Questions

Q1.

What is meant by limited liability?

(2)
Limited liability — when a business has a legal identity separate from its owners. In other words, if
business fails, founder or owner won’t lose their personal assets.
(Total for question = 2 marks)

Q2.

What is meant by a sales forecast?

Sales forecasting is a business process when, company projecting future sales and a prediction of which
deals will move through the sales cycle, based on previous experience.
(2)

Q3.

Willie's Cacao Ltd is a private limited company.

Explain how limited liability might affect Willie's Cacao Ltd.

(4)
Limited liability - when a business has a legal identity separate from its owners. In other words, if business
fails, founder or owner won’t lose their personal assets. Willie’s cacao chocolate products are sold to high-
end retailers, such as waitrose waitrose and selfridges, what makes puts them into a nich market, with
higher price then competitors such as Cadbury, that can affect their demand in bad way. This means that,
its will be hard for Willie’s cacao LTD to borrow money, as they are private limited company, what puts
lenders into a risk of loosing money due to failure of the business. Therefore, WC LTD should give some
kind of a pawn, to make lenders wiling to borrow money for example new machinery, as their old-
fashioned may become a problem in the future.
(Total for question = 4 marks)

Q4.

Extract A

Tended Ltd
Extract B

The expansion of Tended Ltd

Extract C

The global technology wearables market

Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited
company.
(4)

Limited liability - when a business has a legal identity separate from its owners. In other words, if business
fails, founder or owner won’t lose their personal assets. From the extract, tended Ltd is a fast growing
technology start-up company based in lincoln. This means, that using their own money can put them into
a risk of loosing everything. However they need to expand and develop their business and the «tended
project» , therefore, the most approcriate way to raise finance is external finances. For example, salling
shares, as they are private limited company what makes not really able them to use other internal
finances.
(Total for question = 4 marks)

Q5.

Using the data in Extract E, explain one way Hardy Punglia could use his cash flow forecast.
(4)
Cash flow forecast - is the process of obtaining an estimate of a company's future financial position,
based on previous experience. From the extract, Hardy Plans ot expand, by opening another shop and
hoping ot supply other retailers in Yorkshire. In addition, His closing balances in January (3000) and
February (3400) are negative. Therefore, Hardy punglia will be enable to correctly plan his extanditure, by
using his cash flow forecast. He will need to wait for hes business to finally start making a profit, or raise
addtional finances from external or internal resouses, such as banks or personal savings to cover up its
losses in those months.

(Total for question = 4 marks)

Q6.
 
Extract A

Backpack: Student sets up online homework planner business

Assess the importance of a business plan, as a means to obtain finance, to a small start-up company,
such as Backpack Ltd.
(10)
Business plan — a document by which company will follow to run and develop business, in addtion its
needed to support application for finance, both start-up stage and in the future.

From the key study, Backpack Ltd is a small start-up company with limited liability. Therefore to raise
finance for their development they need to search for external resouces such as bank loans etc. Having a
business plan, may help Backpack Ltd gain trust from banks, as banks can understand their ideas and
calculate risks for theirselfes.

However, they can use way to proof their reliability, for example cash-slow forecast. Therefore, full
business plan may be not necessar.

Second reason of importance of having a business plan is helping to reduce the risk of business failure,
as it considers potential risks and moves to prevent it. In addition, it will show what will be the best way to
expand/develop depending on the situation.

However, if person who started a business is not competent, it makes business plan totally unreastic and
irrelevant. This point may be critical, as owner is started company after he graduated from school i the
age of 18. As, was said previously if he does not has relevant degree or understanding, the plan will not
work out.

To conclude, has Alistair already been rejected from bank, so business plan may be not that important, as
they need to find another way to proof their reliability to be able to raise finance for future expanditure
amd development.

(Total for question = 10 marks)

Q7.

Extract A

Cambridge Medical Robotics (CMR) Surgical Ltd secures funding deal

Extract B

Selected information from CMR Surgical Ltd's Statement of Financial Position (2017)
Assess two difficulties CMR Surgical Ltd may face in producing sales forecasts for 2050.
(8)
Cash flow forecast - is the process of obtaining an estimate of a company's future financial position,
based on previous experience.

From the case study they raised 75 million pounds into developm,ent and launching new robot versius -
unique machine to the market. This means that Its really hard to predict how new machinery will operate
and if it will bring that much sales (4 million) in first years of working. In addition, referring to the extract
CMR surgical ltd forecasts that it will generate up to 20 mill in sales. This forecast will be not really
accurate as its too far in the future.

However, they believe that Versius will change keyhole surgery forever, as it helps a surgeon use less
physical effort to perform keyhole surgery. This will significantly increase productivity, what makes CMR
surgical Ltd reach 20 billion pounds in sales even sooner than predicted.

(Total for question = 8 marks)