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UK GCSE JAN 2009 : Unit 3 Business Finance

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Centre Number 71 Candidate Number General Certificate of Secondary Education 2009 Unit 3: Business Finance GDB31 Applied Business Double Award [GDB31] TUESDAY 13 JANUARY, 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. 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. Answer all six questions. 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 GDB3W9 3878 Marks BLANK PAGE GDB3W9 3878 2 Background Information The questions in this paper are based on the following information. You should read this carefully before you start to answer the questions. From Rags to Riches Making a bundle: Carey s business has sales of 4m Julian Andrews Photographer Chris Carey was born in Peckham, South East London where her parents collected unwanted clothing to sell at a street market. Chris and her brothers and sisters helped to collect unwanted items for the market stall. She left school at 15 without any qualifications. She got a job in a factory where she was taught how to use a sewing machine. She liked sewing and started to make her own clothes. A few years later she left the factory to run a stall in the East London street markets, selling second hand clothing that she had washed and repaired. One day, a man came to her stall and asked if she had enough clothes to fill a container to export to Africa . She bought as many clothes as she could and sold them to him. He returned looking for more clothes. To make a profit he needed to fit as many clothes as possible into the container. Carey bought a clothes press for 3 000 and started pressing the clothes into square bales for the next container delivery. The demand for the clothes continued, Carey was making money and decided to invest in a proper machine to press the clothes. This cost 40 000. She approached her local bank for a loan but the bank refused to help. She was forced to re-mortgage her house. Chris Carey then started buying clothes from Charity shops, jumble sales and warehouses that had closed down and she started putting out her own clothing banks. The materials are sorted and reused for various purposes in schools and universities and for export markets in Africa and Afghanistan. Chris Carey has grown the business into a thriving textile reuse and reprocessing company. Last year, the London Development Agency gave her a grant of 185 000 to create more jobs. With this funding and personal investment from Chris, the company has relocated. It now employs 169 staff. Since expansion and relocation there has been a 15% increase in productivity per staff member in the processing of materials. Chris Carey s Collections Ltd now handles 11 000 tons of textiles per year, has 2 000 regular customers and operates a fleet of 30 vehicles. Source: Adapted from The Sunday Times GDB3W9 3878 3 [Turn over 1 (a) Complete the following table by identifying the most suitable type of finance for Chris Carey for each of the items below and give a reason for your choice. Item Type of finance Reason for choice Clothes Press Van Clothing Bank Premises Working Capital [5] [5] (b) When Chris approached her local bank manager to ask for a loan of 40 000 to buy a clothes press, he turned her down. Explain why the bank manager may have refused to give the loan. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) Last year Chris received a grant of 185 000 from the London Development Agency. State two advantages of this to Chris Carey s Collections. Advantage 1 _____________________________________________ _________________________________________________________ ______________________________________________________ [1] Advantage 2 _____________________________________________ _________________________________________________________ ______________________________________________________ [1] GDB3W9 3878 Examiner Only Marks Remark (d) With the government funding and personal investment from Chris, the Company was able to relocate. Explain the meaning of the term personal investment. Examiner Only Marks Remark _________________________________________________________ ______________________________________________________ [1] (e) Discuss one advantage and one disadvantage to Chris of using internal sources of finance to cover the cost of relocation. Advantage _______________________________________________ _________________________________________________________ ______________________________________________________ [2] Disadvantage ____________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W9 3878 [Turn over 2 (a) Chris Carey incurred a number of costs in the setting up of her business. Some of these costs have been included in the following table. Classify the costs by putting a tick ( ) in the appropriate column below. Cost Fixed Variable Warehouse Advertising Vans Wages Insurance [5] (b) What is the difference between a fixed cost and a variable cost? _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) Explain why it is important for Chris to know the costs of the business. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W9 3878 Examiner Only Marks Remark (d) As accountant for Chris Carey s Collections, you have been given the following figures: 2006 2007 m m Sales revenue 3.5 4.0 4.8 Net Profit 1.5 1.6 Remark 2008 m Examiner Only Marks 1.5 (i) Comment on the company s performance 2006 2008. _____________________________________________________ __________________________________________________ [1] (ii) What advice would you give to the management of Chris Carey s Collections to help them to increase their net profit figure? Explain your answer. _____________________________________________________ _____________________________________________________ __________________________________________________ [2] (e) Give two reasons why it is important for the owners of Chris Carey s Collections to know how much profit is being made each year. Reason 1 ________________________________________________ ______________________________________________________ [1] Reason 2 ________________________________________________ ______________________________________________________ [1] (f) What happens to the net profit in a limited company like Chris Carey s Collections? _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W9 3878 7 [Turn over 3 (a) Read the following passage carefully and insert the correct word(s) in the space(s) provided. From time to time Chris Carey needs to know how much the business is worth. She will find this information in the ______________________________ . It is a ___________________________________ of every company to draw up this document and a copy must be forwarded to the Registrar of Companies each year. When the accountant draws up this document for Chris Carey s Collections, he/she first lists the ______________________________ . These are followed by the current assets. Current assets are made up of _________________ , _________________ , _________________ and _________________. The total current liabilities are taken from the total current assets to show the ______________________________ figure. [8] (b) Explain the importance of working capital to Chris Carey s Collections. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) The balance sheet of Chris Carey s Collections is useful to a number of groups of people. Identify two such groups and explain their interest. Group 1 ______________________________________________ [1] Interest _________________________________________________ ______________________________________________________ [2] Group 2 ______________________________________________ [1] Interest _________________________________________________ ______________________________________________________ [2] GDB3W9 3878 Examiner Only Marks Remark (d) Chris Carey s Collections use a Sage computerised package to record their accounts. Give two advantages to the company of using such a computerised package. Examiner Only Marks Remark Advantage 1 _____________________________________________ ______________________________________________________ [1] Advantage 2 _____________________________________________ ______________________________________________________ [1] (e) Give two disadvantages to the company of using such a package. Disadvantage 1 ___________________________________________ ______________________________________________________ [1] Disadvantage 2 ___________________________________________ ______________________________________________________ [1] GDB3W9 3878 9 [Turn over Examiner Only Marks To Chris Carey s Collections Beckenham Bromley LONDON From The Thames Drama Group Archway Road LONDON Account 1861 Date 10 December 2008 Our Reference Payment Amount Your Reference 1.11.08 22.11.08 Invoice No 3241 Credit Note No 99 23451 400.75 23451 (75.04) Cheque Total (a) What is the name of the above document? ______________________________________________________ [1] (b) What is the purpose of this document? _________________________________________________________ ______________________________________________________ [1] (c) Complete the above document by inserting the correct figure against cheque total. [1] (d) Why must this document be accurate? _________________________________________________________ ______________________________________________________ [1] (e) Explain the entry dated 22.11.08. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W9 3878 10 Remark (a) During your work experience in the Accounts Department of Chris Carey s Collections, you have been asked to draw up a cash-flow forecast for the next three months. Use the following information to complete the document overleaf. Examiner Only Marks Remark Estimated revenue from cash sales is: January February March 200 000 300 000 200 000 Materials are bought monthly 100 000 100 000 100 000 100 000 100 000 100 000 750 750 750 3 100 3 700 3 700 250 250 250 Motor 1 000 1 000 1 000 Electricity 70 70 70 Telephone 120 120 120 Packaging 250 250 250 Other expenses 450 450 450 Other expenses are: Wages Rates Fuel Insurance: Premises Chris Carey takes drawings of 6 000 per month Opening balance (2 000) GDB3W9 3878 11 [Turn over Chris Carey s Collections Cash-Flow Forecast January February Examiner Only Marks March Receipts Sales Total receipts Payments Purchases Wages Rates Fuel Insurance: Premises Insurance: Motor Electricity Telephone Packaging Drawings Other expenses Total payments Opening bank balance Add receipts Less payments Balance at the end of the month [9] GDB3W9 3878 12 Remark (b) Explain the purpose of a cash-flow forecast. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) Comment on the bank balance at the end of January. _________________________________________________________ ______________________________________________________ [1] (d) What advice would you give the Finance Manager to improve such a situation? _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (e) What would be the advantage of using a spreadsheet to produce a cashflow forecast? _________________________________________________________ ______________________________________________________ [1] (f) Apart from the Finance Manager, who else is likely to be interested in Chris Carey s Collections cash-flow forecast? Give a reason for your answer. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] GDB3W9 3878 13 [Turn over (g) Explain the difference between cash flow and profit. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W9 3878 1 Examiner Only Marks Remark Chris Carey s Collections operate a fleet of 30 vehicles. These vehicles have been leased from the Ford Motor Co. Discuss the advantages and disadvantages to Chris Carey s Collections of leasing the vehicles instead of buying them outright. In your answer, comment on the effect of this on the cash flow, profits and the balance sheet of Chris Carey s Collections. Examiner Only Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ _________________________________________________________ [9] GDB3W9 3878 1 [Turn over Extra page if required ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ GDB3W9 3878 1 Examiner Only Marks Remark Extra page if required Examiner Only Marks Remark 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________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ GDB3W9 3878 17 [Turn over Extra page if required ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 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________________________________________________________________ ________________________________________________________________ ________________________________________________________________ GDB3W9 3878 1 Examiner Only Marks Remark THIS IS THE END OF THE QUESTION PAPER GDB3W9 3878 19 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. SP (CM/CGW) T56895/4

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