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UK GCSE JUN 2010 : Unit 3 Business Finance

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Centre Number 71 Candidate Number General Certificate of Secondary Education 2010 Unit 3: Business Finance GDB31 Applied Business Double Award [GDB31] MONDAY 7 JUNE, MORNING TIME 1 hour 30 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number in the spaces provided at the top of this page. Write your answers in the spaces provided in this question paper. Answer all six questions. There should be enough space for your answers. If you do require more space, you may complete your answers on the extra lined pages at the back of this booklet. INFORMATION FOR CANDIDATES The total mark for this paper is 90. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. For Examiner s use only Question Number 1 2 3 4 5 6 Total Marks 5270 Marks BLANK PAGE 5270 2 How I survived my first year in business Invest Northern Ireland recently organised a one day seminar for budding entrepreneurs. One of the guest speakers at the event was Carolyn Howe from Lincolnshire who spoke candidly about how she coped in the early days and how she survived her first year in business. Carolyn opened her children s shoe shop, Piggy s in Stamford in 2001. businesslink.gov.uk What I did Plan ahead With help from her accountant, she drew up a financial plan that included budgets and sales forecasts. Carolyn found the plan very useful for monitoring sales targets and estimating stock demand. Get financial support Carolyn did not have sufficient money to fund the business so she had to look elsewhere. She got a bank loan to cover her start-up costs and got a start-up grant to cover IT costs. Keep costs down Cutting costs included simple things like finding the best deals on energy bills for the shop. She rented the smallest premises she could find, expanding only when the business could afford it. The less you take out of the business, the better the chances of surviving the first year. What I d do differently Understand the difference between cash flow and profit In the first couple of months, sales were good and it was easy to watch the money coming in and assume the business was making a profit when it wasn t. I now monitor cash flow each week and wait until the end of the year to calculate profit. Stick to the budget On early stock buying trips, I sometimes spent more than I d intended. Nowadays I always go in with a budget and stick to it, no matter how persuasive the sales rep. This advice not only helped to get the business off the ground but it paved the way for expansion into larger premises, the employment of six staff and the sale of a full range of children s clothing. 5270 3 [Turn over 1 (a) Carolyn drew up a financial plan that included budgets and sales forecasts. What is a budget? _________________________________________________________ ______________________________________________________ [1] (b) Give two benefits to Carolyn of drawing up a budget. Benefit 1 _________________________________________________________ ______________________________________________________ [1] Benefit 2 _________________________________________________________ ______________________________________________________ [1] (c) What is the term given to the difference between a budgeted figure and an actual figure? ______________________________________________________ [1] (d) Carolyn s financial plan included a sales forecast. What is a sales forecast? _________________________________________________________ ______________________________________________________ [1] (e) Carolyn realised that additional funding was required to finance her plan. She got a bank loan to cover start-up costs. Give one advantage to Carolyn of using a bank loan to cover the start-up costs. _________________________________________________________ ______________________________________________________ [1] 5270 4 Examiner Only Marks Remark (f) Give one disadvantage to Carolyn of using a bank loan to cover the start-up costs. Examiner Only Marks Remark _________________________________________________________ ______________________________________________________ [1] (g) Identify two start-up costs for Carolyn s business. _________________________________________________________ ______________________________________________________ [2] (h) Carolyn got a start-up grant to cover IT costs. Explain the difference between a bank loan and a grant. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (i) Read the following passage and insert the correct word(s) in the space(s) provided. Carolyn had to find other ways to finance her needs during the early days of the business. She sold unwanted _________________ to generate income. To finance the purchase of fixtures and fittings, she used _________________ or _________________ and for working capital, she arranged an _________________ with her bank. 5270 5 [4] [Turn over 2 (a) C & J Clark International Ltd have received the following purchase order from Piggy s, Stamford, Lincolnshire L12 3CN. Complete the invoice on the opposite page using the information in the purchase order below. PURCHASE ORDER No 678 Piggy s STAMFORD Lincolnshire L12 3CN To C & J Clark International Ltd 40 High Street STREET Somerset BA16 0YH Please supply Quantity 20 pairs 20 pairs 10 pairs 10 pairs 10 pairs 20 pairs Description Doodles Bootleg Trainers size 7 Molly The Magical Cat Trainers size 8 Clarks First Shoes size 3 Clarks First Shoes size 4 Clarks First Shoes size 5 CICA Clarks size 7 Signature Carolyn Howe 5270 Price 13 per pair 14 per pair 12 per pair 12 per pair 12 per pair 15 per pair Date 9 May 2010 6 Examiner Only Marks Remark Examiner Only C & J Clark International Ltd 40 High Street STREET Somerset BA16 0YH Marks Remark Date: 31st May 2010 Invoice To: INVOICE No. 55623 Quantity Description Unit Price Total Goods Total VAT @17.5% Total Terms 30 days 5270 [4] 7 [Turn over (b) What is the purpose of an invoice? Examiner Only Marks _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) Explain the following terms: (i) VAT _____________________________________________________ __________________________________________________ [1] (ii) Terms 30 days _____________________________________________________ _____________________________________________________ __________________________________________________ [1] (d) It is important that all business documents are accurate. Discuss the problems for Carolyn that may occur as a result of inaccuracies. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] (e) Each month Piggy s receive a statement of account from C & J Clark International Ltd. What is the purpose of a statement of account? _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] 5270 8 Remark (f) Complete the balance column of the statement of account below and show the amount due. Examiner Only Marks Remark Statement of Account C & J Clark International Ltd 40 High Street STREET Somerset BA16 0YH TO ACCOUNT 4534 Piggy s STAMFORD Lincolnshire L12 3CN DATE 30 06 10 Date Details Debit Credit 05 05 10 Invoice 55632 1200.00 12 05 10 Invoice 56731 Balance 645.10 16 05 10 Credit Note 543 20 05 10 Invoice 78145 99.75 84.00 Amount Due [5] (g) Explain the entry of the 16th May. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 5270 9 [Turn over (h) Read the following passage and insert the correct words in the blank spaces. When Carolyn receives the statement of account from C & J Clark International Ltd, she checks it against her _________________ and _________________ received from C & J Clark International Ltd. [2] (i) Describe how using computers could assist Carolyn in reducing her costs. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 5270 10 Examiner Only Marks Remark 3 (a) Carolyn s customers use a variety of methods to pay for shoes at Piggy s. Complete the table below by stating one advantage and one disadvantage to the business of each of the methods of payments listed. Method of Payment Advantages Remark Disadvantages [4] Examiner Only Marks [4] Cash Cheque Debit Card Credit Card (b) What are the costs to Piggy s of accepting credit card payments from customers? _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 5270 11 [Turn over 4 (a) In the first couple of months, sales were good and it was easy to watch the money coming in and assume the business was making a profit when it wasn t. I now monitor cash flow each week and wait until the end of the year to calculate profit. Explain the difference between cash flow and profit. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (b) Carolyn s business is profitable and expanding. She is puzzled to see that although her business made a profit last year, her bank balance fell during the year. Explain two possible reasons for this. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) Carolyn recognises the importance of careful cash flow management and the value of cash-flow forecasts. Explain how cash flow forecasting can be useful to Carolyn. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 5270 12 Examiner Only Marks Remark (d) Carolyn has been told that C & J Clark International Ltd. are about to raise their prices. How will this affect the cash-flow forecast for Piggy s? Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (e) What are the benefits to Carolyn of using a computer spreadsheet to construct a cash-flow statement? _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 5270 13 [Turn over 5 In the Balance Sheet below for Piggy s, some of the figures for 2009 have been omitted. (a) Complete the Balance Sheet by calculating and inserting the missing figures in the spaces provided. Balance Sheet for Piggy s as at 31st December 2009 Fixed Assets Premises Fixtures and Fittings Equipment Current Assets Stock Debtors Bank Cash Less Current Liabilities Creditors 200 000 600 1 000 ______ 9 700 300 650 ______ 15 150 4 230 ______ Working Capital (Net Current Assets) NET ASSETS (1) (1) FINANCED BY Capital Profit and Loss Account (1) 200 000 (1) [6] 5270 14 Examiner Only Marks Remark (b) Explain to Carolyn why working capital (net current assets) is important to her business. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] (c) Comment on the figure for working capital in the balance sheet opposite on page 14. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (d) Explain what the Balance Sheet tells the manager of Piggy s about the financial state of the business? _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [4] 5270 15 [Turn over (e) Carolyn is not the only one interested in the financial statements of her business. Identify two other groups/organisations who might be interested in them and explain why they might find the information useful. Group 1 ______________________________________________________ [1] Reason _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] Group 2 ______________________________________________________ [1] Reason _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 5270 16 Examiner Only Marks Remark 6 As Carolyn s accountant, you advise her to keep accurate records. Discuss the benefits to her of keeping accurate records. Examiner Only Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ _________________________________________________________ [9] 5270 17 [Turn over Extra page if required Examiner Only Marks ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 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________________________________________________________________ 5270 18 Remark Extra page if required Examiner Only Marks Remark ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 5270 19 [Turn over Extra page if required Examiner Only Marks ________________________________________________________________ ________________________________________________________________ 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________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 5270 20 Remark THIS IS THE END OF THE QUESTION PAPER 5270 21 Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. 5270

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