NBV is a multinational company that produces building products, including bricks. In the previous year, NBV’s financial accounts reported capital employed of $144 billion. NBV operates in 18 countries and has a total workforce of 400 000. NBV is affected by some diseconomies of scale. To avoid exchange rate problems, all raw materials are bought from the countries where it operates. NBV plans to open a factory in Country B for the first time. Some people believe this choice will create only disadvantages for other businesses in country B.
(a)[2]
What does ‘exchange rate’ mean?
(b)[2]
What does the term ‘capital employed’ mean?
(c)[4]
Identify and explain two ways NBV’s managers might use its financial accounts when making decisions.
(d)[6]
Identify and explain two diseconomies of scale that NBV could face.
(e)[6]
Do you think NBV’s decision to open a factory will bring only drawbacks to other businesses in country B? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “The value or price of one currency quoted in terms of another” …