Ramford is a private limited company. It runs four factories that manufacture a broad selection of food products, including breakfast cereal and ice cream. The Finance Director is worried about the company’s financial results. She has read that many businesses collapsed in the previous year. ‘I think we are suffering from diseconomies of scale’ she said. Ramford’s directors have chosen to reduce the number of different products it makes from 80 to 10.
Table 2: Extract from accounts
(a)[2]
What does the term ‘private limited company’ mean?
(b)[2]
Identify two causes of business failure.
(c)[4]
Identify and explain two diseconomies of scale that Ramford may be facing.
(d)[6]
Identify and explain two factors that Ramford should take into account when choosing which products to remove from its product range.
(e)[6]
Do you think the Finance Director is justified in worrying about Ramford’s financial performance in 2014? Support your view with evidence from Table 2 and suitable ratios.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A company whose shares are not available for purchase by the general public” …