Unit 1 Introduction to business management

1.1 What is a business?

1.2 Types of business entities

1.3 Business objectives

1.4 Stakeholders

1.5 Growth and evolution

1.6 Multinational companies (MNCs)

Unit 2 Human resource management

2.1 Introduction to human resource management

2.2 Organizational structure

2.3 Leadership and management

2.4 Motivation and demotivation

2.6 Communication

Unit 3 Finance and accounts

3.1 Introduction to finance

3.2 Sources of finance

3.3 Costs and revenues

3.4 Final accounts

3.5 Profitability and liquidity ratio analysis

3.7 Cash flow

3.8 Investment appraisal

Unit 4 Marketing

4.1 Introduction to marketing

4.2 Marketing planning

4.4 Market research

4.5 The seven Ps of the marketing mix

Unit 5 Operations management

5.1 Introduction to operations management

5.2 Operations methods

5.4 Location

5.5 Break-even analysis

Unit 6 Business management toolkit

6.1 Business management tools

IB Business Management SL 3.4 Final accounts Question Bank

(a)

With reference to A F A, explain why applying appropriate principles and ethics of accounting practice is important.

[ 6 ]

[Maximum number: 6]

1. Sotatsu Electronics (SE)
Sotatsu Electronics (SE) manufactures electronic products and is famous for its innovative televisions. In late 2015, SE introduced a new high-definition television with twice the quality of the best-selling television of its chief competitor. Determining that it would be two years before its competitors could have a similar product, SE adopted a price skimming strategy.

$Table 1: Select financial information for SE for 2015 and 2016. Figures in \$000000.$

Table 1: Select financial information for SE for 2015 and 2016. Figures in \$000000.

(a)

(i)

Calculate the values of X and Y in Table 1 (no working required).

[ 2 ]

(ii)

Construct a profit and loss account for SE for 2015 and 2016.

[ 4 ]

[Maximum number: 2]

1. Suparman Fish ( SF )
Gepa Suparman owns and operates four fishing boats in Indonesia. There is a growing demand for canned (tinned) food, including cans of fish. Gepa wants to enter the secondary sector by opening a small factory producing cans of fish.
Gepa's business will be called Suparman Fish ( S F ) and will be a private limited company. Gepa will own all of the shares. The factory will be located in a village three miles from the harbour. Because unemployment is high in the village, Gepa should easily find workers for the new factory. In addition to the manager's salary, workers' wages, and the cost of fish, supplies, and cans, S F will have the semi-variable cost of electricity.
Gepa has prepared a four-month cash-flow forecast based on the following information:
- opening balance month 1: $ 15000.
- month 1 : sales revenue of $ 1000, increasing by 20 % per month.
- manager's salary: $ 300 per month.
- workers' wages: $ 175 per worker per month.

- variable costs (fish, supplies, and cans) are equal to 40 % of sales revenue.
- semi-variable cost of electricity: fixed cost of $ 100 per month, plus a variable cost of $ 0.10 per kilowatt hour (kwh). Month 1 usage: 100 kwh , increasing by 10 % each month.

Although S F would create several jobs in the village, many residents are not happy about the new factory. The new factory would use chemicals, which cause pollution. Residents are concerned about the unpleasant smells from the factory. A representative from the local employment office is concerned whether Gepa's factory will provide a safe working environment.

(a)

Calculate S F 's forecast net profit for the first four months of operation (show all your working).

[ 2 ]

[Maximum number: 6]

1. Fishers
Fishers manufactures baseball caps. In 2017, it sold 75000 caps. The variable cost per cap was $ 6.70 % of Fishers's annual sales occur from April to September. Starting in March, Fishers experiences a significant increase in current assets and current liabilities, which start to decrease in October.

$Table 1: Selected data for Fishers for 2017 (figures in \$000s)$

Table 1: Selected data for Fishers for 2017 (figures in \$000s)

Table 2: Selected forecasted financial information for Fishers for 2018

Sales price per cap will remain the same as in 2017.

(a)

Define the term current assets.

[ 2 ]

(b)

Using Table 1, calculate Fishers's net profit before interest and tax for 2017 (show all your working).

[ 2 ]

(c)

Using Table 2, calculate the following forecasted figures for 2018:

[ 2 ]

(i)

income tax;

[ 1 ]

(ii)

net profit after interest and tax.

[ 1 ]

[Maximum number: 1]

1. LuxEclairage (LE)
LuxEclairage (LE) was founded by Maurice Dahman, an Electrical Engineer from Algeria. He has a degree in electrical engineering and is fluent in French. In 2007, after 12 years working for a large lighting business in Luxembourg, Maurice established LE. His business produces energy-efficient parts for various indoor and outdoor lighting.
L E has a unique selling point (USP): the lowest price in the market. Although most sales are in Europe, all production is in Algeria, where costs are much lower. As a result, growth in sales revenue has been rapid and significant, and L E has gained market share each year.
Selected financial information for L E (all figures in €m):

With the rapid growth in sales revenue since it was first established, L E has experienced some diseconomies of scale, especially in the administration of the business. Production occurs in 12 small factories located around the city of Algiers, rather than in one large factory. Coordination between factories and the administrative offices is, therefore, complicated, and the internet is sometimes unavailable. Whereas French is the language used by managers and customers of L E, the workers generally speak only basic French and prefer to speak Arabic. In addition, patterns of non-verbal communication differ widely between Europe and Algeria.

(a)

Calculate for L E :

[ 1 ]

(i)

the gross profit for 2009 (figure Y).

[ 1 ]

[Maximum number: 4]

1. Piper Industrial (PI)
Piper Industrial (P I) manufactures pipe. The company is highly profitable and its corporate tax rate is 20 % . P I is forecasting major capital expenditure for 2019.

Table 1: Selected forecast financial information for the year ending 31 December 2019

Table 2: Annual cash flow forecast for the year ending 31 December 2019

(a)

Using Table 1, calculate for P I :

[ 2 ]

(i)

gross profit (X);

[ 1 ]

(ii)

$\quad \operatorname{tax}(\mathrm{Y})$ .

[ 1 ]

(b)

Using Table 1 and your calculations in (b)(i) and (ii), construct a profit and loss account for P I.

[ 2 ]

[Maximum number: 6]

1. Rio Mobiliário (RM)
Rio Mobiliário (RM) is a Brazilian furniture manufacturer. It generates sales in South America, North America and Europe. It has successfully outsourced production and distribution facilities to North America.
Selected financial data for the year ended and as of 31 December 2015. All figures in millions of Brazilian reals.

(a)

(i)

Calculate the gross profit X for R M (no working required).

[ 1 ]

(ii)

Using relevant information from the table, construct a fully labelled balance sheet for R M.

[ 5 ]

[Maximum number: 4]

Tipin (TI)

Tipin (TI) manufactures shirts using a batch production method.
Table 1 provides selected financial information for TI from:
- its profit and loss account for the year ending 31 May 2022
- its balance sheet at 31 December 2021.

$Table 1: Selected financial information for TI (all figures in \$000s)$

Table 1: Selected financial information for TI (all figures in \$000s)

At the end of 2021, Tl's current ratio was 2.1. Its net profit margin declined from 14.8 % in 2021 to 10.0 \% in 2022.

(a)

For the year ending 31 May 2022:

[ 4 ]

(i)

calculate Tl's gross profit ( X ) (no working required);

[ 1 ]

(ii)

construct a fully labelled profit and loss account for TI .

[ 3 ]

[Maximum number: 8]

1. Pelican Pies (PP)
Pelican Pies (PP) produces high-quality pies that have limited brand loyalty outside of their local market. The prices of the pies are higher than those of PP's competitors.

Table 1: Selected financial information for PP for the year ending 30 April 2017.

For 2018, PP's owner, Austin, is looking to increase sales beyond the local market by lowering prices and spending a greater proportion of PP's promotional budget on above-the-line methods such as regional newspaper advertisements. To finance this type of promotion, Austin will have to increase his loan amount by $ 10000.

Table 2: Selected financial information for the year ending 30 April 2018.

(a)

Construct a profit and loss account for PP for the year ending 30 April 2017 based on the figures in Table 1 (show all your working).

[ 4 ]

(b)

Construct a forecasted profit and loss account for PP for the year ending 30 April 2018 based on the figures in Table 2 (show all your working).

[ 4 ]

[Maximum number: 6]

1. Nzuri Kio (NK)
Nzuri Kio ( N K ) is a company that manufactures products made of glass, such as windows and table tops. NK sells its products in its own regional trading bloc, a group of eight countries that all have developing economies. NK is located in a poor country where the national government is not very efficient and public sector services are limited. The country's infrastructure needs investment, and quality of life is low. At school, students are in very big classes, with over sixty students in each; few students complete middle school.
The manager of N K is considering purchasing new, high-quality equipment for its factory: glass-making machines from Carrucci SpA. Carrucci SpA is an Italian company that makes the best glass manufacturing equipment in the world. Its computerized equipment is innovative and very efficient. Glass can be cut perfectly, with almost no waste. However, the equipment is expensive and requires highly skilled workers. The new equipment would lead to a better product, which should result in higher sales and a higher gross profit margin.
The total cost of the equipment is $ 800000. NK is considering two different sources of finance:
- (Option A) a seven-year $720000 bank loan.
- (Option B) selling $ 800000 in shares.
Financial information for N K, for the year ending 31 May 2014:

(a)

Using data from the table:

[ 6 ]

(i)

calculate loan capital X (show all your working);

[ 2 ]

(ii)

construct a fully labelled balance sheet for N K;

[ 4 ]

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