Unite one past paper question

with marking criteria

 ✔ Businesses owned by shareholders, but they can
sell shares to the public and their shares are
tradeable on the stock exchange [2] OR
✔ Often a large company, owned by shareholders
who have limited liability. The company can sell
its shares to the general public [2]OR
✔ A company that sells its shares to the general
(a) Define ‘public limited company’.
............................................................................................................... public through a stock exchange (because the
[2]
company can sell shares to anyone, it can raise
Award 2 marks for a full definition. massive amounts of money) [2] OR
Award 1 mark for a partial definition.
✔ A business whose shares can be freely bought
and sold to the general public [2] Partial
definition e.g. a business that can sell shares [1]
Identify two objectives for a business organisation in the public sector.

Award 1 mark per objective.

Points might include:

Financial or examples e.g. meet targets set by government, improve efficiency/reduce costs
Make product/service affordable to all
Provide a service to everyone
Protect or create jobs in certain areas (social objectives)

Other appropriate responses should also be credited.

Identify four ways to measure the size of a business
Award 1 mark per way.
Points could include:
• Sales value / value of output / revenue
• Volume of output / amount of services / amount of sales / number of customers
• (Value of) capital employed / value of statement of financial position / market
capitalisation
• Market share
• Number of employees
• Number of outlets
Reena is a sole trader. Her business provides house-cleaning services. Reena uses
telephone calls to communicate with her 4 employees. She wants to expand the
business by offering a repair 2 service. Reena plans to carry out some market
research. She has been told producing a business plan can help to reduce risk. Reena
would also like to reduce her workload and is considering taking on a business
partner.
(a) Identify two ways a business plan can help a business to reduce risk.
Way 1: ...............................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
........................................................................................................................................... [2]
Award 1 mark per way (max 2).
Points might include:
1.Help secure funding/attract investors 2.Can show whether/when extra finance needed/help budgeting
3 Help set goals/objectives/provide sense of direction 4Help monitor/check/track progress
5 Test feasibility of idea/identify demand
6 Help set (suitable) prices 7. Understand level/type of competition 8.Help identify skills/employees
needed 9.Help allocate resources (appropriately) Other appropriate responses should also be credited.
 Reena is a sole trader. Her business provides house-cleaning services. Reena uses
telephone calls to communicate with her 4 employees. She wants to expand the
business by offering a repair 2 service. Reena plans to carry out some market
research. She has been told producing a business plan can help to reduce risk. Reena
would also like to reduce her workload and is considering taking on a business
partner
(b) Identify two possible reasons why a business might want to expand.
Reason 1: .........................................................................................................................
...........................................................................................................................................
Reason 2: .........................................................................................................................
........................................................................................................................................... [2]
Award 1 mark per reason (max 2).
Points might include:
o Increase sales/revenue o Increase profit
o Widen customer base/target new markets o Increase market share
o Increase reputation/more prestige/status o Increase output
o Spread risk/diversify o Spread risk/diversify
 Reena is a sole trader. Her business provides house-cleaning services. Points might include:
Reena uses telephone calls to communicate with her 4 employees. She • Have to share responsibilities/ management/
wants to expand the business by offering a repair 2 service. Reena
plans to carry out some market research. She has been told producing control [k] of the cleaning business [app] which
a business plan can help to reduce risk. Reena would also like to could lead to conflict [an]
reduce her workload and is considering taking on a business partner • Offer skills (or examples of) [k] which could lead to
Explain two factors Reena should consider when deciding whether business opportunities [an] such as the repair
to take on a business partner. ( service [app]
Factor 1: • May offer experience/expertise/knowledge [k]
................................................................................................................. increasing efficiency [an] to help reduce the
Explanation: workload [app]
................................................................................................................. • Access to finance/capital [k] so can grow
Factor faster/upgrade equipment [an] making it easier to
................................................................................................................. expand [app]
Explanation:........................................................................................[6] • Different objectives/ways of working [k] which
could lead to slower decision-making/conflict [an]
• Whether want to share decision-making/take
Award 1 mark for identification of each relevant factor (max 2).
longer to make decisions [k] but may lead to better
Award 1 mark for each relevant reference to this business (max
decisions [an]
2).
• Someone to share risk/losses/costs [k]
Award 1 mark for each relevant explanation (max 2).
• Whether wants/have to share any profit [k]
compared to staying as a sole trader [app]
 6 marks question

Question :Do you think retailers are the best channel of

distribution for a manufacturing business to use? Justify

your answer.

Marking criteria

-Award up to 2 marks for identification of relevant points.

-Award up to 2 marks for relevant development of points. Justification might include

[k] – knowledge [an]- Analysis [eval]- Evaluation
-Award up to 2 marks for a justified decision as to whether
✔Retailers offer a wide distribution [k] which can help increase
using retailers is the best channel of distribution for a
potential sales [an].
manufacturing business to use. ✔Selling direct to customers [k] would mean the business could keep
all the profit [an].
✔ I think selling to retailers is better as the high sales will increase the
total revenue [eval] which will offset the lower profit margin.[eval]
[k] – knowledge [an]- Analysis
[app]- Application
[k] – knowledge [an]- Analysis
Do you think being a risk-taker is a more important characteristic of a successful entrepreneur
than being creative? Justify your answer. (6 marks) [k] – knowledge [an]- Analysis [eval]- Evaluation

Award up to 2 marks for identification of relevant points.

Award up to 2 marks for relevant development of points.
Award 2 marks for a justified decision as to whether being a risk-taker is a more important
characteristic of a successful entrepreneur than being creative.
Points might include:

Risk-taker: A successful entrepreneur must take risks otherwise there is no business [k]
Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an]
however they may fail and lose their personal possessions [an]
Taking risks is a way to learn [k] if an idea is good or not [an]

Creative: New ideas [k] leading to increased sales/revenue [an]

Creativity adds value [k] so higher prices can be charged [an].
Creativity alone does not guarantee success [k] if customers do not purchase [an]
Other appropriate responses should also be credited.

Justification might include: Entrepreneurs take the risk of investing their own money [k] this may
bring high rewards [an]. Being creative maybe a more important characteristic as making a business
different to its competitors [k] can lead to increased sales [an]. In a competitive market creativity is
especially important because it helps the business stand out from competitors. [eval] An entrepreneur
can take risks, but if customers will not buy, they will not be successful. [eval]
Do you think all businesses benefit from an increase in government spending? Justify your answer.

Award up to 2 marks for identification of relevant points.

Award up to 2 marks for relevant development of points.
Award up to 2 marks for a justified decision as to whether all businesses benefit from an increase in government spending.

Points might include:

•Increase in demand/sales [k] leading to higher revenue [an]

• Can create jobs [k] so able to maintain/increase output [an] but may be difficult for some businesses to recruit skilled workers
[an]
• May have to pay higher taxes (to pay for spending) [k] which increases costs [an] which could delay investment [an]
• Obtain grants/subsidies [k] generating additional funds for the business to spend [an]
• Can encourage business start-ups [k] increasing competition [an]

Justification might include: An increase in government spending could increase sales [k]. However, it could increase taxes
[k] which increases costs leading to higher prices [an]. Overall, I think all businesses can benefit. For example, if the
government decides to build new roads, construction businesses are likely to benefit the most as can receive an increase
revenue from the extra sales, but other businesses still benefit from better transport links which can helps all businesses send
or receive goods on time. [eval] [eval]
Question : Outline two ways Izaak could increase added value.

Award 1 mark for each relevant way.

Award 1 mark for each relevant reference to this business.

Ways to increase added value are:

❑ Increase price (1) greater margin per meal served. (1)

❑ Reduce costs of materials (1) so buy cheaper fish. (1)

Question : Identify two possible causes of business failure.
Cause 1: ...........................................................................................................................
...........................................................................................................................................
Cause 2: ...........................................................................................................................
........................................................................................................................................... [2]

Award 1 mark for each relevant cause (max 2).

Causes may include:
• Poor planning/lack of objectives
• Cash flow problems / lack of working capital
• Poor management skills / lack experience / lack of knowledge
• Overexpansion / business expands too quickly
• Lack of demand/sales / (too much) competition
• Poor marketing
• Economic influences / changes in business environment
AH is an insurance business. It operates in a competitive [k] – knowledge [app]- Application
market. AH has 1000 employees including 50 supervisors.
The supervisors use an autocratic leadership style. AH
Award 1 mark for each relevant benefit (max 2).
currently has a 5% market 3 share and is planning to take
Award 1 mark for each relevant reference to this business (max
over a competitor. The Managing Director is considering
2).
how to communicate with AH’s employees about the
takeover. There are many sources of finance available to Points might include:
fund business growth. • Increase in market share [k] from 5% [app]
• Benefit from economies of scale [k] in the competitive market

(c) Outline two benefits to AH of taking over a competitor. [app]

Benefit 1: • Power to set/influence market prices [k] for insurance [app]
.................................................................................................
Benefit 2:
............................................................................................[4] • Gain brand name of competitor [k]
• Gain skills/resources (from other business) [k]
• Protection from risk of takeover [k]
 Points might include:
AH is an insurance business. It operates in a competitive market. AH has (Bank) loan [k]
1000 employees including 50 supervisors. The supervisors use an autocratic • Can receive all the money at once [an]
• (Long time to) repay [an]
leadership style. AH currently has a 5% market 3 share and is planning to • Need to pay interest [an] which can increase costs [an]
take over a competitor. The Managing Director is considering how to Retained profit [k]
• No repayment costs [an]
communicate with AH’s employees about the takeover. There are many • May not be enough funds available [an]
sources of finance available to fund business growth. Sell shares /share issue [k]
• No need to repay /permanent source of capital [an]
(e) Explain two sources of finance which could be used to fund business • Will dilute ownership / lead to loss of control [an]
• Shareholders may expect dividends [an]
growth. Which source of finance would be the best to use? Justify your • Sell (unwanted) non-current assets [k]
answer. [6]
Justification might include:
• Award up to 2 marks for identification of relevant points. One option is a bank loan [k] but the business will need to pay
• Award up to 2 marks for relevant development of points. interest
• Award 2 marks for a justified decision as to which source of finance [an]. An alternative could be retained profits [k] as there is no
need to
should be used to fund business growth
repay [an]. I think a bank loan is the best source because there
may not
[k] – knowledge [an]- Analysis [eval]- Evaluation be sufficient retained profit which may delay the expansion.
[eval] [eval]
 Viktor is starting up a business as a photographer. He will be a
sole trader. Quality control will be important. Viktor plans to use Points might include:
sampling when carrying out market research. There are legal • Difficult to raise capital [k] which could restrict growth
controls 4 which could affect his marketing strategy. Viktor will
[an] of the
employ 5 photographers. He knows there are many ways to
motivate employees. photography business [app]
• Unlimited liability [k] of his start-up business [app] so his
• (d) Explain two disadvantages to Viktor of operating as a sole
trader. personal
assets are at risk if he cannot pay debts [an]
Disadvantage 1:
........................................................................................................ • Has all the responsibility / make decisions on own [k] so
Explanation: may lead to wrong decisions being taken [an]
........................................................................................................ • May have to work long hours [k]
........................................................................................................ • Business does not have a separate legal identity [k]
Disadvantage 2:
........................................................................................................ • No continuity of business/ if die, the business will close [k]
• No one to share risks/losses with [k]
Explanation:
........................................................................................................
.................................................................................................. [6]

Award 1 mark for each relevant disadvantage (max 2).

Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
• Tom wants to leave his job to become an entrepreneur. He
and his sister plan to start a window cleaning business. Tom (b) Define ‘opportunity cost’.
has been told that new businesses are at a greater risk of .......................................................................................................
failure than 4 established businesses. Tom has to decide .................................................................................................[2]
whether a partnership is a suitable form of business
organisation for the new business. He has calculated the Award 2 marks for a full definition. Award 1 mark for a partial
business will need $700 as start-up capital. Tom knows that
definition.
every decision he makes will have an opportunity cost.
• (a) Define ‘entrepreneur’. • The next best alternative given up by choosing another item
................................................................................................... [2]
...................................................................................................
.........................................................................[2]
OR
• The benefit that could have been gained from an alternative
Award 2 marks for a full definition. Award 1 mark for a partial use of the same
definition. resource [2]
• A person who takes the risk for a new business venture OR
[2]OR • A benefit, profit or value that a firm has to give up in order
• An individual who takes the financial risk of starting and to achieve something
managing a new business[2] else [2]
• Partial definition e.g. what you have to give up / forgo [1]
• Partial definition e.g. person who starts up a business [1]
 • Tom wants to leave his job to become an entrepreneur. He and his sister plan to Points might include:
start a window cleaning business. Tom has been told that new businesses are at a • Own savings [k] from his time working in his other job [app]
greater risk of failure than 4 established businesses. Tom has to decide whether a as no need to
partnership is a suitable form of business organisation for the new business. He
has calculated the business will need $700 as start-up capital. Tom knows that
repay/no interest to pay [an]
every decision he makes will have an opportunity cost. • Borrow from friends/family [k] such as his sister [app] as may
give long time to
repay [an]
(d) Explain two suitable sources of start-up capital Tom’s business might use. • (Bank) loan [k] for this window cleaning business [app] as
could provide all the
Source 1: .................................................................................................................
money at once [an]
Explanation: • Overdraft [k] can arrange quickly/only pay interest when used
....................................................................................................................................... [an]
.....................................................................................................................................S
• Government grant [k] as may be willing to support
ource 2: ......................................................................................................................
Explanation: ................................................................................................................. entrepreneurs [app] as no
................................................................................................................................ [6] interest/no need to repay [an]
• Crowdfunding [k] to raise the $700 [app] so no interest to
repay [an]
• Micro-finance [k] as does not need security to obtain [an]

Award 1 mark for identification of each relevant source of start-up capital (max 2).
Award 1 mark for each relevant reference made to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
 • Tom wants to leave his job to become an entrepreneur. He Points might include:
and his sister plan to start a window cleaning business. Tom Partnership:
has been told that new businesses are at a greater risk of • Share workload/responsibility [k] which could allow time fo
failure than 4 established businesses. Tom has to decide
each partner to focus on different business activities [an]
whether a partnership is a suitable form of business
organisation for the new business. He has calculated the
• More ideas/skills [k] which could help make the business
business will need $700 as start-up capital. Tom knows that more competitive [an]
every decision he makes will have an opportunity cost. • Can share any potential loss/risks [k]
• Unlimited liability [k] personal possessions at risk if unable
e)Do you think a partnership is the best form of business
organisation for a new business? Justify your answer. pay business debts [an]
• Risk of disagreements / slow decision making [k] so less
.....................................................................................................................
.....................................................................................................................
responsive to changes in customer demand [an]
..................................................................................................................... • Must share any profits made [k]
............................................................................................................... [6]
Other options might include:
Award up to 2 marks for identification of relevant points.
Sole traders [k]
Award up to 2 marks for relevant development of points.
• It’s simple/very little paperwork required to set up [an]
Award up to 2 marks for justified decision as to whether a
• Require limited start-up capital [an]
partnership is the best
• Make all the decisions / has total control of business [an]
form of business organisation for a new business.
• Keep all the profit [an]
• Limited access to finance [an]
EQR owns 150 cafes. It sells a range of drinks including coffee. Being ethical is important to EQR. The Managing
Director has been analysing EQR’s statement of financial position. The business 1 has the objective to increase its
6% market share. The Managing Director plans to grow the business by selling franchises for $85 000. She is also
considering ways to increase added value.
(c) Outline two ways EQR could increase added value.
Way 1: ...............................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
Way 2: ...............................................................................................................................
...........................................................................................................................................
........................................................................................................................................... [4]

Award 1 mark for each relevant way (max 2).

Award 1 mark for each relevant reference to this business (max 2)
Points might include:
• Increase prices [k] at its cafes [app]
• Reduce material/variable costs [k] of coffee [app]
• Branding/change packaging [k] which can also help when selling its franchises [app]
• Excellent/better service [k]
• Additional product features/improve design [k]
• Convenience [k]
EQR owns 150 cafes. It sells a range of drinks including coffee. Being ethical is important to EQR. The
Managing Director has been analysing EQR’s statement of financial position. The business 1 has the objective
to increase its 6% market share. The Managing Director plans to grow the business by selling franchises for $85
000. She is also considering ways to increase added value.

d) Explain two advantages to EQR of selling franchises as a way to grow its business.
Award 1 mark for identification of each relevant advantage (max 2). Award 1 mark for each relevant reference
to this business (max 2). Award 1 mark for each relevant explanation (max 2).
Points might include:
• Franchise fee must be paid / licence has to be bought [k] for a cafe [app] providing funds for investment [an]
• Can expand at a faster rate [k] which can help increase its market share [an] above 6% [app]
• Receives royalties / share of (franchisee) profit [k] as well as the $85000 [app]
• Not/franchisees responsible for day-to-day management [k] so have time to focus on other issues [an] such as
increasing added value [app]
• Increase brand awareness [k] of it being ethical [app] increasing sales [an]
Following the end of a recession in country X, Beena wants to start up a hairdressing business. One option is to purchase a franchise
from an established hairdressing business. Beena has $800 4 in savings and knows having enough working capital will be important
for her business. She plans to use market research to help her decision-making. Beena knows there are many ways to segment a
market.
e)Explain two possible advantages to Beena of buying a franchise.
Award 1 mark for identification of each relevant advantage (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
• Established brand / well-known brand [k] therefore no need to spend on advertising [an]
• Reduces risk of failure [k] especially after a recession [app]
• Training / advice offered by franchisor [k] which saves costs [an] which is important for a start-up business [app]
• Attracts customers [k] helping to ensure / increase revenue [an] for her hairdressing business [app]
• Easier to obtain finance / bank more willing to lend [k] which may be necessary with savings of $800 [app]
• Franchisor pays for advertising [k]
• Stock control and accounting systems often provided by franchisor [k] which can help make business more efficient [an] and improve
her working capital [app]
• All supplies are obtained from a central source / the franchisor [k] which can help ensure quality [an]
• Fewer decisions to be made (than an independent business) [k]
 Justification might include:
Do you think a public limited company is a better form of business organisation for a growing
A public limited company has better
business than a private limited company? Justify your answer.
access to capital [k] which can help
Award up to 2 marks for identification of relevant points . finance expansion [an]. Whereas a
private limited company can control
Award up to 2 marks for relevant development of points.
who buys the shares [k] which can
Award up to 2 marks for a justified decision as to whether a public limited company is a better form of reduce the risk of being taken over
business organisation for a growing business than a private limited company. [an]. Becoming a public limited
company is better because as the
Points might include:
business is growing having access
Public limited company: to more funds is likely to be very
important otherwise it could delay
• Access to very large amounts of capital [k] which does not need to be repaid [an]
its plans [eval], whereas a private
• Shares available on the stock exchange / can sell shares to public [k] limited company is restricted to a
smaller group of people so may not
• Cannot control who buys the shares / no restriction on who can buy shares [k] which increases the
be able to raise sufficient funds
risk of a takeover [an]
[eval].
• More legal requirements / controls to follow / must hold an annual general meeting [k] which
increases costs / time-consuming [an]
• Selling shares to the public is expensive [k]
Private limited company:
• Can only sell shares to friends/family [k] which could limit amount of finance able to raise [an]
• Able to control who buys the shares [k] which can help reduce risk of takeover [an]