Oct/Nov 2020

SRB is a bank that lends to business customers. SRB is planning to make 100 managers’ jobs redundant across its 80 branches. This would eliminate one layer of hierarchy. It is part of the plan to cut costs by $1m over the next 2 years. The Managing Director said: ‘SRB is consulting the trade union on this plan. SRB will rely more heavily on delegation. The bank must react to greater competition from online banks. SRB could either increase advertising or create new products and services.’

Organisation and management

YMG is a private limited company and the biggest producer of soft drinks in country Y. Every year, YMG makes 1 billion litres by using flow production. The Managing Director wants the business to grow. He explained: ‘My plan is to raise output to 3 billion litres within the next 5 years. That would let us sell our products in fresh markets in other countries. I realise that import quotas and a lack of local knowledge may create difficulties, but there are methods we can use to deal with them.’ He also intends to put $60m into new technology so efficiency improves.

Production of goods and services

Elton runs the business as a sole trader. He sells specialist sports clothing and equipment, including items for baseball and hockey. This is a niche market. Elton set up the business 5 years ago, and it has stayed small. Keeping a broad range of inventory is important. Elton has been examining how well the business is performing financially. The profit margin in 2018 was 35%. Table 3.1 shows an extract from the accounts.

Analysis of accounts

KTF produces building materials such as cement and bricks. In the previous year, KTF recorded sales of $25bn. Since it was founded 60 years ago, KTF’s objectives have frequently altered. The Managing Director wants KTF to grow. KTF is going to acquire one of its key rivals. The enlarged business will have total sales of $40bn. The Managing Director said: ‘Many stakeholder groups will be affected by this decision.’ She understands that many external influences shape business activity, including the business cycle, interest rates and laws that safeguard the environment.

Business objectives and stakeholder objectives

Kolo runs a profitable hairdressing salon in the city centre and employs 4 part-time staff. The business has recorded a profit in each of the last 3 years. To exploit the economic boom, Kolo plans to open another hairdressing salon. He intends to use external recruitment to appoint a manager for the second salon. Kolo has shortlisted 2 possible candidates for the role. Details about them are given in Table 1.1.

Recruitment, selection and training of employees

DSY is a private limited company. It manufactures washing machines and cleaning equipment. The Managing Director wants DSY to enter a different market. He intends to invest $2bn in developing electric cars. Competition in the electric car market is intense. This market is expanding very quickly. A leading pressure group has highlighted the environmental issues caused by non-electric cars. The Managing Director is aware that important choices still need to be made about the method of production and the brand image of the new car.

Enterprise, business growth and size

Veronique feels uninterested in her job in a large factory. Because she is a creative person, she wants to resign and open a flower shop. She has looked into micro-finance and drawn up a cash flow forecast; an extract appears in Table 3.1. Veronique has also done some market research and discovered that flower demand is expected to be high at festival times. She believes she has the qualities needed to become a successful entrepreneur.

Cash-flow forecasting and working capital

Gino runs a fast-food restaurant that serves fried chicken and potato fries. He has 5 full-time chefs and 12 part-time workers who help to serve the food. Communication is important, so Gino holds regular meetings with his part-time employees to keep them updated about any menu changes. It took 3 years for Gino’s business to break-even. He wants to achieve a Return on Capital Employed (ROCE) of $10\%$. Gino is always searching for ways to increase the number of customers. Inflation could be a difficulty for Gino’s business.

Costs, scale of production and break-even analysis

Explain two reasons why having business objectives matters for Gemma.

Business objectives and stakeholder objectives

Shop manager job specification Job title: Shop manager Location: New shop Details of job: Oversee the shop and the employees

Recruitment, selection and training of employees

Explain the reasons that liquidity and profitability matter to a business.

Marketing mix

Explain the impact of these changes on GJ. • Depreciation in the exchange rate of country Z • Increase in income tax in country Z

Economic issues

Explain two reasons why CC needs finance.

Achieving quality production

Explain two possible reasons why Aisha decided to establish CC as a business partnership.

Recruitment, selection and training of employees

Explain two reasons why a new business faces a higher risk of failure than an established business.

Marketing mix

Using the figures in Appendix 3, calculate these ratios for CC: • Gross profit margin • Profit margin • Current ratio • Acid test ratio Show your workings.

Analysis of accounts