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Business Management Paper 2 TZ2 HL

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87 views2 pages

Business Management Paper 2 TZ2 HL

Uploaded by

ameliazzzz7777
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Section A

Answer one question from this section.

1. Call it Magic (CIM)

Call it Magic (CIM) is an online jewellery store that sells silver earrings. It has completed its
first year of trading, during which it sold 1000 pairs of earrings. CIM’s selling prices are low
compared to those of other jewellery stores. The average unit cost per pair of earrings is $5,
and overhead costs are already at a minimum level.

Table 1: Selected financial information for CIM for the year ended 31 December 2022

Cost of goods sold X

Debtors $100

Dividends $500

Expenses $500

Gross profit $7000

Interest $0

Net profit after interest and tax $5850

Net profit before interest and tax Y

Net profit before tax $6500

Retained profit $5350

Sales revenue Z

Stock 800 pairs

Tax $650

(a) State two problems that a new business might face. [2]

(b) Using relevant information provided above and in Table 1:

(i) calculate CIM’s cost of goods sold, X, in 2022 (show all your working); [2]

(ii) calculating Y and Z, construct a profit and loss account for CIM, for 2022; [3]

(iii) calculate CIM’s net profit margin (no working required).[1]

(c) Explain one strategy CIM could use to improve its net profit margin. [2]
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2. Urban Express (UE)

Urban Express Ltd. (UE), a private limited company, owns and operates city buses
in an economically unstable country. Interest rates are forecasted to increase in the
next few years. The government of the country has approached UE to set up a public-
private partnership (PPP) to purchase electric buses. UE has forecasted the following
annual net cash flows for UE’s first purchase of electric buses.

Table 2: Forecasted annual net cash flows for UE’s first purchase of electric buses

Year Net cash flows ($000)

0 –5000

1 2200

2 1800

3 2400

4 1100 (including residual value)

Table 3: Discount rates at 8 %

Year Discount rate

1 0.9259

2 0.8573

3 0.7938

4 0.7350

(a) State two features of a public-private partnership (PPP). [2]

(b) Using Table 2, for UE’s first purchase of electric buses, calculate:

(i) the average rate of return (ARR) (show all your working);[2]

(ii) the payback period (show all your working).  [2]

(c) Using Table 2 and Table 3, calculate the net present value (NPV) at a discount rate of
8 % (show all your working).  [2]

(d) Explain one factor that may have influenced UE’s choice of the discount rate of 8 %.  [2]

Turn over

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