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Finance and accounts Ratio analysis, break-even analysis and cash-flow forecasting using original company data.
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Business Management SL Finance and accounts
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1 A retail company reports the following for the year: gross profit $180,000, revenue $600,000, net profit $60,000. (a) Calculate the gross profit margin. (b) Calculate the net profit margin. (c) Suggest one reason the gap between the two margins might be considered large, referring to what lies between the two figures. ✓ Reviewed Paper 1 style Medium 4 marks Calculator + 2 Marking analysis: A learner attempts the following task: “A retail company reports the following for the year: gross profit $180,000, revenue $600,000, net profit $60,000. (a) Calculate the gross profit margin. (b) Calculate the net profit margin. (c) Suggest one reason the gap between the two margins might be considered large, referring to what lies between the two figures.” Their response addresses only this point: “Calculates gross profit margin = 180,000/600,000 × 100 = 30%.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + 3 A small workshop makes handmade candles. Each candle sells for $12 and has variable costs of $7 per unit. The workshop's total fixed costs are $2,500 per month. (a) Calculate the contribution per unit. (b) Calculate the break-even quantity per month. (c) Calculate the profit if 600 candles are sold in a month. (d) State the margin of safety in units if 600 candles are sold. ✓ Reviewed Paper 1 style Medium 5 marks Calculator + 4 Marking analysis: A learner attempts the following task: “A small workshop makes handmade candles. Each candle sells for $12 and has variable costs of $7 per unit. The workshop's total fixed costs are $2,500 per month. (a) Calculate the contribution per unit. (b) Calculate the break-even quantity per month. (c) Calculate the profit if 600 candles are sold in a month. (d) State the margin of safety in units if 600 candles are sold.” Their response addresses only this point: “Calculates contribution per unit = 12 − 7 = $5.” Evaluate the response against the complete 5-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 5 marks Calculator + 5 A start-up's cash-flow forecast shows an opening balance of $3,000 for March, total cash inflows of $8,000 and total cash outflows of $9,500 for the month. (a) Calculate the net cash flow for March. (b) Calculate the closing balance for March. (c) Explain one action the business could take if it foresees a negative closing balance in an upcoming month. ✓ Reviewed Paper 2 style Medium 4 marks Calculator + 6 Marking analysis: A learner attempts the following task: “A start-up's cash-flow forecast shows an opening balance of $3,000 for March, total cash inflows of $8,000 and total cash outflows of $9,500 for the month. (a) Calculate the net cash flow for March. (b) Calculate the closing balance for March. (c) Explain one action the business could take if it foresees a negative closing balance in an upcoming month.” Their response addresses only this point: “Calculates net cash flow = 8,000 − 9,500 = −$1,500.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + 7 A business needs finance for two different purposes: (i) covering a short-term, one-off gap in cash flow while waiting for a large customer invoice to be paid, and (ii) funding a major long-term expansion of its factory. (a) Distinguish between internal and external sources of finance, giving one example of each. (b) Suggest a suitable source of finance for purpose (i), and justify your choice. (c) Suggest a suitable source of finance for purpose (ii), and justify your choice. ✓ Reviewed Paper 1 style Medium 5 marks No calculator + 8 Marking analysis: A learner attempts the following task: “A business needs finance for two different purposes: (i) covering a short-term, one-off gap in cash flow while waiting for a large customer invoice to be paid, and (ii) funding a major long-term expansion of its factory. (a) Distinguish between internal and external sources of finance, giving one example of each. (b) Suggest a suitable source of finance for purpose (i), and justify your choice. (c) Suggest a suitable source of finance for purpose (ii), and justify your choice.” Their response addresses only this point: “States that internal finance comes from within the business itself, such as retained profit or the sale of unused assets, while external finance comes from outside the business, such as a bank loan or share capital.” Evaluate the response against the complete 5-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 5 marks No calculator + 17 A business has an operating profit of $50,000 for the year and capital employed (total equity plus non-current liabilities) of $250,000. (a) Calculate the business's return on capital employed (ROCE). (b) State what ROCE measures. (c) Suggest one reason this ROCE figure might be more meaningful when compared against the ROCE of similar businesses in the same industry, rather than viewed alone. ✓ Reviewed Paper 2 style Medium 4 marks Calculator + 18 Marking analysis: A learner attempts the following task: “A business has an operating profit of $50,000 for the year and capital employed (total equity plus non-current liabilities) of $250,000. (a) Calculate the business's return on capital employed (ROCE). (b) State what ROCE measures. (c) Suggest one reason this ROCE figure might be more meaningful when compared against the ROCE of similar businesses in the same industry, rather than viewed alone.” Their response addresses only this point: “Calculates ROCE = (operating profit ÷ capital employed) × 100 = (50,000 ÷ 250,000) × 100.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + 19 A business is considering an investment project costing $100,000. It forecasts net cash inflows of $30,000 in Year 1, $40,000 in Year 2, and $50,000 in Year 3. (a) Calculate the cumulative net cash flow at the end of each of the three years. (b) Calculate the payback period, giving your answer in years and months. ✓ Reviewed Paper 2 style Medium 5 marks Calculator + 20 Marking analysis: A learner attempts the following task: “A business is considering an investment project costing $100,000. It forecasts net cash inflows of $30,000 in Year 1, $40,000 in Year 2, and $50,000 in Year 3. (a) Calculate the cumulative net cash flow at the end of each of the three years. (b) Calculate the payback period, giving your answer in years and months.” Their response addresses only this point: “Calculates cumulative cash flow at end of Year 1 = $30,000.” Evaluate the response against the complete 5-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 5 marks Calculator + 21 A different investment project costs $150,000 and is expected to generate total net profit of $75,000 over its 5-year life. (a) Calculate the average annual profit generated by the project. (b) Calculate the average rate of return (ARR) for the project. (c) State one advantage of using ARR, rather than payback period, to evaluate this investment. ✓ Reviewed Paper 2 style Medium 4 marks Calculator + 22 Marking analysis: A learner attempts the following task: “A different investment project costs $150,000 and is expected to generate total net profit of $75,000 over its 5-year life. (a) Calculate the average annual profit generated by the project. (b) Calculate the average rate of return (ARR) for the project. (c) State one advantage of using ARR, rather than payback period, to evaluate this investment.” Their response addresses only this point: “Calculates average annual profit = total profit ÷ number of years = 75,000 ÷ 5 = $15,000.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + 23 A business buys a delivery vehicle for $40,000. It expects the vehicle to have a residual (resale) value of $5,000 after 5 years, and depreciates it using the straight-line method. (a) Calculate the annual depreciation charge. (b) Calculate the vehicle's book value after 2 years. (c) State one reason a business needs to account for depreciation on assets like this vehicle. ✓ Reviewed Paper 2 style Medium 4 marks Calculator + 24 Marking analysis: A learner attempts the following task: “A business buys a delivery vehicle for $40,000. It expects the vehicle to have a residual (resale) value of $5,000 after 5 years, and depreciates it using the straight-line method. (a) Calculate the annual depreciation charge. (b) Calculate the vehicle's book value after 2 years. (c) State one reason a business needs to account for depreciation on assets like this vehicle.” Their response addresses only this point: “Calculates annual depreciation = (cost − residual value) ÷ useful life = (40,000 − 5,000) ÷ 5.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + 25 A business budgeted for sales revenue of $200,000 this month but achieved actual sales revenue of $215,000. It also budgeted for raw material costs of $50,000 but actually spent $58,000. (a) Calculate the variance for sales revenue, and state whether it is favourable or adverse. (b) Calculate the variance for raw material costs, and state whether it is favourable or adverse. ✓ Reviewed Paper 2 style Medium 4 marks Calculator + 26 Marking analysis: A learner attempts the following task: “A business budgeted for sales revenue of $200,000 this month but achieved actual sales revenue of $215,000. It also budgeted for raw material costs of $50,000 but actually spent $58,000. (a) Calculate the variance for sales revenue, and state whether it is favourable or adverse. (b) Calculate the variance for raw material costs, and state whether it is favourable or adverse.” Their response addresses only this point: “Calculates the sales revenue variance = 215,000 − 200,000 = +$15,000.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + 27 A business begins the year with inventory (stock) valued at $10,000. During the year it purchases a further $60,000 of inventory, and ends the year with inventory valued at $15,000. Its sales revenue for the year is $90,000. (a) Calculate the cost of sales (cost of goods sold) for the year. (b) Calculate the business's gross profit for the year. ✓ Reviewed Paper 2 style Medium 4 marks Calculator + 28 Marking analysis: A learner attempts the following task: “A business begins the year with inventory (stock) valued at $10,000. During the year it purchases a further $60,000 of inventory, and ends the year with inventory valued at $15,000. Its sales revenue for the year is $90,000. (a) Calculate the cost of sales (cost of goods sold) for the year. (b) Calculate the business's gross profit for the year.” Their response addresses only this point: “Uses the formula: cost of sales = opening inventory + purchases − closing inventory.” Evaluate the response against the complete 4-mark task. Identify what earns credit and state every additional requirement needed for full marks. ✓ Reviewed Marking analysis Medium 4 marks Calculator + Self-assessed 0 / 0
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