Business Studies: Edexcel IGCSE

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Edexcel IGCSE
Business Studies
Friday 27 May 2011 – Afternoon Paper Reference
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centre number and candidate number.
• There are two sections for this paper – Section A and Section B.
• Answer all questions.
• Answer the questions in the spaces provided
– there may be more space than you need.
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• The total mark for this paper is 100.
• –Theusemarks for each question are shown in brackets
this as a guide as to how much time to spend on each question.
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every question.
• if you have time at the end.
Turn over
P38726A
©2011 Edexcel Limited.
*P38726A0120*
6/6/6/3/
Fabian Fabric Ltd (FF Ltd) is a family wholesale business importing high quality hand woven cloth in
large quantities and selling to retailers in small quantities.
It sells most of its cloth to retail shops which sell curtain cloth. FF Ltd also takes orders from
individual customers to make curtains for them. The curtains are unique and are made to each
customer’s measurements.
FF Ltd employs several office staff, some of whom are specialists in buying cloth from manufacturers.
These employees travel abroad to buy the cloth from manufacturers in other countries. The company
also employs skilled machinists to make the curtains for customers. These workers are paid time rate,
that is a wage rate per hour.
Recently FF Ltd has begun to also import low quality cloth. This cloth is to be used to make cheaper
curtains. This is a low market share and high market growth product.
2
*P38726A0220*
Answer ALL questions.
SECTION A
For each of the questions (i) – (v), choose an answer A, B, C, D and put a cross in the box .
Mark only one answer for each question. If you change your mind, put a line through the
box and then indicate your new answer with a cross .
1 (a) (i) The skilled machinists would work in the

(1)
A administration department.
B finance department.
C marketing department.
D production department.
(ii) Buying cloth from abroad is called
(1)
A importing.
B inventing.
C exchanging.
D exporting.
(iii) FF Ltd can raise finance by
(1)
A selling shares to family and friends.
B selling shares to the public.
C taking on a partner.
D taxation.
(iv) FF Ltd’s cash flow forecast shows
(1)
A how much money it owes to its creditors.
B the inflows and outflows of the business.
C the profit it makes.
D the value of its shares.
3
*P38726A0320* Turn over
(v) FF Ltd is most likely to advertise its high quality hand woven cloth in
(1)
A leaflets handed out in the street.
B local newspapers.
C shop windows.
D specialist retail magazines.
FF Ltd recruits new employees when an employee leaves. It follows a recruitment and
selection process which includes the following stages:
A Carry out an interview.
B Draw up a job description.
C Look through application forms to shortlist candidates.
D Produce a job (person) specification.
E Advertise the job.
(b) Place these five stages of the recruitment and selection process in the correct
order, using the letters A–E, in the boxes below.
(5)
Vacancy arises
Successful applicant appointed
4
*P38726A0420*
(c) To help FF Ltd carry out its work, it has several departments. These include:
• Purchasing
• Production.
Using an example of a job, explain how these departments help FF Ltd.
(i) Purchasing department
(3)
Job .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . .. . . . . . .
Explanation .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .

To keep business financially healthyPurchasing departmentsProduce and
Text
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(ii) Production department

(3)
Produce goods and/or provide services
Job .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . .. . . . . . .
Explanation .............. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
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in most businesses , most of the firm's employees works in the produc8on department. This is
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due to the fact that they are the firm's keystone to fuc8oning. They are the people who
. . . .produce the basic good or provide you with certain serivce. In primary secotr it eould be the
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miners extrac8ng coal from the ground. In secondary sector, it would be the machina operator.
Finally in the ter8ary secotr it would be a recep8onist chencking in clients.
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5
(d) FF Ltd knows that total quality management (TQM) is very important.
(i) What is meant by ‘total quality management’?
(2)
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It describes the total mangment approach to success through customer
sa4sfac4on and other indicators.
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(ii) How might FF Ltd be affected if it had a lot of complaints from customers?
(2)
If FF Ltd reputa-on was to be worsening, its high-end customers who they
par-ally target may turn thei backs on them as they are searching quality, and
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if bad reviews will start appearing, it is obvious that the expected quality has
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dropped. Een with customers on budget, who were searching for standard
. . . . . . . . . . .curtains might leave as bad news would spread to them, leaving them not
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wan-ng the badly reputated curtains. This will affect the business ion financial
gains as revenue will drop as less customers are coming in. This might result in
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dismissing long-term loyal employees, which is the worst scenario. (Total for Question 1 = 20 marks)
6
*P38726A0620*
2 FF Ltd is a wholesaler that imports high quality hand woven cloth.
(a) What is meant by a ‘wholesaler’?
(2)
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Being a wholesaler means that you arent selling to indiidual customers,rather you are selling producsts to
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individual firms in large quan99es , usually 'bulk buying'

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(b) Outline two reasons why retailers might buy their cloth from a wholesaler such
as FF Ltd.
(4)
When firms will start buying from a wholesaler like FF LTd, they will most
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probably be shooping in bulk, this is also going to be represented in the

pricing as large quan>>es bought will lower down the cost per unit, ergo
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the total cost is going to be lower when buying from a wholesaler

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When a firm needs large quan00es of stock, going to a small business might
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be complicated as it the produc0on.storage capaci0es tend to be significantly
lower with small businesses compared to well-established wholesalers who
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have large quan00es of the product on stock

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7
The directors of FF Ltd have set an aim of producing high quality curtains.
(c) (i) Why might this aim be important for FF Ltd?
As has been men*oned earlier, FF LTD focuses on manufacturing quality curtains from good materials and
(2)
also economy ones. If the quality of their crtains was to drop, exis*ng customers who have been used to
buying curtain at FF will suddenly have a bad experience with them resul*ng in bad reviews and reputaion.
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Long story short, the profit might be at risk if the quality will drop, this is why it is important to keep up the
standards
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For question 2(c)(ii), choose two answers from A, B, C, D, E, F and put a cross in the box .
If you change your mind, put a line through the box and then indicate
your new answer with a cross .
(ii) Which two objectives, from the list below, is FF Ltd most likely to set?
(2)
Indicate your answers by marking two boxes only.
A To cut the costs of making each curtain.
B To sell curtains at a financial loss.
C To use poor quality cloth to make each curtain.
D To pay higher rates of interest on money borrowed.
E To have an effective marketing strategy.
F To start making curtains of only one size.
8
*P38726A0820*
(d) The Boston Matrix shows businesses all the different products they have in their
product range. This matrix places products into four categories. This helps FF Ltd to
identify whether they need to develop a new product.
Boston Matrix
M High
a
r
k
e A B
t
G
r
o
w
t
h
C D
R
a
t Low
e
High Low
Market Share
Give the names of the four categories of the Boston Matrix.
(4)
A … … …………………………. …………. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................................................... .................................................................................. . . . . . . . . . . . . . . . . . .
B … ……………………………. …………. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................................................... .................................................................................. . . . . . . . . . . . . . . . . . .
C … ……………………………. …………. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................................................... .................................................................................. . . . . . . . . . . . . . . . . . .
D … …………………………… . …………. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................... ................................................................................. . . . . . . . . . . . . . . . . . . .
9
The directors of FF Ltd are thinking of expanding the production of one of its products
below:
Product 1 – Curtains made for customers using high quality hand woven cloth. This
has had a high market share and high market growth over recent years.
Product 2 – Curtains made for customers using low quality cloth. This has had a low
market share and high market growth over recent years.
Select the product which you think would lead to increased profits for FF Ltd.
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(e) Discuss two reasons why expanding production of this product might lead to
increased profits for FF Ltd.
(6)
Product one features an already established high market share which means that
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this product has already well placed on the market while being respecteably
successful. In addi:on its market growth is constantly growing, meaning that its
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market share is con:nuosly growing resul:ng at the ned of the day in higher
revenue therefore profit. In contrary, Product 2 has had a low market share in
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thelast years meaning that the prodict was for the most part unsuccessful, and
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only in the recent years it has been trying to establish iotself on the market. This
raises ques:ons wether it will bring as much profit as the Product 1 who is
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constantly rising even from the past years. In addi:on, we must consider why has
the Product 2 suddenly started risingaBer the years. Most likely is the reason that
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cash has been invested into marke:ng to promote the product on the market. This
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demands capital that has been used to pay marke:ng insted of paying it to other
useful investments. If we look at Product 1, it is probably that marke:ng wasnt
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used as it is selling well when looking at the market share, this means that
resources like cash dont have to be used to promote this product, and instead can
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
be used for inestment capitalisa:on.

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
(Total for Question 2 = 20 marks)
10
*P38726A01020*
3 The directors have been given a summary of the most recent profit and loss account
for FF Ltd. This summary is shown below.
Profit and Loss Account for FF Ltd at the year ending 31 December 2010
£
Sales Revenue 3 000 000
Direct costs 1 200 000
Gross Profit 1 800 000
Expenses 1 200 000
Net Profit ?
(a) (i) What is the amount of net profit made by FF Ltd in 2010?
(1)
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
(ii) What would be two examples of expenses that might be included in this
Profit and Loss Account?
(2)
Overheads and salary costs
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
(b) (i) Name two stakeholders who might be interested in seeing this Profit and Loss
Account.
(2)
Stakeholder 1 .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . . . . . . . . . . . . . . . .
Stakeholder 2 .......... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . . . . . . . . . . . . . . . .

(ii) For each stakeholder named in (i), identify one reason why they would want
to see this account.
(2)
Cusomers are stakeholders in a compamny as they are impacted by its
1 . . quality and price, for example passengers in an aircra: are risking their lives
. . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . .. . . . . . . . . . . . . .
based on the aircra: quality

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
2 . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . .. . . . . . . . . . . . . .
rectly at stake as their income/salary depends on the success of a business, also some other
bemefits may be part of the paycheck
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
11
The net profit margin for FF Ltd was 15% and its gross profit margin was 70% for the
previous year, which ended 31 December 2009.
(c) Analyse whether the directors of FF Ltd will be pleased with the profit margins for
the year ending 31 December 2010.
(4)
Well both of the ra,os present a very good figure across all industries as a 15% net profit is very
good even for companies that are not labour and capital intemsive. Yet if we compare the two
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
numbers we see that they differ from each other by 55%. The only difference is that one is profit
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
and one is gross profit. This huge percentage gap may be caused by high cost of goods sold
. . . . . . . .(expenses), to lower down this gap the company might be considering to invest into chepaer
. . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
produc,on, mey be considering automa,sa,on in some parts. It may also hogher up the prices to
increase the gross domes,c product, but I think this tac,c is not worth it as it may baxkfire and
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
lower the market share of the firm. What it may make a good use of is to find cheaper bargains for
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
the materials they use for the produc,on, this would increase the net profit ra,on and so the gap
would be smaller.
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ .................
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
The production department at FF Ltd uses high quality hand woven cloth to make
individual curtains for its customers. These curtains are made using job production.
(d) (i) What will be the benefit to FF Ltd of using job production?
(5)
Job produc*on means that the company accepts contracts for
cura*ns that are custom made, this means that tehre are not too
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
many customers for such product as it may be too expensive for

most of the customers. The benefits for FF LTD are that it does not
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
hjave to employ people full *me but rather part *me especially
when they have such contract. ANother advantage is that the
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
quality is going to be ery high, the product is

. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
customiseable ,therefore it is very flexible to change whatever the

customer want to. This all results in larger mark-up on the product
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
compared to mass produced products.

. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
12
*P38726A01220*
(ii) Discuss two possible benefits to FF Ltd of using an alternative method of
production.
(4)
1 . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................. . . .. . . . . . . . . . . . . .
Batch produc,on can be used to create units in larger quan,,es without any bogger change, this would
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lower down the costs for investment into design and planning therefore more money would be saved. Also
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . the cost per unit is going to be lowered.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
2 . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................. . . .. . . . . . . . . . . . . .
Con$nuous produc$on is naother alterna$ve method, the benefits here are lower
costs, reduced material handling which is good when producing large quan$$es of
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
goods in a short $me. This is then durectly connected to higher and faster return
on investment, making this good for cash flow and finances.
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
TOTAL FOR SECTION A = 60 MARKS
13
SECTION B
4 FF Ltd needs to raise additional finance to expand its business so the company can
employ more staff and increase the quantity of cloth it is buying. The directors of
FF Ltd are considering changing to a public limited company (plc).
(a) (i) Discuss one likely benefit to FF Ltd of becoming a public limited company.
(3)
When a comapny happens to be a PLC it can obtain large quan88es of cash fast from
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
public. The firm doesnt have to personally talk to poten8al investors but rather
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investors who see poten8al in the firm can inest directly to the firm.
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
(ii) Analyse one likely problem for the shareholders of FF Ltd if it becomes a
public limited company.
(3)
When the firm would eneter the stockexcange and start selling its stocks, the
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
exis7ng shareholders will start loosing control over the firm. As before they
had most of the control over the firm, now more shares are being sold to
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
ppublic (people who they dont know) and so the control is par7ally dispersed
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
to the new shareholders
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . .
14
*P38726A01420*
(iii) Analyse two suitable methods, other than selling shares, of raising finance for
the expansion of the business.
(6)
A good source of cash to finance the expansion of the business is to obtain a loan with a reasonable
1 . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................. . . .. . . . . . . . . . . . . .
interest rate. When your creadit score is good enough, banks wont hesitate to borrow you large sums
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
of money especially to a firm of such size. Also, borrowing from a bank saves you from borrowing
. . . . . . .from rela?ves/firneds(if theya re so financially wealthy) which mioght not end the best way.
. . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
2 . . . . . . . ................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................. . . .. . . . . . . . . . . . . .
Another not so common method is crowd funding. I know this is mostly used with startups, yet
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . .
also alarge business can gain from this system if it doesnt want to esnte rthe stockexchange
and wants to sell shares in lower amounts. This also involves the arrial of new shareholders, yet
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the money flow is more direct and simpler process-wise compared to becoming a PLC.
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15
The directors of FF Ltd are discussing whether to move the factory to a new location.
The proposed site is nearer to the company’s main customers but is further away
from the port where the cloth comes into the United Kingdom. It is in an area where
government grants are available for businesses locating there because there are high
levels of unemployed unskilled workers in the area.
(b) Discuss the advantages and disadvantages to FF Ltd of moving production to this
new location.
(8)
Moving to a loca,on where customers are nearer is always good, especially
with whole sale and mass producers. This lowers down the costs of
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transpor,ng goods on longer distances and lowers down the transport ,me
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as well, making the whole shipping more effecive. In addi,on government
grands are avaiable which will help the cash flow of the firm. When a
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government is giving out grants in such area, the probability is very high that
land will be cheaper there as well. This is a huge benefit as greenfield sites
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are more available for a bteter price. Plus, the payrolls of employees will tend
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to be lower as they are unskilled. This all contrubutes to saving cash in the
establishing of a new factory. The break-even point will go more right in this
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case meaning that less units have to be produced to meet the break-even
point. On the other hand having a factory further from the port will increase
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the shipping expense when shipping to UK customers. This also increases the
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,me that cargo is transported. Nonethless, the as it has been said, the area
seems to not be developed, making it hard to find any suppliers nearby. Even
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if the coimpany has already contracted suppliers from different areas, it will
be firther from them as the area is further from the original loca,on. To add
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to it, unskilled labour means that the company will have to invest into
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training to make these employees suitable for working in the factory, which
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16
*P38726A01620*
comapred to and inexperiences sales manager.
5 The Human Resources department of FF Ltd needs to recruit a sales manager for the
new cloth it plans to sell. FF Ltd could use either:
• Internal recruitment or
• External recruitment.
Select one of these methods of recruitment.
External
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(a) Analyse why this method of recruitment could be used by FF Ltd to recruit a new
sales manager.
I belive employing a sales manager externally makes more sense as if there was a (5)
suitable employee for this posi8on, he/she would already be employes to sell the
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new cloth. Obviosly, re-quailifying an exis8ng employee is possible, but the output is
not going to be the same. That is why I would prefer external employment as
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employing an experience and successful sales manager is possible. The revenue of

the firm relies on that man as he/she can introduce you customers to the team if he/
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she is experienced. And I dont tkink a newly re-qialified sales manager can achieve
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this
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17
The new sales manager will need to have some training. The training could be
on-the-job or off-the-job training.
(b) (i) What is meant by on-the-job training?
(1)
On job training means that the trainee will be prac4sing right at the firm the same way
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he will be doing actual work, on-site

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(ii) Evaluate whether on-the-job or off-the-job training would be suitable for a

sales manager.
(4)
I think on job training is more suitable especially with a sales manager. A
sales manager plays an important role when introducing new customers
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to the firm and therefore increasing the total profit thanks to new
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clientele. Many issues or problems can be picked up when trianing on job
compared to off job training where such issues would not be visible.
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Basically the traines is experiencing the idenAcal experience as he would

be in actuak work. Doing off-site training will improve your sales manager
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skills, but it won't bring th actual experience of working with itself.

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The directors of FF Ltd want to increase the motivation of its production workers.
They are considering the following two options for the production workers:
Option 1 Changing from a wage per hour to a payment for each curtain they make
(piece rate)
Option 2 Introducing a cash bonus each month for the worker who has produced
the highest number of curtains that month.
Select one of these options to increase the motivation of production workers.
Op#on 1
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(c) Justify why you have selected this option and rejected the other.
(10)
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18
*P38726A01820*
k an hourly wage will motivate
Text the employees the most. As we know from numerous economic studies that
I believe rewarding employees based on the hours worked makes more sense in term of
employee happiness and produc9vity as a whole. From many economic researches we
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know that hours worked are propor9onal to the output. Meaning that when employees are
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going to be mo9vated to work more hours, the comoany is going to produce more cusrtains
in this case. This has been a verified tac9c of how to increase produc9on, since even For
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applied the same technique when produc9on lines were firstly introduced to complete the
ford model T. Nonethless, I think rewarding the best employee only would cause conflicts
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among the employees as the one who wou win the bonus would be suspicious of having
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good rela9ons with the managment and so winning the bonus for that reason. THe
happiness of employees would drop and extra costs would have to be payed to HR
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department to seFle the costs. That is why I believe the op9on I chose is the best
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TOTAL FOR SECTION B = 40 MARKS
TOTAL FOR PAPER = 100 MARKS
19
*P38726A01920*
BLANK PAGE
20
*P38726A02020*

Business Studies: Edexcel IGCSE

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Friday 27 May 2011 – Afternoon Paper Reference

Time: 2 hours 4BS0/01

1 (a) (i) The skilled machinists would work in the

Successful applicant appointed

(ii) Production department

individual ﬁrms in large quan99es , usually 'bulk buying'

probably be shooping in bulk, this is also going to be represented in the

the total cost is going to be lower when buying from a wholesaler

have large quan00es of the product on stock

be used for inestment capitalisa:on.

(Total for Question 2 = 20 marks)

based on the aircra: quality

many customers for such product as it may be too expensive for

quality is going to be ery high, the product is

customiseable ,therefore it is very ﬂexible to change whatever the

compared to mass produced products.

(Total for Question 3 = 20 marks)

TOTAL FOR SECTION A = 60 MARKS

(Total for Question 4 = 20 marks)

employing an experience and successful sales manager is possible. The revenue of

he will be doing actual work, on-site

(ii) Evaluate whether on-the-job or off-the-job training would be suitable for a

Basically the traines is experiencing the idenAcal experience as he would

skills, but it won't bring th actual experience of working with itself.

(Total for Question 5 = 20 marks)

TOTAL FOR SECTION B = 40 MARKS

TOTAL FOR PAPER = 100 MARKS

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