5.3 and 5.4

First Attempt 1 AHG is an established business as it has been operating for a long time. It sells garden products including plants and flowers. AHG uses competitive pricing. The business has 4 managers and 30 other employees. All AHG's managers use delegation. The Finance Manager is analysing AHG's statement of financial position as she is interested in its liquidity. An extract is shown in Table 1.1. (a) Define 'current liabilities'. [2] Page 531

MARK SCHEME Define ‘current liabilities’. Award 2 marks for a full definition. Award 1 mark for a partial definition. (Short-term) debts owed by a business, to be repaid in less than one year [2] OR Debts of a business which it expects to pay before the date of the (next) statement of financial position [2] Partial definition e.g. money owed by a business [1]

First Attempt 2 Samira owns a successful business selling takeaway fried food. She employs 2 part-time workers. Last year revenue fell for the first time in 10 years. This was because of increased competition from a well-known franchise. To respond to this, Samira could lower her prices, as shown in Table 1. Another option is to start a delivery service. Samira plans to do some market research. She has to decide whether to use secondary research or set up a focus group with some of her customers. (c) Identify and explain two reasons why revenue is important for Samira's business. Reason 1: Explanation: Reason 2: Explanation: [4] Page 524

MARK SCHEME Identify and explain two reasons why revenue is important for Samira’s business. Knowledge [2 ⋅ 1] – award 1 mark for each reason identified Application [2 ⋅ 1] – award 1 mark for each explanation in context Points might include: • Pay its day to day expenses [k] of producing/selling (fried) food [app] • Measure of success/size of business [k] against increased competition [app] • Need it to generate profit OR breakeven [k] for her takeaway [app] • Steady amount can help gain credit/support loan application [k]

First Attempt 2 MLC makes motorcycles. The Managing Director has been analysing MLC's costs. An extract of this information is shown in Table 2.1. To reduce average costs, MLC plans to close its factory and relocate production to another country. Only 50 of the existing employees will be offered jobs at the new location. The trade union has been informed. All the new employees will be given either on-the-job training or off-the-job training. This planned relocation will have an impact on MLC's income statement. (c) State four features of an income statement. Feature 1: Feature 2: Feature 3: Feature 4: [4] Page 517

MARK SCHEME State four features of an income statement. Award 1 mark for each relevant feature. Points might include: • Revenue • Cost of sales • Gross Profit • Profit (for the year) • Retained Profit • Expenses Other appropriate responses should also be credited.

First Attempt 3 CLN is a public limited company. It sells a range of electrical products such as televisions and computers. The Managing Director has been analysing CLN's accounts. An extract is shown in Table 3.1. He said: 'We need more finance. Last year CLN made a loss of $250m. I blame increased competition from e-commerce.' CLN plans to close 30 of its 120 shops. This decision will affect many of its stakeholders including the local communities. The number of sales from each shop will be used to decide which shops to close. (e) Do you think the number of sales from each shop is the best way for a retail business to decide which shops to close? Justify your answer. [6] Page 515

MARK SCHEME Do you think the number of sales from each shop is the best way for a retail business to decide which shops to close? Justify your answer. Award up to 2 marks for identification of relevant issues. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether the number of sales from each shop is the best way for a retail business to decide which shops to close. Points might include: • Higher sales could mean higher revenue [k] which can help contribute to break-even [an] • Lower sales could suggest shop is not a popular location [k] so customers less likely to complain if it closes [an] • What products are sold [k] as a shop selling high value items would not need to sell many as one selling low value items [an] Other factors could include: • Costs/expenses [k] as a business could be still be profitable as long as costs are lower than revenue [an] • Number of competitors [k] as a shop with many competitors might have a lower market share leading to fewer potential sales [an] • Size of target market/number of customers [k] • Profit [k] • Number of employees [k] • Value of sales/revenue [k] • Proximity to its other shops [k] Other appropriate responses should also be credited Justification might include: Lower sales could suggest shop is not popular [k] so customers less likely to complain if it closes [an]. However, lower sales might be misleading as some shops might sell a small number of higher value items [k] so number of sales alone might lead to a potential loss of revenue [an]. Costs could be used as a factor, but the problem is that a popular location might have a higher rent. Therefore, as no method will give perfect answers but as number of sales is probably best especially as it is simple to use, so at least people will be able to understand the reasons for using it. [eval][eval]

First Attempt 2 T JM is a private limited company. It is a food retailer and has 450 shops. In 2021 T JM's revenue increased by $500 million. The Finance Director is analysing T JM's financial statements. An extract is shown in Table 2.1. The directors are planning to expand T JM by opening 20 new shops. T JM will have to carry out a recruitment and selection process for 400 new employees. (a) Define 'revenue'. [2] Page 533

MARK SCHEME Define ‘revenue’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Money coming in from selling a product (over a given period of time) [2] OR Amount of money a business earns from the sale of its products [2] Partial definition e.g. Income of the business [1