IBH is a private limited company owned by a family. It produces a range of children’s shoes by using batch production. The market is highly competitive. Like many businesses, IBH needs finance for several reasons. The Finance Director has been examining some financial data. An extract appears in Table 1. Some directors want IBH to move into the women’s shoe market and would like to know whether its performance is improving.
Table 1: Extract from financial data for IBH ($000):
Revenue: 2016 = 400, 2017 = 480.
Gross profit: 2016 = 240, 2017 = 320.
Profit: 2016 = 120, 2017 = 120.
Non-current liabilities: 2016 = 100, 2017 = 200.
(a)[2]
What does the term ‘non-current liabilities’ mean?
(b)[2]
Identify two reasons why a business may need finance.
(c)[4]
Identify and explain two possible advantages to IBH of being a private limited company.
(d)[6]
Identify and explain two advantages to IBH of using batch production.
(e)[6]
Do you think IBH’s performance improved in 2017? Justify your answer with profit margins.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “debts / loans due for repayment in more than 12 months” …