2

1 HCB manufactures cars in country X. It has 200 employees working in its factory. The business
has changed its method of production due to new technology. HCB’s Managing Director is
considering ways to become more ethical. She is aware that other businesses in country X have
started to import cars. The interest rate in country X has increased due to rising inflation.

(a) Define ‘inflation’.

when a countries GDP falls , so prices

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

of and
goods services increase
...........................................................................................................................................

An increase in the general price level

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

of goods and services overtime.

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

(b) Identify two ways technology could change production methods.

flow production X
Way 1: ...............................................................................................................................

fewer mistakes
...........................................................................................................................................

Automation ~ less employees

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

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

-
(c) Outline two ways HCB could become more ethical.

Reduce air pollution

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

This is because HCB manufactures cars

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

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

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

Pay workers fairly

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

This because HCB

employees
is has 200

g
.
...........................................................................................................................................

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

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

© UCLES 2023 03_0450_12_2023_1.13

 3

(d) Explain two ways HCB could be affected by an increase in the interest rate in country X.

Expensive raw materials

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

fewer sales
...........................................................................................................................................

Explanation: This is because HCB manufactures

......................................................................................................................
carss

As a result it would be more costly per unit

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

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

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

more expensive to barrow ~

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

This is because HB uses new technology which

Explanation: ......................................................................................................................
,

could be quite costly· As a result it could

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

limit the amount of

machinery they can
...........................................................................................................................................

purchase
...........................................................................................................................................
.
[6]

(e) Do you think manufacturing businesses will always benefit from the introduction of import
tariffs? Justify your answer.

An advantage to this is that

they'll make more
...........................................................................................................................................

profit. As a result increasing revenue.

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

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

A disadvantage to this is that it may discourage

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

buyers as it's more expensive. Resulting in a decrease

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

of sales
...........................................................................................................................................
.

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

Overall to a
manufacturing business they
...........................................................................................................................................

won't
always benefit as their raw materials
...........................................................................................................................................

could be ~ costly for the business.

...........................................................................................................................................
imported which is

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

...........................................................................................................................................
-- [6]

© UCLES 2023 03_0450_12_2023_1.13 [Turn over

 4

2 WFH produces hats and sells them to a mass market. It holds a high level of inventory. The Managing
Director is concerned about the liquidity of the business and has been analysing WFH’s financial
statements. An extract is shown in Table 2.1. The Managing Director thinks that the business might
fail. Other stakeholder groups might also be interested in WFH’s financial statements.

Table 2.1
Extract from WFH’s financial statements ($000)

2021 2022

Current assets 60 50

Inventory 20 30

Trade receivables 25 10

Cash 15 10

Current liabilities 20 40

Profit/loss 15 (10)

(a) Identify two possible causes of business failure.

expanded too quick

Cause 1: ...........................................................................................................................

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

Didn't market beforehand

study
Cause 2: ...........................................................................................................................

...........................................................................................................................................
8
[2]

(b) Calculate WFH’s acid test ratio for 2022. Show your working.

50 30
Working: ...........................................................................................................................
-

40
...........................................................................................................................................

...........................................................................................................................................
0 5
Final answer: ....................................................................................................................
O [2]
.

© UCLES 2023 03_0450_12_2023_1.13

 5

if sales
increase
(c) Identify four reasons why businesses hold inventory.

Reason 1: .........................................................................................................................

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

cos
Reason 2: .........................................................................................................................

Save transport costs ~

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

Reason 3: .........................................................................................................................

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

incase
suppliers delay
Reason 4: .........................................................................................................................

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

(d) Explain why the following two stakeholder groups might be interested in WFH’s financial
statements.

if their being paid

fairly
Employees: .......................................................................................................................

ask for pay rise

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

This is because WFH has made

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

a 10 loss in 2022 , which could effect

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

the
salary of employees
...........................................................................................................................................

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

pay them back

ensure they have enough to
Suppliers: ..........................................................................................................................

on time
...........................................................................................................................................

Explanation: This is because WFH produces

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

hats . As a result it lets suppliers

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

allow WH to
pay them after receiving
...........................................................................................................................................

their inventory
.
........................................................................................................................................... [6]

© UCLES 2023 03_0450_12_2023_1.13 [Turn over

 6

(e) Do you think it is always better for a business to sell to a mass market? Justify your answer.

An advantage to this is a mass market has

...........................................................................................................................................
lots of customers , which increases sales.
...........................................................................................................................................

A disadvantage is that it could be hard to meet

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

customer demands , therefor decreasing customer loyalty.

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

I think it depends on what the

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

business sells , if they sell a variety of

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

products they should sell to a mass market

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

to meet various wants from customers.

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

However if their products are unique

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

and of high quality they should consider

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

selling to niche market .

...........................................................................................................................................
a

........................................................................................................................................... [6]

© UCLES 2023 03_0450_12_2023_1.13

 7

3 AH is an insurance business. It operates in a competitive market. AH has 1000 employees including

50 supervisors. The supervisors use an autocratic leadership style. AH currently has a 5% market
share and is planning to take over a competitor. The Managing Director is considering how to
communicate with AH’s employees about the takeover. There are many sources of finance available
to fund business growth.

(a) Identify two responsibilities of supervisors.

ensure
employees on task ~
Responsibility 1: ...............................................................................................................

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

ensure employees are doing job

Responsibility 2: ...............................................................................................................

correctly 8 effecient
.
........................................................................................................................................... [2]

(b) Identify two methods of written communication.

email
Method 1: ..........................................................................................................................

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

letter
Method 2: ..........................................................................................................................

...........................................................................................................................................
8
[2]

(c) Outline two benefits to AH of taking over a competitor.

Decrease competition
Benefit 1: ..........................................................................................................................
This is because At has 5%
...........................................................................................................................................

market share .
...........................................................................................................................................

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

economies of scale
Benefit 2: ..........................................................................................................................

This is because All is an insurance

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

company
...........................................................................................................................................

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

© UCLES 2023 03_0450_12_2023_1.13 [Turn over

 8

(d) Explain one advantage and one disadvantage to AH of its supervisors using an autocratic
leadership style.

faster decision
making
Advantage: .......................................................................................................................

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

This is because AH is
planning a
Explanation: ......................................................................................................................

takeover. As result it would increase effecient

...........................................................................................................................................
a

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

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

demotivates employees
Disadvantage: ...................................................................................................................

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

This is because All has 1000 employees

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

As result it could reduces productivity .

...........................................................................................................................................
a

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

........................................................................................................................................... [6]

(e) Explain two sources of finance which could be used to fund business growth. Which source
of finance would be the best to use? Justify your answer.

The first
way could be a bank loan. An advantage
...........................................................................................................................................
to this

is that they can barrow large sums of money.

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

The method could be

second
leasing . An advantage
...........................................................................................................................................
equipment
to this is that it doesn't require large sums upfront.
...........................................................................................................................................

The best is
using a banloan , it
...........................................................................................................................................
way yes
does have to be repaid with interest but when
...........................................................................................................................................

the business grows so will their profit grows

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

with it, the interest would be minor

...........................................................................................................................................
compared
to their revenue
...........................................................................................................................................

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

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

........................................................................................................................................... [6]

© UCLES 2023 03_0450_12_2023_1.13

 9

4 Viktor is starting up a business as a photographer. He will be a sole trader. Quality control will be
important. Viktor plans to use sampling when carrying out market research. There are legal controls
which could affect his marketing strategy. Viktor will employ 5 photographers. He knows there are
many ways to motivate employees.

(a) Identify two ways legal controls could affect marketing strategy.

list all ingredients on packaging

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

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

increase cost of Manufacturing

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

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

(b) Define ‘quality control’.

when quality of a product is checked at

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

the end of the production process , to

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

ensure O faults in the product

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

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

(c) Outline two reasons why Viktor might use sampling when carrying out market research.

cost-effective
Reason 1: .........................................................................................................................
This is because Viktor is starting
...........................................................................................................................................

photography business
...........................................................................................................................................
a

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

time-effective
Reason 2: .........................................................................................................................

This is because he's sole trador

...........................................................................................................................................
a

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

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

© UCLES 2023 03_0450_12_2023_1.13 [Turn over

 10

(d) Explain two disadvantages to Viktor of operating as a sole trader.

No shared
management
Disadvantage 1: ................................................................................................................

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

Explanation: This is vivita plans to employ 5

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

employees. As a result it would be hard

...........................................................................................................................................
to supervise employees while managing
...........................................................................................................................................

work load
...........................................................................................................................................
.

No shared ideas
Disadvantage 2: ................................................................................................................

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

Explanation: This is because vinta started a

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

photography business. As a result it can

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

limit the different ideas of editing

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

Photos
...........................................................................................................................................
.
[6]

(e) Explain two ways a service business could motivate its employees. Which would be the best
way to use? Justify your answer.

Commission per sale. As result it would

...........................................................................................................................................
a

motivate employees to increase their sales.

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

Better communication with manager. As a result

...........................................................................................................................................
it would motivate them to do their best.
...........................................................................................................................................
I think communication is the best
way to
...........................................................................................................................................

motivate employees of service sector business

...........................................................................................................................................
a

as it decreases absenteeism where as commission

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

could be quiet costly for the business.

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

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

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

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

........................................................................................................................................... [6]

© UCLES 2023 03_0450_12_2023_1.13