1

1 Tom wants to leave his job to become an entrepreneur. He and his sister plan to start a window cleaning
business. Tom has been told that new businesses are at a greater risk of failure than established businesses.
Tom has to decide whether a partnership is a suitable form of business organisation for the new business. He
has calculated the business will need $700 as start-up capital. Tom knows that every decision he makes will
have an opportunity cost.

Do you think a partnership is the best form of business organisation for a new business? Justify your answer.

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[Total: 6]
 2

2 VCG manufactures high-quality briefcases and travel bags. VCG has 50 skilled production workers in its
factory. VCG is planning to expand by building a second factory. Different locations are being considered.
The Managing Director is reviewing VCG’s financial statements. An extract is shown in the table below.
Both internal and external stakeholder groups of VCG are interested in this information.

Extract from VCG’s 2021 financial statements ($)

Revenue 2 000 000

Current assets 300 000

Current liabilities 250 000

Shareholders’ equity (funds) 800 000

Identify two financial statements a public limited company is legally required to publish each year.

Financial statement 1: ..............................................................................................................................

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Financial statement 2: ..............................................................................................................................

.................................................................................................................................................................. [2]

[Total: 2]

3 Define ‘public limited company’.

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[Total: 2]
 3

4 TJM is a private limited company. It is a food retailer and has 450 shops. In 2021 TJM’s revenue increased
by $500 million. The Finance Director is analysing TJM’s financial statements. An extract is shown in table
below. The directors are planning to expand TJM by opening 20 new shops. TJM will have to carry out a
recruitment and selection process for 400 new employees.

Extract from TJM’s financial statements for 2021 ($m)

Non-current assets 400

Current assets 300

Current liabilities 240

Profit for the year 200

Outline two advantages of TJM being a private limited company.

Advantage 1: ............................................................................................................................................

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Advantage 2: ............................................................................................................................................

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[Total: 4]
 4

5 BGR is a private limited company. It operates 6 cinemas in different towns. Effective internal communication
is important for BGR. The Finance Director has been analysing BGR’s accounts and an extract is shown in
the table below. BGR plans to open another cinema and will need to recruit 10 new employees. The new
cinema will cost $8m. The Finance Director has to decide whether BGR should issue new shares or use a
bank loan to finance the expansion.

Extract from BGR’s Income statement for year ending 2020 ($000’s)

Revenue X

Cost of sales 180

Gross profit 720

Expenses Y

Profit 400

Do you think issuing new shares is a better way for a limited company to finance expansion than using a
bank loan? Justify your answer.

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[Total: 6]
 5

6 Identify two features of a public limited company.

Feature 1: .................................................................................................................................................

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Feature 2: .................................................................................................................................................

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[Total: 2]

7 Identify two features of a sole trader.

Feature 1: .................................................................................................................................................

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Feature 2: .................................................................................................................................................

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[Total: 2]
 6

8 The economy of country C is experiencing economic growth. Based on secondary market research data,
Samuel started a plumbing business. His business installs and repairs bathroom equipment. Samuel operates
as a sole trader. He used all his $500 savings to buy the tools needed. Samuel had to decide on a suitable
pricing method to use. He thinks that providing a good quality service could help his business to increase
added value.

Explain two possible disadvantages to Samuel of operating as a sole trader business.

Disadvantage 1: .......................................................................................................................................

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Explanation: ............................................................................................................................................

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Disadvantage 2: .......................................................................................................................................

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Explanation: ............................................................................................................................................

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[Total: 6]
 7

9 Nadia started her successful hairdressing business 4 years ago. Maintaining quality has always been important
to Nadia. She said: ‘I started with no experience of business plans, recruitment, cash flow or profit. I did not
understand how economic issues such as inflation could affect a business. Now I have 5 hairdressing shops
and 20 employees. Last year I made a profit of $100000.’Nadia is planning to expand her business. One way
she could do this is by selling franchises.

Outline one advantage and one disadvantage to Nadia’s business of selling franchises toexpand.

Advantage:................................................................................................................................................

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Disadvantage:...........................................................................................................................................

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[Total: 4]
 8

10 DCN is a large chemical company. It has 8 000 employees across its 3 factories. DCN has agreed to set up
a joint venture with a glass making business to develop a new type of environmentally friendly packaging.
DCNs Managing Director said: There are disadvantages to a joint venture. The companies have different
leadership styles and business objectives. We will need to look at ways to overcome possible communication
barriers.

Explain two possible advantages to DCN of setting up a joint venture with the other business.

Advantage 1:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]

11 Define ‘partnership’.

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[Total: 2]
 9

12 Pamela is a sole trader. She started her successful photography business 30 years ago. She specialises in
taking pictures of people and places for use in posters, calendars and fashion magazines. It is a niche market.
Pamela uses cost-plus pricing as part of her marketing mix. Offering a high quality service is important to
Pamela and her 2 employees.

Explain two advantages to Pamela of operating as a sole trader.

Advantage 1:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]

13 Define ‘limited liability’.

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[Total: 2]
 10

14 Lola and Raul are in a business partnership. They make a range of hand-printed products including t-shirts,
bags and posters using job production. Most of Lola and Raul’s customers are tourists. Lola designs and
prints all the products at the back of a small shop. Raul is responsible for sales and finance. Production is
slow and it is difficult for Lola to keep up with demand. Raul wants to increase output. One way of doing
this is to introduce some machinery into the process. Raul also wants to develop a website.

Explain one advantage and one disadvantage to Lola and Raul of being in a business partnership.

Advantage: ...............................................................................................................................................

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Explanation: ............................................................................................................................................

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Disadvantage: ..........................................................................................................................................

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Explanation: ............................................................................................................................................

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[Total: 6]

15 Define ‘sole trader’.

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[Total: 2]
 11

16 DSY is a private limited company. It produces washing machines and cleaning equipment. The Managing
Director wants DSY to expand into a different market. He plans to spend $2bn on developing electric cars.
There is a lot of competition in the electric car market. This market is growing rapidly. A leading pressure
group has identified the environmental problems of non-electric cars. The Managing Director knows that
important decisions about the method of production and the new car’s brand image still have to be made.

Outline two advantages to DSY of being a private limited company.

Advantage 1: ............................................................................................................................................

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Advantage 2: ............................................................................................................................................

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[Total: 4]

17 State two types of business organisation.

Type 1:......................................................................................................................................................

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Type 2:......................................................................................................................................................

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[Total: 2]
 12

18 BMT is a business partnership owned by 2 brothers. The brothers received government support when they
started BMT 6 years ago. BMT now has 30 employees who make high quality watches. The business tries
to achieve lean production. Demand has increased each year and in 2019 BMT sold 8000 watches. BMT
makes some parts for watches and all the other parts are imported. BMT had to consider a number of factors,
including exchange rates, when deciding whether to import parts for watches.

Outline two disadvantages of BMT being a business partnership.

Disadvantage 1:........................................................................................................................................

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Disadvantage 2:........................................................................................................................................

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[Total: 4]
 13

19 Gomez is a sole trader. He provides painting and decorating services to business customers. His business
does not benefit from any economies of scale because it is small. Gomez has to pay his suppliers within 1
month. However, he gives customers 3 months to pay. Gomez uses an old van he has borrowed from his
father to travel to his customers’ offices and shops. As the van often breaks down, Gomez is thinking of
buying a new van. A cash-flow forecast for the next 3 months is shown in the table below.

Explain one advantage and one disadvantage to Gomez of being a sole trader.

Advantage:................................................................................................................................................

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Explanation:.............................................................................................................................................

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Disadvantage:...........................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
 14

20 Do you think selling franchises is a better way for a retail business to expand than opening more of its own
shops? Justify your answer.

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[Total: 6]

21 What is meant by ‘public corporation’?

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[Total: 2]

22 What is meant by ‘franchise’?

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[Total: 2]
 15

23 FGH is a private limited company. FGH has a tall hierarchical organisational structure. It is a book retailer
which plans to take over one of its competitors for $800m. If the takeover happens, FGH would have 6 500
bookshops across 20 countries. FGH’s Managing Director said: ‘We expect to reduce total costs by $300m
each year after the takeover. We will stop all off-the-job training of employees.’ The Managing Director
thinks FGH would benefit from becoming a public limited company but some of the other directors cannot
decide if this is a good idea.

Identify and explain one advantage and one disadvantage to FGH of becoming a public limited company.

Advantage:................................................................................................................................................

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Explanation:.............................................................................................................................................

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Disadvantage:...........................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
 16

24 IBH is a family-owned private limited company. It makes a range of shoes for children, using batch production.
It is a competitive market. Like many businesses, IBH needs finance for a number of reasons.

Identify and explain two possible advantages to IBH of being a private limited company.

Advantage 1:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]

25 Paul is the Managing Director of a private limited company called PShirts. It manufactures and sells men’s
and women’s shirts in country Y. Its products are priced lower than most of its competitors. Sales have fallen
recently even though there has been an economic boom. Paul is thinking about starting to sell shirts in other
countries. One of the directors is worried about legal controls in other countries.

Identify and explain two disadvantages to PShirts of being a private limited company

Disadvantage 1:........................................................................................................................................

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Explanation:.............................................................................................................................................

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Disadvantage 2:........................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]
 17

26 ZumGo is a business partnership between two brothers Richie and Justin. It provides bus tours for people
wanting to go on holiday. After two successful years, Justin wants to expand the business by buying another
bus. This will cost $28 000. When Richie produced the cash flow forecast as part of ZumGo’s business plan
he forgot to include the $6000 for advertising in March. They cannot decide whether to lease the bus or use
all their retained profit to buy one. Leasing would cost $1000 per month for 2 years.

Cash flow forecast for 3 months ending 31 March 2018 ($)

January February March

Cash in 36 000 36 000 30 000

Cash out:
Advertising 12 000 0 6000

Other costs 24 000 25 000 22 000

Total cash outflow: 36 000 25 000 W

Net cash flow 0 11 000 X

Opening balance (15 000) (15 000) Y

Closing balance (15 000) (4 000) Z

Identify and explain one advantage and one disadvantage of ZumGo being a business partnership.

Advantage:................................................................................................................................................

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Explanation:.............................................................................................................................................

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Disadvantage:...........................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
 18

27 CHONS is a public limited company. The directors want to open a new coal mine. All the coal will be
exported. The Managing Director is hopeful that the Government will allow the coal mine to be opened. She
said: ‘CHONS always meets legal controls. In an area of high unemployment surely creating jobs is more
important than protecting the environment. Most stakeholder groups including shareholders and suppliers
are happy. CHONS will not be asking for any Government support.’

Information about the proposed coal mine

Planned output 50m tonnes per year

Number of years coal mine will

60 years
operate

Jobs created 10 000

Level of waste products causing

High
pollution

Risk of traffic problems HIgh

Identify and explain one advantage and one disadvantage of CHONS being a public limited company.

Advantage:................................................................................................................................................

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Explanation:.............................................................................................................................................

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Disadvantage:...........................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]
 19

28 Five years ago Manisha started making cakes from her home. The cakes are for celebrations, such as weddings
and birthdays. Now she has a small shop and 3 employees. Product quality is important to her business.
Manisha said: ‘I have benefited from the economic boom but I did not expect demand to increase by 500%
each year. Somehow I have managed to cope with higher interest rates and all the challenges of being a sole
trader. The business is profitable at last but I have to work every day.’ A friend has offered to become
Manisha’s business partner.

Do you think Manisha should have a business partner? Justify your answer

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[Total: 6]
 20

29 C&P Designs is a business partnership between Cory and Phoebe. They make handmade jewellery. Phoebe
works from home making all the jewellery such as necklaces and bracelets. C&P pays for materials when
they are ordered, but allows their customers one month to pay. Cory manages the accounts and the shop. He
is worried about cash flow, as shown in the Table. Cory said: ‘The bank will not increase our overdraft. We
should ask customers to pay more quickly.’ Phoebe thinks advertising would increase sales but is worried
about legal controls on marketing.

Table: Cash flow forecast for C&P ($)

Identify and explain two ways in which legal controls on marketing might affect C&P.

Way 1: ......................................................................................................................................................

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Explanation:.............................................................................................................................................

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Way 2:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]
 21

30 C&P Designs is a business partnership between Cory and Phoebe. They make handmade jewellery. Phoebe
works from home making all the jewellery such as necklaces and bracelets. C&P pays for materials when
they are ordered, but allows their customers one month to pay. Cory manages the accounts and the shop. He
is worried about cash flow, as shown in the Table. Cory said: ‘The bank will not increase our overdraft. We
should ask customers to pay more quickly.’ Phoebe thinks advertising would increase sales but is worried
about legal controls on marketing.

Table: Cash flow forecast for C&P ($)

Identify and explain one advantage and one disadvantage to Cory and Phoebe of being in a business
partnership.

Advantage:................................................................................................................................................

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Explanation:.............................................................................................................................................

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Disadvantage:...........................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
 22

31 What is meant by a ‘joint venture’?

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[Total: 2]

32 Wilde Soup Stop (WSS) makes a range of soups and hot drinks. It owns 30 shops and has sold its franchise
to 10 other shops in country Z. The Marketing Director said: ‘Results from our focus group show that being
an ethical business is important’. WSS plans to extend its product range to include curries and cakes.

Identify and explain two advantages to WSS of selling its franchise

Advantage 1:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]
 23

33 BGN sells furniture such as beds and tables. It started as a partnership but is now a private limited company.
BGN has expanded quickly and has 10 shops located in different cities. Each shop manager is responsible
for recruitment and decisions about inventory levels. They send the Board a monthly report. The Managing
Director has a laissez-faire leadership style. There has been an increase in customer complaints and employees
think internal communications need to be improved.

Identify and explain two advantages to BGN of being a private limited company.

Advantage 1: ............................................................................................................................................

..................................................................................................................................................................

Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]

34 Table: Private sector business organisations in country R (millions)

Calculate the percentage (%) of businesses in country R which are partnerships.

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[Total: 2]
 24

35 Moeen and Ali plan to start up a small luxury hotel in the centre of a city in country R. They have a budget
of $30 000 to pay for all costs. After researching different types of business organisation, Moeen thinks the
hotel should be a private limited company. If the business is to be successful, Ali knows choosing the right
location will be important. He cannot decide whether to recruit full-time or part-time employees.

Identify and explain two advantages to Moeen and Ali of forming a private limited company.

Advantage 1:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 4]

36 Table: Private sector business organisations in country R (millions)

Calculate the percentage (%) of businesses in country R which are partnerships.

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[Total: 2]
 25

37 Moeen and Ali plan to start up a small luxury hotel in the centre of a city in country R. They have a budget
of $30 000 to pay for all costs. After researching different types of business organisation, Moeen thinks the
hotel should be a private limited company. If the business is to be successful, Ali knows choosing the right
location will be important. He cannot decide whether to recruit full-time or part-time employees.

Identify and explain two advantages to Moeen and Ali of forming a private limited company.

Advantage 1:.............................................................................................................................................

..................................................................................................................................................................

Explanation:.............................................................................................................................................

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Advantage 2:.............................................................................................................................................

..................................................................................................................................................................

Explanation:.............................................................................................................................................

.................................................................................................................................................................. [4]

[Total: 4]
 26

38 Alex and Raul are business partners. They started a bicycle repair business with their own savings as the
bank would not give them a loan. Raul does most of the repair work, while Alex manages the accounts. Alex
is surprised that the business has made a small profit in the first year. ‘We can use this profit to expand. I
don’t know why people think we would benefit from having a business plan. Much of the demand for our
repair business comes from our friends who own bicycles.’

Table: Extract from balance sheet as at 31 March 2016 ($)

Identify and explain two benefits to Alex of having a business partner.

Benefit 1:..................................................................................................................................................

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Explanation:.............................................................................................................................................

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Benefit 2:..................................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
 27

39 After 20 years working for a bank, Luis has savings of $5000. He wants to start up his own business selling
and repairing mobile (cell) phones. It is a competitive market. Luis has decided not to buy a franchise for
$4500 as he thinks it is better to operate the business independently rather than be a franchisee. Based on his
primary market research, he will need 15 customers each week to break even. Luis believes building customer
relationships will be important. He plans to use social networks for promoting his new business.

Do you agree with Luis’s decision not to become a franchisee? Justify your answer.

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[Total: 6]

40 What is meant by a ‘sole trader’?

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.................................................................................................................................................................. [2]

[Total: 2]