Oct/Nov 2021

After spotting a gap in the soft drinks market, Jerome created a low sugar drink. To launch the business and fund working capital, he borrowed $5000 from family and friends. Jerome runs the business as a sole trader. In order to advertise the product, Jerome gave away free samples in the town centre. During the first year, Jerome’s business sold 10 000 units. That figure is 200 units above his break-even output. Jerome is thinking about methods of raising added value.

Costs, scale of production and break-even analysis

NSN is a multinational company that manufactures cars. Over time, technology has altered production methods. NSN uses just-in-time inventory control in all of its factories. NSN intends to open a new factory in country Z, creating 7000 jobs. The Government of country Z has offered NSN an $80m grant. A spokesperson for NSN said: ‘Governments should support business activity. Other factors also influenced our choice to construct the new factory there, including the possible effects of economic growth.’

Production of goods and services

SBG produces a variety of goods, including specialist paints. It operates 6 factories and employs 700 workers. All SBG’s employees are encouraged to take part in decision-making. SBG’s products are exported to 16 countries, with wholesalers as the main distribution channel. The Managing Director said that the business aims to grow and make a profit. He also recognises that all business activity creates externalities for SBG’s stakeholder groups.

Business objectives and stakeholder objectives

BGR is a private limited company, and it runs 6 cinemas in towns in different areas. Effective internal communication matters to BGR. The Finance Director has been studying BGR’s accounts, and an extract is given in Table 4.1. BGR intends to open another cinema and will need to employ 10 new staff. The new cinema will cost $8m. The Finance Director must choose whether BGR should issue new shares or take a bank loan to fund the expansion.

Business finance

SWB operates in the secondary sector. Each week it makes 150 000 wooden bookcases by using batch production. It sells all of its output to one customer. Quality control is important. SWB employs 240 workers, and 100 of them are part-time. To cut communication barriers, SWB’s managers use noticeboards placed around the factory and hold meetings with employees every month. The Operations Manager is thinking about bringing in just-in-time inventory control to cut the amount of waste.

Production of goods and services

Tom set up ALB 5 years ago, and it makes trainers (sneakers) from sustainable materials like wool. One of ALB’s aims is to safeguard the environment. As part of his research, Tom worked out some costs that he could use for break-even analysis. An extract is shown in Figure 2.1. ALB distributes its products through retailers. Tom believes that a successful entrepreneur must also be a capable manager. Figure 2.1 is a bar chart with these labels and percentages: retailers’ costs 50%, manufacturers’ profit 5%, fixed costs 15%, variable costs 30%. The horizontal axis is labelled percent and runs from 0 to 60.

Costs, scale of production and break-even analysis

Aurelie runs as a sole trader. She opened her small hotel 1 year ago with government support. Aurelie understood that developing strong customer relationships would matter. She now wants to use ratio analysis to examine her financial statements. An extract appears in Table 3.1. She is concerned about how the Government’s plan to introduce a new tourist tax of $1 per tourist per night might affect her business.

Analysis of accounts

GCF is a public limited company. It offers a variety of computer services to businesses, including website design and app creation. The Human Resources Director applies ideas from Maslow’s Hierarchy of Needs to help ensure that GCF’s 250 employees stay well motivated. An extract of the methods used appears in Table 4.1. GCF intends to grow by acquiring one of its competitors. This will cost $50m. To pay for the takeover, GCF is thinking about issuing new shares.

Motivating employees

VDN is a private limited company. One of VDN’s objectives is to act ethically. VDN makes office products such as pens and paperclips. Every raw material is brought in from abroad. The Managing Director intends to install new machinery to help reduce average costs. This will require training for VDN’s 380 employees. The Managing Director also wants to bring Kaizen into the factory.

Recruitment, selection and training of employees

Four years ago, Asmaa used a government grant to establish a small car repair business. She now employs 3 full-time workers. It matters to Asmaa that her employees remain highly motivated. She believes the business has gained from a low unemployment rate in the economy. Asmaa is checking her cash-flow forecast. A section is shown in Table 2.1. She wants to find out how the closure of a rival and a rise in the minimum wage rate could alter her forecast.

Cash-flow forecasting and working capital

Country C's economy is seeing economic growth. Using secondary market research, Samuel has started a plumbing business. The business installs and repairs bathroom equipment. Samuel works as a sole trader. He put all his $500 savings into buying the tools he needed. Samuel then had to choose a suitable pricing method. He believes that offering a high-quality service might help his business add more value.

Marketing strategy

BEF is a sizeable business in country X. It uses flow production to make a broad range of products, including toothpaste and shampoo. At present, all of BEF’s products are sold only in country X. BEF recognises that effective internal communication methods matter. The Operations Director is examining production data. Table 4.1 gives an extract. BEF is thinking about exporting its products to country Y.

Production of goods and services

Explain two advantages and two disadvantages of specialisation in a manufacturing process.

Production of goods and services

Explain two methods by which SSM can grow.

Market research

Explain four ways SSM could improve the motivation of its production workers.

Motivating employees

Explain two methods that might resolve SSM’s cash-flow difficulties.

Cash-flow forecasting and working capital

Explain two reasons why PPE may stay small.

Types of business organisation

Explain two advantages and two disadvantages of job production.

Production of goods and services

Explain one cost and one benefit to PPE of developing a new product.

Marketing mix

Explain four management functions performed by Kaari.

Organisation and management

Show how each of the following four users of MA’s accounts could use the financial information in Appendix 1 when making decisions: Shareholders: Suppliers: Employees: Banks:

Analysis of accounts

Explain two ways that could be used to gauge the size of MA’s airport business. Method 1: Explanation: Method 2: Explanation:

Enterprise, business growth and size

Explain two benefits to MA of using the new technology described in Appendix 2. Benefit 1: Explanation: Benefit 2: Explanation:

Market research

Explain four factors that could influence the source of finance a business chooses to use. Factor 1: Factor 2: Factor 3: Factor 4:

Business finance