × 4 = $80,000.
- Calculates total profit (net return) by subtracting the initial investment: 80,000 − 50,000 = $30,000.
- Calculates average annual profit by dividing by the number of years: 30,000/4 = $7,500.
- Uses the formula ARR = (average annual profit / initial investment) × 100.
- Substitutes to obtain (7,500/50,000) × 100 = 15%.
Examiner tip: A common error in ARR calculations is forgetting to subtract the initial investment before dividing by the number of years — remember that ARR measures average annual profit, not average annual cash inflow.
14.
Marking analysis: A learner attempts the following task: “Using the same project (initial investment $50,000, net cash inflow $20,000 per year for 4 years), calculate the average rate of return (ARR).” Their response addresses only this point: “Calculates total cash inflow over the project's life: 20,000 × 4 = $80,000.” Evaluate the response against the complete 5-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[5 marks]
Marking points
- Recognises credit for the stated point: Calculates total cash inflow over the project's life: 20,000 × 4 = $80,000.
- Identifies the missing requirement: Calculates total profit (net return) by subtracting the initial investment: 80,000 − 50,000 = $30,000.
- Identifies the missing requirement: Calculates average annual profit by dividing by the number of years: 30,000/4 = $7,500.
- Identifies the missing requirement: Uses the formula ARR = (average annual profit / initial investment) × 100.
- Identifies the missing requirement: Substitutes to obtain (7,500/50,000) × 100 = 15%.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
15.
A company is considering an investment of $50,000, expected to generate net cash inflows of $20,000 per year for 3 years. Using a discount rate of 10% (discount factors: Year 1 = 0.909, Year 2 = 0.826, Year 3 = 0.751), calculate the net present value (NPV) of this project, and state whether the company should accept it based on this result alone.
[6 marks]
Marking points
- Calculates the present value of Year 1 cash flow: 20,000 × 0.909 = $18,180.
- Calculates the present value of Year 2 cash flow: 20,000 × 0.826 = $16,520.
- Calculates the present value of Year 3 cash flow: 20,000 × 0.751 = $15,020.
- Sums the present values: 18,180 + 16,520 + 15,020 = $49,720.
- Subtracts the initial investment: NPV = 49,720 − 50,000 = −$280.
- States that since NPV is negative (though only marginally), the company should reject the project based on this result alone, as it is expected to very slightly destroy value in today's money terms.
Examiner tip: NPV already accounts for the time value of money by discounting future cash flows — a positive NPV means the project is expected to add value in today's terms, while a negative NPV (even a small one) means the opposite, regardless of how 'close to zero' it appears.
16.
Marking analysis: A learner attempts the following task: “A company is considering an investment of $50,000, expected to generate net cash inflows of $20,000 per year for 3 years. Using a discount rate of 10% (discount factors: Year 1 = 0.909, Year 2 = 0.826, Year 3 = 0.751), calculate the net present value (NPV) of this project, and state whether the company should accept it based on this result alone.” Their response addresses only this point: “Calculates the present value of Year 1 cash flow: 20,000 × 0.909 = $18,180.” Evaluate the response against the complete 6-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[6 marks]
Marking points
- Recognises credit for the stated point: Calculates the present value of Year 1 cash flow: 20,000 × 0.909 = $18,180.
- Identifies the missing requirement: Calculates the present value of Year 2 cash flow: 20,000 × 0.826 = $16,520.
- Identifies the missing requirement: Calculates the present value of Year 3 cash flow: 20,000 × 0.751 = $15,020.
- Identifies the missing requirement: Sums the present values: 18,180 + 16,520 + 15,020 = $49,720.
- Identifies the missing requirement: Subtracts the initial investment: NPV = 49,720 − 50,000 = −$280.
- Identifies the missing requirement: States that since NPV is negative (though only marginally), the company should reject the project based on this result alone, as it is expected to very slightly destroy value in today's money terms.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
17.
Explain one advantage of using NPV over payback period as an investment appraisal method, and one disadvantage of NPV compared to payback period.
[2 marks] · no calculator
Marking points
- Explains a valid advantage of NPV, such as it accounting for the time value of money (unlike payback), and considering all cash flows over the project's entire life, not just those up to the payback point.
- Explains a valid disadvantage of NPV, such as being more complex to calculate and requiring an estimated discount rate, which introduces a source of uncertainty or potential error not present in the simpler payback calculation.
Examiner tip: No single investment appraisal method is perfect — a strong evaluation answer usually recommends using multiple methods together (payback for liquidity/risk, NPV and ARR for profitability) rather than relying on just one.
18.
Marking analysis: A learner attempts the following task: “Explain one advantage of using NPV over payback period as an investment appraisal method, and one disadvantage of NPV compared to payback period.” Their response addresses only this point: “Explains a valid advantage of NPV, such as it accounting for the time value of money (unlike payback), and considering all cash flows over the project's entire life, not just those up to the payback point.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains a valid advantage of NPV, such as it accounting for the time value of money (unlike payback), and considering all cash flows over the project's entire life, not just those up to the payback point.
- Identifies the missing requirement: Explains a valid disadvantage of NPV, such as being more complex to calculate and requiring an estimated discount rate, which introduces a source of uncertainty or potential error not present in the simpler payback calculation.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
19.
Explain how window dressing (manipulating financial statements to appear more favorable) could mislead a stakeholder relying on ratio analysis, using the example of a company temporarily delaying payments to suppliers just before its year-end to improve its current ratio.
[2 marks] · no calculator
Marking points
- Explains that delaying supplier payments keeps cash within the business longer, temporarily inflating current assets (cash) relative to current liabilities right at the point the balance sheet is prepared.
- Explains that this makes the current ratio appear healthier than the company's typical, ongoing liquidity position actually is, potentially misleading a stakeholder (such as a lender or investor) who relies on this single snapshot figure.
Examiner tip: Ratio analysis is always based on a single snapshot in time (the balance sheet date) — this makes it vulnerable to short-term manipulation timed deliberately around that date, which is why trend analysis across several years is more reliable than a single year's ratios.
20.
Marking analysis: A learner attempts the following task: “Explain how window dressing (manipulating financial statements to appear more favorable) could mislead a stakeholder relying on ratio analysis, using the example of a company temporarily delaying payments to suppliers just before its year-end to improve its current ratio.” Their response addresses only this point: “Explains that delaying supplier payments keeps cash within the business longer, temporarily inflating current assets (cash) relative to current liabilities right at the point the balance sheet is prepared.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that delaying supplier payments keeps cash within the business longer, temporarily inflating current assets (cash) relative to current liabilities right at the point the balance sheet is prepared.
- Identifies the missing requirement: Explains that this makes the current ratio appear healthier than the company's typical, ongoing liquidity position actually is, potentially misleading a stakeholder (such as a lender or investor) who relies on this single snapshot figure.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
21.
A firm's cost of sales for the year was $600,000 and its average inventory was $100,000. Calculate (a) the inventory turnover ratio and (b) the average number of days inventory is held, to 1 decimal place.
[3 marks]
Marking points
- Uses inventory turnover = cost of sales / average inventory.
- Calculates 600,000 / 100,000 = 6 times per year.
- Calculates days held = 365 / 6 ≈ 60.8 days.
Examiner tip: Turnover in times per year and in days are two views of the same figure; days = 365 divided by turnover.
22.
Marking analysis: A learner attempts the following task: “A firm's cost of sales for the year was $600,000 and its average inventory was $100,000. Calculate (a) the inventory turnover ratio and (b) the average number of days inventory is held, to 1 decimal place.” Their response addresses only this point: “Uses inventory turnover = cost of sales / average inventory.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks]
Marking points
- Recognises credit for the stated point: Uses inventory turnover = cost of sales / average inventory.
- Identifies the missing requirement: Calculates 600,000 / 100,000 = 6 times per year.
- Identifies the missing requirement: Calculates days held = 365 / 6 ≈ 60.8 days.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
23.
A firm has trade receivables (debtors) of $50,000 and annual credit sales of $400,000. (a) Calculate debtor days to 1 decimal place. (b) Explain why a rising debtor-days figure could threaten the firm's liquidity.
[3 marks]
Marking points
- Uses debtor days = trade receivables / credit sales × 365.
- Calculates 50,000 / 400,000 × 365 ≈ 45.6 days.
- Explains that longer collection times mean cash arrives later while the firm must still pay suppliers and wages, straining cash flow.
Examiner tip: Profit on paper is not cash: slow-paying customers can leave a profitable firm short of liquidity.
24.
Marking analysis: A learner attempts the following task: “A firm has trade receivables (debtors) of $50,000 and annual credit sales of $400,000. (a) Calculate debtor days to 1 decimal place. (b) Explain why a rising debtor-days figure could threaten the firm's liquidity.” Their response addresses only this point: “Uses debtor days = trade receivables / credit sales × 365.” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks]
Marking points
- Recognises credit for the stated point: Uses debtor days = trade receivables / credit sales × 365.
- Identifies the missing requirement: Calculates 50,000 / 400,000 × 365 ≈ 45.6 days.
- Identifies the missing requirement: Explains that longer collection times mean cash arrives later while the firm must still pay suppliers and wages, straining cash flow.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
25.
Explain two limitations of using ratio analysis to judge a company's performance.
[2 marks] · no calculator
Marking points
- Explains that ratios use historical data and may not predict future performance.
- Explains that firms may use different accounting policies, and ratios ignore qualitative factors, so comparisons between firms or years can mislead.
Examiner tip: Ratios are most useful when compared against past years, competitors and industry averages, not read in isolation.
26.
Marking analysis: A learner attempts the following task: “Explain two limitations of using ratio analysis to judge a company's performance.” Their response addresses only this point: “Explains that ratios use historical data and may not predict future performance.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains that ratios use historical data and may not predict future performance.
- Identifies the missing requirement: Explains that firms may use different accounting policies, and ratios ignore qualitative factors, so comparisons between firms or years can mislead.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
27.
A firm's current ratio is 0.8. Explain one way it could improve this ratio in the short term, and one risk of that action.
[2 marks] · no calculator
Marking points
- Explains a valid method, such as taking a long-term loan to raise cash (increasing current assets without raising current liabilities) or selling surplus non-current assets.
- Explains a risk, such as higher gearing and interest costs, or losing productive assets needed for future output.
Examiner tip: A current ratio below 1 means current liabilities exceed current assets, so the fix must add liquid assets or cut short-term debt.
28.
Marking analysis: A learner attempts the following task: “A firm's current ratio is 0.8. Explain one way it could improve this ratio in the short term, and one risk of that action.” Their response addresses only this point: “Explains a valid method, such as taking a long-term loan to raise cash (increasing current assets without raising current liabilities) or selling surplus non-current assets.” Evaluate the response against the complete 2-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[2 marks] · no calculator
Marking points
- Recognises credit for the stated point: Explains a valid method, such as taking a long-term loan to raise cash (increasing current assets without raising current liabilities) or selling surplus non-current assets.
- Identifies the missing requirement: Explains a risk, such as higher gearing and interest costs, or losing productive assets needed for future output.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.
29.
Distinguish between internal and external sources of finance, and explain one advantage and one disadvantage of using retained profit to fund expansion.
[3 marks] · no calculator
Marking points
- States that internal sources come from within the business (e.g. retained profit, sale of assets) while external sources come from outside (e.g. loans, share issues, overdrafts).
- Explains an advantage of retained profit, such as no interest or loss of ownership.
- Explains a disadvantage, such as limited amounts and a lower dividend for shareholders.
Examiner tip: Retained profit is the cheapest finance but is limited by how much profit the firm actually makes.
30.
Marking analysis: A learner attempts the following task: “Distinguish between internal and external sources of finance, and explain one advantage and one disadvantage of using retained profit to fund expansion.” Their response addresses only this point: “States that internal sources come from within the business (e.g. retained profit, sale of assets) while external sources come from outside (e.g. loans, share issues, overdrafts).” Evaluate the response against the complete 3-mark task. Identify what earns credit and state every additional requirement needed for full marks.
[3 marks] · no calculator
Marking points
- Recognises credit for the stated point: States that internal sources come from within the business (e.g. retained profit, sale of assets) while external sources come from outside (e.g. loans, share issues, overdrafts).
- Identifies the missing requirement: Explains an advantage of retained profit, such as no interest or loss of ownership.
- Identifies the missing requirement: Explains a disadvantage, such as limited amounts and a lower dividend for shareholders.
Examiner tip: Treat each marking point as a separate requirement. Do not award the same idea twice, and do not infer work the learner did not show.