ZIMBABWE SCHOOL EXAMINATIONS COUNCIL

GCE A’ LEVEL

BUSINESS STUDIES

PAPER 1

JUNE 2011
Section A – 70 marks

1a). State any two factors of production. (2)

b). What factors should be considered by an entrepreneur when
choosing the location of his business? (3)

2a). Distinguish between direct and commercial services. (4)

b). How can the government assist small businesses in your country? (4)
3. To what extent is job evaluation useful to an organization? (4)
4a). What is the difference between span of control and chain of
command? (2)
b). Briefly explain why some people prefer to work for a business with
wide spans of control. (4)
5a). State any two communication methods. (2)
b). Explain how McGregor’s Theory X and Theory Y might influence the
leadership styles of mangers. (4)

6a). What is price? (3)

b). Explain the importance of price in business. (4)

7a). Distinguish between market share and market size. (2)

b). The following information relates to a firm in a shoe manufacturing
industry:

2004 2005

Units Value Units Value

$ (000) $ (000)

Total industry 36 000 48 000

sales
Firm’s sales 3 600 5 000
Total industry 5 000 6 500
sales
Firm’s sales 500 600
i. Calculate the growth rate of the total industry sales over the two
years. (4)
ii. This firm’s market share dropped from 10% to 9.23% over the two
years. Explain the meaning of this decrease. (2)

8a. Define the term productivity. (2)

b. How might a company improve its productivity? (4)

9. Explain why shareholders might be concerned about a decision to

borrow more capital if profits of the company have continued to fall
several years. (4)

10. Explain the problems that may arise from having a low level of
working capital in a business. (4)
11a). Name any two types of ratios that are used in business. (2)

b). An analysis of a small firm’s accounts discloses an acid test ratio of

0:4 and a current ratio of 1:1.
Comment on the financial position of this firm. (4)

12. Comment on the usefulness of the blending technique as a decision

making tool. (6)

SECTION B – 30 Marks

The Bunny Biscuit Company

The Bunny Biscuit Company has been operating for the last ten years. It
was started by two friends Rashid and Rashod, who produced biscuits for
the local community. The business enjoyed considerable success and two
years later they convinced their friends and relatives to invest in the
business. They converted the business into a private limited company. With
this conversion they were able to lease a factory on a new industrial estate
and to purchase new machinery. Business has been booming and they are
now operating at full capacity. It has now reached a point where managers
need to make some demanding decisions. They feel that there are two
options: to expand or to subcontract part of their work to another
company. The latter option will take some of the pressure off the company.
If they are to expand, they will need to raise about $200 000. This will pay
for new machinery, new premises, motor vehicles and the recruitment and
training of new staff.

Sales for year 2003 were $250 000 and overheads amounted to $150 000.
Variable costs were 25% of turnover. If the company expands, the
managers anticipate that the sales figure will double by the end of year
2004. The overheads would increase by $50 000 while variable costs will
be 40% of the anticipated turnover.

The firm’s Balance Sheet as at 31 December 2003 was as follows:

Balance sheet as at 31 December 2003

$ $

Fixed Assets 265 000

Current assets 115 000

Less: Current Liabilities 30 000
Working capital 85 000
350 000
Financed by:
Share capital 250 000
Retained profits 20 000
Long term liabilities: loan 80 000
350 000

13a). Calculate the net profit figures and the net profit margins for the year

i. 2003
ii. 2004 (4)

b). Comment on your findings. (2)

14. Examine the issues the two friends would have considerable before
converting the business into a private limited company. (8)

15a). Analysing the financial information in the case, would you

recommend the option of expansion? (6)

b). Evaluate any further evidence you would seek before making final
decision. (10)