Year 10

2024 -End of Year Exam Resource Pack

BUSINESS
Dear students,
Please see the sample questions for revision. These are just few
questions for your reference and not the replica of the question
paper. You have to revise all the PPT/notes given in TEAMS.
Good luck!

TOPICS
 Chapter 1 What is business activity
 Chapter 2 Business objectives
 Chapter 3 Sole trader, partnerships, social enterprise and franchises
 Chapter 4 Limited companies and multinationals
 Chapter 5 Public corporations
 Chapter 8 Decision on location
 Chapter 10 Importance of growth of multinationals
 Chapter 14 Measuring success in business
 Chapter 16 Importance of good communication in business
 Chapter 18 Recruitment and selection
 Chapter 20 Training
 Chapter 21 Importance of motivation at work
 Chapter 22 Methods of motivation at work
 Chapter 23 Organisation structure and employees
 Chapter 24 Departmental functions.
 Chapter 25 Source of finance
 Chapter 26 Cash flow forecasting
 Chapter 27 Costs
 Chapter 28 Break even analysis
 Chapter 29 Statement of comprehensive income
 Chapter 30 Statement of financial position
 Chapter 31 Ratio analysis
 Chapter 32 The use of financial documents
 Section 1
Unit 1 : What is business
activity?

Overview
1. Understand the natural of business activity and the reasons why business
exists
2. Understand the role played by different stakeholders
3. Understand that businesses operate in a changing business environment

1. Business activity
1.1 Businesses provide a wide range of goods and services
• Consumer goods : goods and services sold to ordinary people (consumers)
rather than businesses
• Producer goods : goods and services produced by one business for another.

1.2 Satisfying needs and wants

• Needs : basic requirements for human
survivals For example : Food,
accommodation etc.
• Wants : people’s desires for goods and
services For example : Entertainment ,
iPhone etc.

2. The purpose of business activity

: Each type of organisation has a different purpose.
2.1 Private enterprise
• Meaning : Most businesses are owned privately by individuals or groups of
individuals. They are private sector of businesses.
• Objectives : Maximise profit

2.2 Social Enterprise

• Meaning : Some organisation are non-profit making. eg. Charities,
pressure groups, clubs and societies exist for reasons other than profits
• Objectives : non-profit organisation
• For example : UNICEF
2.3 Public enterprise
• Meaning : Some goods and services are provided by organisations owned by
central or local government. Eg. Healthcare, Education etc.
• Objectives : Better standard of living

3. Business stakeholders
• Stakeholder : an individual or group with an interest in the operation of a
business
• Shareholders : People who invest and be part of business.

3.1 Owners / Entrepreneur

• Entrepreneur : person who takes risks and sets up businesses; individual
who organises the other factors of production and risks their own
money in a business venture.
• Or Shareholder : Investor who invest money in business and get a share of
profit called “dividend”
• Objective : Profits, Dividend etc.

3.2 Customers
• Consumers : person buy the goods and services that businesses sell.
Consumers could be individual or firms.
• Objective : Cheaper price , High quality products
3.3 Employees
• Employees : person who work in businesses,
• Objectives : Salary, Training , Connection, Security etc.

3.4 Managers
• Managers : person who help to run business. They are often employed to run
the different departments in businesses such as marketing, production,
finance and human resources.
• Objective : Promotion, Salary

3.5 Financiers
• Financiers : Company / individual who lend money to the business.
• Objective : Interest / firms able to repay debt

3.6 Suppliers
• Suppliers : Businesses that provide raw materials , parts, commercial
services and utilities, such as electricity and water, to other businesses
are called suppliers.
• Objective : Sales revenue , Good relationship, Prompt payment and regular
orders

3.7 The local community

• Most businesses are like to have an impact on the local community. There
may be more jobs, more overtime and possibly higher pay

3.8 The government

• Taxes from businesses and their employees are used to finance government
spending.

4. The changing business environment

• External factors that are likely to change overtime such as strength of
competition, the economic climate, government legislation, population
trends, demand patterns, world affairs and social factors.
 Unit 2
Business Objectives
Overview
1. Understand the financial aims and objectives of businesses
2. Understand the non-financial aims and objectives of businesses
: social objectives, personal satisfaction, challenge,
independence and control
3. Understand why business objectives change in response to make conditions,
technology, performance, legislation and internal reasons.

1. The important of clear objectives

: Businesses need to have objectives for the following reasons
-
Employees need somethings to work towards. Objectives help to motivate
people.
-
Without objectives owners might not have the motivation needed to
keep business going.
-
Objectives help to decide where to take a business and what steps are
necessary to
get there.
-
It is easier to assesses the performance of a business if objectives are set. If
objectives are achieved it could be argued that the business has performed
well.

2. Financial Objectives
2.1 Survival
: At the beginning, owners face with high competition, lack experience and may
be a shortage of resources.

2.2 Profit
: Most businesses aim to make a profit because their owners want a
financial return. Shareholder would like to gain large dividends.
2.3 Sales
: This is because businesses with large volumes of sales may enjoy a number
of benefits Eg. - may enjoy the lower cost (economies of scales), have a large
market share Meaning market share : Sales of Com A.
Total sales of sector
2.4 Increase market share
: Businesses often want to build a large market share.
Advantages
-
Able to dominate market ; as a result ; it is possible to charge higher price.
-
Large market share also have higher profile in the market. As a result, it
is easier to launch new products

2.5 Financial security

: Some business might aim to make enough profit to give them financial
security. This is sometimes called “ Profit satisficing”

3. Non-financial objectives
: These are objectives that are not connected with money.
3.1 Social Objective
: In the public sector, gov owns business which concerns on social objectives.

Aims of government
-
Social objectives are designed to improve human-being. eg. National Defence

3.2 Personal satisfaction

: Some owners have developed their hobby into a business.

3.3 Challenge
: Some people are motivated by challenges and starting a business can be very
challenging.

3.4 Independence and control

: Some people want to be “ their own boss” - they want to be in control.
4. Why might objective change as businesses evolve ?
Its aims and objectives are likely to change. This is usually because businesses
have to respond to events or changes in circumstances. Some of the main
examples are outlined below

4.1 Market conditions

-
A new entrant may appear in the market, a rival might introduce new
products all the time
-
The economy may start to decline. As a result, the demand will be declined.

4.2 Technology
-
As the pace of technological development increases business may have
to adjust objectives
-
Eg. Automation : Firm changes aims to be increase sales of growth. Since
would like to
utilise machine and achieve economies of scales.
-
Eg. Firms changes aims to increase market share after introducing
online selling technology.

4.3 Performance
-
The performance of business is not likely to stay constant.
-
Eg. If business has been growing sales for several years, firms might
decide to focus on profit.

4.4 Legislation
-
New legislation might have an impact on the objectives of a business.
-
Many business have become more socially responsible. This might be a
reaction to new environmental, employment or consumer legislation.
-
Eg. Construct building that were more energy efficient

4.5 Internal reasons

-
Sometimes a business might change its objectives for internal reasons
-
Eg. Change in ownership or change in the senior management team.
(They might change from high market share to high profit in order to
pay high dividend to shareholders)

Exercise part 1:
 Unit 1.3
Sole traders, Partnerships, Social enterprise and Franchises

1. Entrepreneurs
: People who set up business
Roles of entrepreneurs
-
Innovator
-
Responsible for organising other factors of production
-
They have to make all the key decision.
-
Risk takers

2. Unincorporated and incorporated business

2.1 Unincorporated : Business where there is no legal difference between the
owner and the business.
2.2 Incorporated : Business that has a separate legal identity from that of its owners.

3. A sole trader or sole proprietor

Meaning : Business owned by a single person

4. Partnership
Meaning : Business owned by between 2 and 20 people. The owners will share
responsibility for running the business. They also share profits.

5. Limited partnership
Meaning : Partnership where some partners contribute capital and enjoy a
share of the profit but do not take part in the running. Such partner will have
limited liability. However, there must always be at least one partner with
unlimited liability.

6. Franchises
Meaning: Structure in which a business (the franchisor) allows another
operator (the franchisee) to trade under their name. Eg. KOI, Mcdonald’s,
Subway etc.
• What does the franchisor offer the franchisee?
-
Brand name
-
Start-up package including help, advice, essential equipment
-
Training, system operation
-
Materials, equipment and support services that are needed to run the business
-
Marketing support
-
An exclusive geographical area in which to operate. This means that business
will not face competition from other franchisees in the same franchise group.

• In return for these services the franchisee has to pay certain fees.
-
A one-off start-up fee
-
An ongoing fee (usually based on sales)
-
Contribution to marketing costs
-
Franchisors may take a profit on some of the materials, equipment and
merchandise supplied to franchisees.

7. Social enterprises
Meaning : Business that aims to improve human or environment well-being,
charities for example.

7.1 Cooperatives
: Usually operate as consumer cooperatives or retail cooperatives.
: Owned and controlled by their members.
: Members can buy shares which entitle them to elect directors to make key
decision. Any profit made by the cooperative is given to members.

7.2 Worker cooperatives

: are businesses in which its employees share ownership.
: Workers will contribute to production and involved in decision making, share
in the profit and provide capital when buying a share in the business.

7.3 Charities
: Charities rely on donations for their revenue.
 Chapter 1.4
Limited companies and multinationals

1. Limited companies
• Meaning : business organisations that have a separate legal identity from that of their
owners.
• Main features :
-
Limited liabilities : shareholders are legally responsible for the debts of a company
according to how many shares they own.
-
The business raises capital by selling shares.
-
Shareholders receive dividend.
-
The shareholders elect directors to run the company.
-
Whereas sole traders and partnerships pay income tax, companies pay
corporation tax on profits.
-
It is necessary to follow a legal producer.

1.1 Private limited companies

• Features of private limited companied
-
Shares can only can be transferred “ privately” (from one individual to another).
-
All shareholders must agree on the transfer and they cannot be advertised for sale.
-
They are often family businesses owned by family members or close friends.
-
The directors of these firms tend to be shareholders and are involved in the
running of the business.

1.2 Public limited companies (PLCs) : tend to be larger than private limited
companies. Their shares can be bought and sold by the public on the stock
exchange.
• Going public can be expensive because
-
The company needs lawyers to ensure that the prospectus is “legally” correct
-
The company must insure against the possibility of some shares remaining unsold,
therefore, a fee is paid to an underwriter who must buy any unsold shares.
-
There are advertising and administrative expenses
1.3 Multinational Companies
Meaning : Larger business with significant production or service operations in
at least two different countries.
• Key features of a multinational include :
-
Huge assets (Land, building, plants machinery and money)
: Multinationals are extremely well-resourced and can often afford to take on
large-scale contracts.
-
Highly qualified and experienced professional executives and managers
-
Powerful advertising and marketing capability
-
Highly influential both economically and politically
-
Very efficient since they can exploit huge economies of scales
-
Ownership and control is centered in the host country
 Chapter 5
Public
Corporations

1. Features of public corporations

- State owned : The government owns public corporations.
- Created by law : Public corporations are created by an act of parliament.
- Incorporation : Public corporations are incorporated businesses. This is
they have a separate legal identity.
- State-funded : The money comes from tax.Provide public services : Eg. NHS
provides
free health care in the UK.
- Public accountability : Public corporations have to produce annual reports.

2. Reasons for the public ownership of businesses

Natural monopoly : market where it is more efficient to have just one
organisation meeting total market demand.
- Avoid wasteful duplication : A natural monopoly, this means it is more efficient
to have
just one business providing a services for the whole market.
- Maintain control of strategic industries : This would prevent “outsiders” from
another country taking them over and exploiting the nation.
- Save jobs : Businesses have been taken into public ownership to save jobs.
- Fill the gaps left by the private sector : In some market, the private sector
will not make an adequate provision to meet the market’s needs. Eg.
Education
- Serve unprofitable regions : In some markets, private sector would not deliver
important services to unprofitable regions. Eg. Providing electricity to a
remote farm

3. Reasons against the public ownership of businesses

- Cost to government
: A number of public corporations make losses. These losses have to be met by
taxpayer.
- Inefficient
: Since no competition in the market, the absence of profit as an objective
- Political interference
: This may occur because different governments have different views about
the way public corporations should operate.
- Difficult to control
: Some public corporations are very large. They may employ many thousands
of workers spread across a wide geographical area and own huge quantities
of physical assets.

4. Privatisation :
Meaning : transfer of public sector resources to the private sector (business)
Privatisation can take a number of forms.
-
Sale of public corporations : Transferring business activity from the public to
the private sector.
-
Deregulation : This involves lifting legal restrictions that prevented private
sector
competition.
-
Contracting out : Many government and local authority services have been
“contracted out” to private sector businesses.
-
The sale of land and property

5. Why does privatisation take place?

- To generate income
- To reduce inefficiency in the public sector
- As a result of deregulation
: Legal barriers were removed that allowed new businesses in some markets,
such as bus and coach services. New firms could encouraged to join the market.
- To reduce political interference
 Chapter 8
Decision on location

1. Factors influencing the location and relocation of

businesses 1.1 Proximity (closeness) to the market
: Businesses that make larger or heavy products may be located close to their
customers
to keep transport costs down.
1.2 Proximity to labour
: Businesses needing larger numbers of workers have to consider wage costs
and labour skills.
1.3 Proximity to materials
: Businesses that use large amounts of raw materials that are difficult to
transport may choose to locate their premises very close to their sources.
1.4 Proximity to competitors
: Most service providers will prefer to locate where competition is minimised.

2. The nature of business

activity 2.1 Services
: When choosing a suitable location, businesses have to take into account the
ease of
access and parking facilities.
2.2 Office-based businesses
: In some field of business, such as creative marketing, consultancy, financial
services and customer service provision, business activity is office-based.
2.3 Manufacturing and processing
: The locations chosen by manufacturers may
vary. For example
- If manufacturing is labour-intensive, factory need to locate where there is a
good
supply of skilled and relatively cheap labour.
2.4 Agriculture
: Most farmers require large areas of land for their businesses.
: Fishing industry, businesses will tend to be located on the coast.
 3. The impact of the internet on location decisions
: Many people are switching to the Internet when shopping rather than going to
stores.

4. Influence of legal controls and trade blocs on location

: Governments, both local and national, may try to influence location decisions
for several reasons.
4.1 To avoid congestion where there is already enough or too much development
: This will reduce the strain on existing infrastructure such as roads, schools and
hospitals
4.2 Minimise the impact businesses might have on local communities.
: For example, most people would object if a business opened a noisy night
club in a highly residential area.
4.3 To encourage manufacturers to locate where unemployment is high.
: This will help to improve the distribution of jobs around a country.
4.4 Government often use financial incentives to influence business choice
of location.
: For example, government can offer low rates, tax breaks and low rents if they
locate in
areas preferred by the government.
4.5 To attract foreign manufacturers into the country. Many countries rely on
inward investment to help create employment and work for domestic suppliers.
:Many countries use trade barriers to control the level of imports into their country.
To
avoid trade barriers, such as tariffs a business might decide to locate inside a
trade bloc.

(Trade bloc : Group of countries situated in the same region that join together and
enjoy trade free of barrier.)
 Chapter 10
The importance and growth of multinational companies
1. The importance and growth of multinationals
: contribute about 10 percent to the world GDP and about 66 percent to global
exports.

2. How have multinationals developed

2.1 Economies of scale
: Many companies have developed into multinationals because larger companies
enjoy lower costs. This is because they can exploit economies of scale

2.2 Marketing
: Some firms have become multinationals by relying on effective marketing. Eg.
Starbucks and McDonald’s.
: They have protected their brand with patents and use heavy advertising and
innovation marketing to attract customers globally.

2.3 Technical and Financial superiority

: They have developed advanced technologies and build a huge bank of
knowledge. They can also afford to invest heavily in research and
development.
: They are experienced and can afford to employ the most talented people
available.
3. Benefits to a business of becoming a multinational

Topic Explanation

: Multinationals will have access to a much wider

1. Larger customer base market than companies that focus entirely on

domestic market.
: Multinationals are large companies they can
2. Lower costs exploit
economies of scales and enjoy lower cost.
:It will enjoy a higher profile in the market. Large

3. Higher profile companies with strong brand names can gain

a lot of customers.
: Since multinationals are prepared to set up

4. Avoiding trade barriers operations in other countries, they can bypass

trade barriers by
establishing operations in those countries.
: Multinationals can reduce the amount of tax

5. Lower taxes they pay on their profits by basing their head

offices in countries
where taxes are lower.
4.Benefits of multinationals to a country/economy

Topic Explanation

1. Increase in income and : Multinationals create new jobs in developing

employment countries.
: The profits made by multinationals are taxed by
2. Increase in tax revenue the
host nation.
Therefore, if this output is sold out of the host
country,
3. Increase in exports
it is counted as an export. This helps
countries to increase their foreign currency
reserves.
: Multinationals often provide foreign suppliers with

4.Transfer of technology technical help, training and other information.

: Multinationals provide training and work

5.Improvement in the
experience for their workers. In less developed
quality of humans capital
countries such
training may otherwise be unavailable.
: Multinationals may have provided the skills and
6. Enterprise development
motivation needed for enterprise.
5. Possible drawbacks of multinationals to a country/economy

Topic Explanation

: Multinationals are heavily involved in the

1. Environmental Damage extraction
industries, such as coal, oil and gold mining
-
Multinationals often pay low wages. They

2. Exploitation of may also employ child labour and the

less developed working conditions are often very poor.
countries
-
Tax paid to the host nation are often minimal
: The profits made by multinationals are returned to
3.Repatriation of profits the
country. As a result, the host country loses out.
: Some argue that because multinationals are
so large and powerful they lack accountability.
4. Lack of accountability
They may be able to evade the law, especially
in countries where
government is weak or corrupt.
 Chapter 14
Measuring success in business

1. Measures or success

1.1 Revenue
: The amount of revenue generated by a business is a guide to its success. If
revenues increase each year, most business owners feel that they are
successful.

1.2 Market share

: Some businesses aim to increase their market share each year. With large
market share a business might be able to dominate market, this will raise the
profile of the business.

1.3 Customer satisfaction

: Many businesses will look at how consumers’ needs and wants have been
satisfied when measuring success. If its customer service is good, a successful
business will find that it has loyal customers and a growing customer base.

1.4 Profit
: Most private sector businesses aim to make a profit. Therefore rising profits
should signal improving success.

1.5 Growth
: Many businesses aim to grow, therefore the size of the business is important
when measuring size.

1.6 Owner/Shareholder satisfaction

: Most shareholders in public limited companies have bought shares with the
aim of making some money consequently they will focus on dividend payments
and share prices to rise.

1.7 Employee satisfaction

: If business is growing and profitable, employees are likely to get higher
wages, more benefits and perhaps bonus.
 Section 2 People in business
Chapter16 The importance of good communication in business

Overviews

1. The nature of communication ?

2. The difference between internal and external communication

3. The important of good

The difference
communication 4. methods of communication, their benefits and their
limitation

1. What is communication ?
Communication is about sending and receiving information.

2. How does communication take place?

Communication channels: routes along which information might travel in a
business

1. Downward communication
- Downward communication : passing messages from the top of the
organisations to those at the bottom
- Downward communication is important because
1)Managers can guide and lead subordinates.
2)Employees can carry out decisions made by management.
3)Manager can control and organise.

2. Upward communication
- Upward communication : passing messages from the bottom of an organisation to
those at the top
- Upward communication is important because
1) Managers understand the views and needs of subordinates.
2) It make managers aware of problems
3) Staff feel that they are valued
4) Manager can get information for making decisions.
3. Horizontal communication
Horizontal communication : when workers on the same level in the organisation
exchange information. E.g. communication within a department

3. Internal and external communication

1. Internal communication : communication between people inside the
business
2. External communication : communication between the business and
those outside such as customers, investors or the authorities

4. Formal and informal communication

1. Formal communication : use of recognised channels when communicating
2. Informal communication : use of non-approved channels when
communicating

5. Importance of good communication in business

• Poor external communication can damage company’s image

• Poor internal communication can lead to mistakes, wasted resources, and

confusion => lower profit, higher cost
6. Methods of communication

Methods Advantages Disadvantages

1.Face to face communication

1.Face to face •Allow immediate feedback •Negative body language

communication •Encourage cooperation •Cannot record message
When spoken •Allows new ideas to •Non relevant
information is be generated information may be
exchanged by included
people who can
see each other.

2.Written communication

2.1 Letters •Flexible to send to a •Letter writing can take

variety of people time and effort for some
•For private employees with poor
communication and written skills
provide record of
information

2.2 Reports •To communicate important •Takes time to research

information in a formal and write
manner Short or complex
and detailed

2.3 •Contain brief messages

Memorandums
(short written
notes)

2.4 Forms •Used to communicate •Forms may be inflexible

routine information and out of date
•Application forms for
jobs, loans or licenses

2.5 Noticeboards •Cheap to use and can pass •Untidy and overlooked
on information to many
people

3.Electronic communication
3.1 Email •Can send message •Message may be ignored.
and images via •Many email and do not
computer have time to read
C er – Recruitment and
h Selection
a
p
t

1. The different types of employment - full time, part time, job share,
casual, seasonal and temporary
2. The different recruitment documents - job description, job specification,
application form and curriculum vitae
3. Internal and external recruitment - job advertise, short listing and
interviewing

1. Types of employment
1. Full-time worker: employees will usually work 5 days and the number
of hours may vary in different countries. (Full-time workers usually
work an average 35 hours/week; however, it varies from one country
to another.)
2. Part-time workers: worker is someone who works fewer hours than a
full-time worker.
3. Job share: where two part-time workers share the work and pay of a
single full- time post. This is because workers would like to have more
leisure time.
4. Other types of employment
4.1) Casual employment: workers do not get guarantees of work
from their employers.
• Their working hours are variable and uncertain.
4.2) Seasonal employment: the work is regular and full time bus short
 lived.
• E.g. Ski resorts require full time workers in winter. Farmers are
required during harvest.
4.3) Temporary employment: sometimes businesses need to take on staff
for a short period of time to cover for absent workers such as
paternity leave.

2. Reasons for recruitment

1. Business expansion
2. Workers are leaving
3. Positions have become vacant owing to promotion
4. Workers are required for temporary to cover staff absence, paternity leave.
3. Stages in recruitment process
Recruitment : is the process from identifying that the business needs to
employ someone up to the point at which applications have arrived at the
business.
1. To identify the number and type of staff that need to be recruited,
choosing
between part-time and full-time workers.
2. To identity Job description and person specification
•
Job description : outlines the responsibilities and duties to be carried out by
someone employed to do a specific job.
•
Person specification : is a document which outlines the personal profile
needed to do a particular job e.g. qualifications, level of education,
experience , personal characteristics etc.
3. Advertising Vacancy
4. Job seekers apply for a job in job application form and employers copy
curriculum vitae(CV). A business must sort through all the applications
and produce a shortlist.
Job application form: standard document need to collect information from job application

Curriculum vitae(CV): document used by a job seeker that lists personal details,
qualifications, work experience.
Shortlist: list of the most suitable people for a job, chosen from all the people
who were first considered.
5. Shortlisted applicants will be invited for an interview.
6. After interviews, businesses evaluate the performance of applicants
and check reference for final decision.
7. A job offer has been made and accepted and provides feedback to the
unsuccessful candidates.
4. Recruitment documents
1. Job description : outlines the responsibilities and duties to be
carried out by someone employed to do a specific job.
2. Person specification : is a document which outlines the personal profile
needed to do a particular job e.g. qualifications, level of education,
experience, personal characteristics etc.
3. Job application form: standard document needs to collect information
from job application. It includes full name and address and contact
details, education, experience, qualification, hobby and interest.
4. Curriculum vitae(CV): document used by a job seeker that lists personal
details, qualifications, work experience.
5. Internal and external recruitment
1) Internal Recruitment : vacancy may be advertised on a company
board, filled by someone who is an existing employee of business.

Advantages Disadvantages

• It saves time and money from • No new ideas or experience come

advertising and interviewing into the business.

costs. • There may be jealousy and rivalry

• The person is already known among existing employees.

to the business.

• It is easier to work with others.

2) External Recruitment : is when a vacancy is filled by someone who is

not an existing employee and will be new to the business.
• Local newspaper
• Specialist magazines and journals
• Headhunting
• Job Centre, Direct applications, Word of mouth
• Employment agency

Advantages Disadvantages

• Receive new ideas or • It might be higher cost since

experience come into the companies need to advertise in

business. public and spend longer recruiting.

• New employees might not know the

business overview so companies

need to provide training courses

 which are

expensive.
Job advertisements : It includes ...
1. job title
2. name, address, email, and telephone number of employers
3. job description
4. skills and qualification required for the jobs
5. salary and benefits
6. method of application
 CHAPER 20 – TRAINING
1. The importance of training to a business and its workers
2. The different types of training and their main purpose
3. The role of training in compliance with health and safety laws
4. The benefits and limitations of training

1. The importance of training to a business and its workers

- Training: process that involves increasing knowledge

and skills of worker to enablethem to do their job more
effectively.
- Why is training important?
1. Introduce a new process or new equipment
2. Improve the efficiency of the workforce
3. Provide training for the unskilled workers
4. Decrease the supervision needed
5. Improve opportunity for internal promotion
6. Decrease the chances of accidents

2. The types of training

There are three main types of training

1. Inducing training: is an introduction given to a new
employee when they first starta job.
 Advantage Disadvantages

• It helps new employees to • Time consuming

settle intotheir jobs • Wages are paid but no
quickly. work is beingdone by the
• Workers are less worker.
likely to • It delays the start of the
makemistakes. employee's work.

• It may be a legal requirement

to
giveHealth and Safety training.

2. on-job training: training that takes place while doing the job by . .
.
• Watching another worker
• Mentoring

Mentoring: where people with a lot of experience and knowledge advise and
help otherpeople at work or young people preparing for work.
Supervision: when workers supervise someone or something.
• Job rotation: where employees alternate between different
jobs during the courseof their employment.

Advantage Disadvantages

• Individual tuition • Output may be lost if

• Easy to organize workers makemistakes.
• Some products are created • The trainer will not be as
from theworkers while they productive asusual because
are training. they are showing the
• The cost is usually lesser trainee.
than othertraining. • The trainer may have bad

habits andpass on them to the

trainee.
3. O ned away from the
f workplace, usually byspecialist trainers.
f
- Disadvantag
Advanta
t ge s
h
e • Output is not affected by • No output is created.
mistakes.
• Costs are high.
j • Customers are not put at risk
• Some aspects of work
o
• If these courses are taught
b cannot be taughtoff-th
after work,the employees
t still carry out their work.
r
a • Learning cannot be
i distracted by work.
n
i
n 4.Benefits and limitation of training
g
: Benefits of training Limitation of tr
i
n • Keeping workers up to • High cost of training
v date in newtechnology • Training is impractical a
o
l and safety procedures. workers reallystart learn
v • Improving labour flexibility until they arrive at their
e
as they aretrained to do workstation.
s
many jobs. • Loss of output from off-
b the-job training.
• Improving job satisfaction and
e • After training, it is easie
i motivation
for the employee
n
g

t
r
a
i
 Chapter 21
Overview
The importance of motivation in the
workplace

1. The financial methods of motivation

2. The non financial methods of motivation : job rotations, job enrichment and
autonomy

1. Motivation : desire to achieve a goal

2. Why is employee motivation important in business?

1. Easier to attract potential employees
2. Easier to retrain employees as it reduces turnover rate ( the rate at
which people leave their jobs.)
3. High labour productivity, resulting in lower cost and better goods and
service.

3. How can business influence motivation

1. Herzberg two-factor theory : There are two factors of motivation which are
Hygiene factors and Motivator factors.

Factors of
Motivators factors Hygiene Factors
motivation
Definition Motivators are factors Hygiene Factors are factors
that give workers job that can lead to workers being
satisfaction, such as dissatisfied such as pay and
recognition for their conditions.
effort, more
responsibilities. An improvement in hygiene
factors cannot motivate
workers.

Example • Achievement • Company policy

• Recognition • Supervision
• Personal Growth • Relationship
• Promotion • Work conditions
• Responsibility • Salary
 2. Maslow theory: Order of people’s needs starting with basic human
needs. The concept of a hierarchy of needs provides a five-tier model of
human needs.
1. Physiological needs: basic needs of humans for their survival
2. Safety and security : people need protection from danger and threat.
3. Social needs : People need friends.
4. Esteem needs : People need to be recognised and respected.
5. Self-actualisation : People need to be developed and reach their
potentials.

3.F.W. Taylor : This theory is based on payment. Higher payment motivates

labor to work harder and more effectively. He recommended that jobs should
be broken down into simple tasks and that workers should:
• Use specialist tools and equipment
• Follow a strict working procedure
• Receive proper training
• Be paid according to what they produce.

• To sum up: an increase in wage can increase motivation of workers to

work harder and as a result this can increase productivity and lower
average cost.
Motivating Factors
: There are 3 factors which are financial rewards, Non-financial rewards and

Chapter22

Methods of motivation at work

Overviews
1. The financial method of motivation: remuneration, bonus, commission,
promotion, fringe benefits.
2. The non-financial methods of motivation: job rotation, job enrichment, and autonomy

Remuneration: money paid to employees for their work or services.

Time rate: payment system based on the amount of time employees spend at work
Gross pay: pay before deductions such as tax

Net pay: pay after deductions such as income tax, pension, student loan

Overtime: rate of pay above the normal rate to compensate employees for working extra
hours

introducing ways to give job

satisfaction.

1 Financial Reward Motivators: involved with monetary basis

Financial Rewards Advantages Disadvantages

1. Wage • Employees receive • It is a waste of

: payment for work, money every time to calculate

usually paid every week/day. every week.

week. • If employees work

overtime, they can
receive extra
payment.
2. Time Rate • It is easy to • Good or bad workers
calculate. receive the same
: payment by the
hour amount.
3. Piece Rate • Piece rate can motivate • Employees concern
: payment by workers to work faster only quantity but not
the amount of and more outputs are quality.
product produced to meet • Piece rates cannot be
is made. customers’ demand. used if work cannot be
measured.

4. Performance- • To reward workers whose • The assessment from

related pay output is difficult to the manager may be
(PRP) measure. biased.

: payment system • The performance

designed for non- target is impossible to
manual workers achieve.
where pay increases
are given if
performance targets
are met.

5. Bonus payment • Bonus is paid in

: payment in addition addition to the basic
to basic wage for wage.
reaching targets or • The bonus is paid
in recognition for when target is met.
service.

6. Commission • The payment is based on

: payment based on the sales generated by a
the value of sales, salesperson.
usually a percentage
of sales made.
7. Promotion • Motive workers in the
: promotion comes ways of internal
with higher pay. recruitment
8. Fringe benefits • It can attract and retain
e.g. car / discount better qualified
on firm’s products employees.
/training
2. Non-financial reward: job rotation, job enrichment, and autonomy

2.1 Job rotation: the periodic changing of jobs or tasks. Eg. Moving
from HR to marketing.

Advantages Limitation

• Reducing boredom • Lower productivity as workers learn

• Employees benefit from wider new jobs and take time to settle in.
training. • Worker motivation is not guaranteed. They
• Motivating workers may change from a boring job to another.

2.2 Job enrichment: Giving employees greaterLimitation

Advantages responsibility and recognition by vertically
extending their work arole.
• Giving employees challenge will develop • Workers who are unable to make it
their unused skills and encourage them to may not respond to incentives.
be more productive. • Not all workers react in the same way to
job enrichment as motivation.

2.3 Autonomy; giving workers the authority to make choices and decisions about the way
they work (sometimes called empowerment).

Advantages Limitation

• This helps to motivate workers as they • Workers may not receive extra pay.
feel they are trusted. • Worker may not be confidence enough to
take all responsibilities.
• Employees are more self-confidence and
their works are recognized.
 Chapter23 Organisation structure and
employees
Overviews
1. The organizational charts for different types of business: hierarchical
 and flat, centralized and decentralized.
2. The roles and responsibilities of employees in terms if compliance and
accountability: span of control, chain of command and delegation.

1. Organisational charts
• Organisational chart: diagram that shows the different job roles in a business and how
they relate to each other.
•
Formal organization: internal structure of a business as shown by an
organisation chart.
• Hierarchy: order or levels of responsibility in an organization from the lowest to the
highest.

• The formal organisation can be represented by an organization chart, which shows :

1) How the business in split into functions and departments
2) The roles of employees and their job titles
3) Who has responsibility
4) To whom people are accountable
5) Communication channels
6) The relationships between different positions in the business.
 2. Employee roles and responsibilities
1. Directors : are appointed by the owners to run the business. They make all the
important decisions in the business.
2. Managers : are responsible for planing, controlling, organising, motivating, problem
solving and decision making.
3. Supervisors : monitor the work in their particular area.
4. Operatives : are skilled workers which involved in the production process.
5. General staf f : Businesses often employ staff that do not have any
specific skills. With training they have more status than general staff.
6. Professional staf f : are skilled and highly trained. Examples include
lawyers, accountants, doctors, pilots and dentists.
3. Features of organizational structures

3.1) Chain of command (Line of authority) : is the structure in an organisation

which allows instructions to be passed down from senior management to
lower levels of management.

Advantages and Disadvantages of short chains of command

Advantages Disadvantages

1. Communication is quicker 1. Managers may lose control

and more accurate. because of lots of subordinates.

2. This can encourage 2. If subordinates are poorly

managers to delegate tasks and trained, they could make many

have more time to do other jobs. mistakes.

3. Less direct control of each

worker and

they will feel more trusted.

3.2) Span of control

Span of control: is the number of subordinates working directly under manager.
•
Subordinates: people in the hierarchy who work under the control on a more
•
senior worker.
E.g. in the marketing department a manager is responsible for 5 marketing officers
• => 5 subordinates.
3.3) Flat and hierarchical (Tall) structures

Business A : Short chains of command / Wide span of control

Advantages and disadvantages of flat structure

Organizational
Advantages Disadvantages
structure

1. Flat 1. Communition is better& 1. Managers may lose control

structures quicker from short over thier subordinates
chain of command. from wide span of control.
2. Management cost is low 2. It may cause a fall in
from fewer layers of productivity of
management. subordinates.
3. Employees are 3. It may have co-
motivated by less closely ordination problems if
controlled. manager are
4. Less formal. responsible for many
subordinates.
Business B : Hierarchical(tall) structure / Long chains of command / Narrow
span of control

Advantages and disadvantages of tall structure

Organizational
Advantages Disadvantages
structure

1. Tall 1. Managers have more 1. Management cost is

structures control over thier higher as there are more
subordinates. managers.
2. A clear route for 2. Poor communication from
promotion motivates staff. long chain.
3. Communication is poor. 3. Slow down decision making

3.4) Delegation
Advantages of delegation to managers Advantages of delegation to subordinates
Delegation : authority to pass down work from superior to subordinate.
• Managers do not have • Employees feel more

to do everything by important to company.

themselves. • Delegation allows workers

• Managers can assess to be trained.

performance of staff from the

tasks delegated.
3.5) the chain of command.
Centralise • Decentralised : type of organization system
d and
where decision making is pushed down the
decentrali
zed chain of command and away from the top.

• Centr Advantages of centralisation DIsadvantages of c

alise 1. Senior management has more 1. Employees maybe
d: control over business. without any authority

type 2. Coordination and control is 2. Less creativity and

easier.
of
3. Senior managers have 3. Procedures may be
orga more experience in making make decision makin
decision.
nizati
on
syste Advantages of decentralisation Disadvantages of de
m 1. It empowers and motivates 1. Senior managers m
workers. control of resources.
wher
2. It reduce stress and burden to 2. Costs maybe highe
e
senior manager. less standardisation
most variability in decision.
decis 3. Subordinates have grater job 3. Some workers may
satisfaction by making their own make decision.
ion decision.
are
mad
4. Organisational charts and growth
e at
As business grow, the formal organization is likely to change.
top -
Small business, it has entrepreneurial structure => centralized decision by owners. As
of -
business grow => traditional structure based on hierarchy and sharing decision
the
-
Matrix structure where employees are put into teams that cut across departmental
orga
roles. They may work together on specific project.
nizati
on
and
then
pass
es
down
Overviews
C apter24 Departmental
h functions

1. The human resources function - workforce planning, recruitment, and

selection etc. 2.
The finance function - wage/salaries, cash flow forecasting, budgets and accounting.
3. The marketing function - market research, product planing, pricing, sales
promotion
4. The production function - manufacturing the product, design new
products, stock control

1. Human resource department

Human resource department : is responsible for the welfare of employees.
The role of human resource department :
1. Workforce planning: to have enough staff to produce the products
to meet customers’ order.
2. Recruitment and selection: involves attracting and selecting
the best candidates for position
3. Wage and salaries: retain and motivate employees
4. Industrial relation: it must be effective in communication
between representatives of trade unions.
5. Training Programme: provides training programme linked with future
plan of the business.
6. Health and Safety: Businesses have to comply with health and
safety legislation.
7. Staff welfare: e.g. waking facilities, drinking water
8. Employment issues: HR draw up contracts of employment for
employees about pay, place of work.
9. Disciplinary and grievance procedures: Workers may have to be
discliplined owing to poor conduct.
10. Redundancy: is when an employee is no longer needed and so lose
their job. It is not due to any aspect of their work being
unsatisfactory.
11. Dismissal: HR is responsible to give formal warnings to workers and
dealing with any legal requirements when laying off staff. (Unfair
dismissal: When worker is dismissed illegally by business.)
2. Financial department firms’ money, producing budgets and
The financial cash flow forecast.
department is 5. Accounts : producing business’s accounts.
responsible for
administering and 3. Marketing department
monitoring all financial The role of marketing department:
transactions carried
1. Market research : to discover customers’
out by the business. needs, markets and competitors
The role of financial 2. Product planning : deciding which product
department : should be marketed.
1. Recording 3. Pricing : deciding what prices should be
transactions :
record and charged for the range of products sold
produce by business.
financial
statements 4. Sales promotion : e.g. free gifts, coupon,
discount
2. Wages and
5. Advertising : to create innovative and
salaries :
effective adverts to create wants and
process
increase sale revenue.
payment
6. Customer service : providing good quality
on time customer service.
and make 7. Public relations : communication
payment to between the company and the
tax general public including shareholders
authorities. and investors.
3. Credit control : 8. Packaging : designing packaging
monitoring the
amount of 9. Distribution : making sure that products
money owed by are available in the right place at the
customers.
right time.
4. Cash flow
forecasting
and
budgets :
controlling
4. Production department
The role of production
department:
1. Design new products
to meet changing
customer needs.
2. Purchasing
3. Stock control
4. Research and
development

5. Relationships and
interdependence
between departments
• The production
department may
be having to meet
with the marketing
department to
discuss about
customers’ order.
• The HR department
meet the sales
director to discuss
customer complaints
about one of the sales
people.
• The HR department
communicate with
financial department
about wage and
salaries
1. The need for funds
1.1 Short-term needs
S tion 3 Business finance
e Unit 25 : Sources of
c finance

: This money can be used to meet the day-to-day running costs of the
business, such as wages, raw materials, components and promises
and utility bills.
: Short-term finance : money borrowed for one year or less.
1.2 Long-term needs
: This money can be used to buy / invest in machinery, tools, vehicle,
property.
: Long-term finance : money borrowed for more than one year.
1.3 Start-up capital
: Funds are most needed when first setting up a business. Eg. Land,
property or equipment. Or other start-up costs might include research,
converting premises, legal fees, website design and marketing.
1.4 Expansion
: Once a business is established, the owners often want to expand.

2. Internal sources of finance

Meaning : Finance generated by the business from its own means.

Internal Sources of
Details
finance
: Some owners have saved money for many years
1. Personal Saving to

invest in business
: profit held by a business rather than returning it
2. Retained profit to the

owners and which may be used in the future.

: An established business may be able to sell some

3. Selling assets unwanted assets to raise finance.

3. External sources of finance
Meaning : Finance obtained from outside the business
3.1 Short-term external sources of finance (Less than 1 year to repay
debt)

External Sources of
Details
finance
: Agreement with a bank where a business spends
1. Bank Overdraft more

money than it has its account (Up to an agreed limit)

: Buying resources from suppliers such as raw
2. Trade payable materials

and components, and paying for then at a later date.

: Credit cards are popular because they are

3. Credit cards convenient, flexible and avoid interest charges if

accounts are settled

within the credit period.

3.2 Long-term external sources of finance (more than 1 year to repay
debt)

External Sources
Details
of finance
: A loan is fixed agreement between a business and the

1. Loan capital bank. The amount borrowed, interest must be repaid in

regular instalment

over a fixed period.

: This means that the bank lends money without the
2. Unsecured bank
security of having a claim on your assets if you do not pay
loans
it back. Therefore,

if the business collapses, the bank might not get its

money back.
: is a long-term loan and the borrower must use land or

3. Mortgages property as security. This means that if the borrower fails

to make the

repayments, the lender can respossess the property.

: Long-term security yielding a fixed rate of interest,

issued by a company and secured against assets

4. Debenture
: Debentures holders are entitled to a fixed return, but
have no

voting rights.
: Businesses may use hire purchase to buy tools,
5. Hire purchase equipment,

vehicles and machinery.

: The sale of shares can raise very large amounts of

6. Share capital money.When limited companies are formed, shares are

issued to raise start-up

capital.
 : specialist investors in the provision of funds for small-

7. Venture capital medium size of businesses.

: They may invest in businesses after the initial start-up.

: where a large number of individuals invest in a business
8. Crowd funding venture

using on online platform and therefore avoiding using a

bank.
 Chapter 26
Cash flow forecasting
1. The importance of cash
: Cash is the most liquid of all business assets.

1.1 To pay supplier, overheads and employees

: Overheads - Money spent regularly on rent, insurance, electricity and other
things that are needed to keep business operating.
: Suppliers have to be paid for the materials and components that have been
purchased.
: Finally employees have to be paid every week and every month.

1.2 To prevent business failure

: If business runs out of cash, it may become insolvent, This means that the
business cannot pay its debts.

2. The difference between cash and profit

Cash ≠ Profit
2.1 Some goods are sold on credit. So, at the end of the period, some
customers will still owe money. Therefore, profit is greater than cash.

2.2 Sometimes owners might put more cash into the business. This
will increase the cash balance, but have no effect on the profit made.

2.3 Purchases of fixed asset, such as equipment, will reduce cash

balances, but have no effect on the profit a company makes. This is
because the purchase of assets is not included for the purpose of calculating
profit.

3. Cash inflows and outflows

- Cash inflow : flow of money into a business
- Cash outflow : flow of money out a business
- Net cash flow : The difference between cash inflows and cash outflows
4. Cash flow forecast:
: This is a financial document and shows the expected cash inflows and cash
outflows over a future period. It also shows the closing cash balance at the
end of each month.

Why are cash flow forecasts important?

4.1 Identifying cash shortages

: A forecast can help to identify in advance when a business might need to
borrow cash. The forecast clearly shows how much cash is left at the end of
each month. This will help to identify when, or if, a bank overdraft will be
needed.

4.2 Supporting application for funding

: When trying to raise finance, lenders often insist that businesses support
their allocations with a cash flow forecast.

4.3 Help with planning the business

: Careful planning in business is important. It helps to clarify aims and
improve performance.

4.4 Monitoring cash flow

: A business should compare the predicted figures in the cash flow forecast
with those actually occur. It could then try to investigate the reasons why the
figures were different.
Unit 27
Costs
1. Type of costs?
1.1 Fixed costs : costs that do not vary with the level of output
in short run For example : Rent, Insurance, Interest payment, etc.

1.2 Variable costs : costs that do vary with the level

of output For example : Raw material, Packaging cost

1.3 Total costs : Fixed cost + variable cost

2. Average cost
: is the cost of producing a single unit of output. The formula for calculating
average cost is given by

Average cost = Total cost

Quantity produced

3. Total revenue
: Money generated from the sale of output. It is price multiplied by quantity.

Total revenue = Price per unit x Quantity

4. Calculating profit
: The difference between total revenue and total costs
 Unit 29
Statement of comprehensive income

1. The purpose of a statement of comprehensive income

-
Statement of comprehensive income : Financial document showing a
firm’s income and expenditure in a particular time period.
-
Profit : money left over after all costs have been subtracted from revenue
-
Gross profit : Sales revenue less cost of sales
-
Operating profit : gross profit less expenses

2. Retained and distributed profit

-
Distributed profit : profit that is returned to the owners of a business
-
Retained profit : Profit held by a business rather than returning it to the
owners and which may be used in the future
-
Dividend : share of the profit paid to shareholders in a company
3. The statement of comprehensive income
: The statement of comprehensive income shows the income and expenses of a
business during the financial year.

• Revenue : is the money the business receives from selling goods and
services.
• Cost of sales
: For a manufacturer, cost of sales would include costs such as raw
materials and the wages of factory workers.
: For retailer, cost of sales would be the cost of buying inventory
• Gross profit : is calculated when the cost of sales is subtracted from the
revenue
• Administrative expenses : general overheads or expenses of the business.
Eg. Office salary, stationary supplies.
• Other operating expense : Any expenses not included in administrative
expenses above may be called other operating expenses. Eg. Office supplies,
postage etc.
• Selling expense : A business may incur a range of expenses that are directly
related to the selling of its products. Eg. Sales commissions, advertising.
• Operating profit : Gross profit - operating expense - administrative expense
• Finance cost : If a business borrows money it will have to pay interest to the
lender.
• Profit for the year : If the cost of finance is subtracted from the operating
profit, the profit for the year is determined. This is the profit before
taxation.
• Profit for the year after tax : Profit for the year -tax
4. How might the statement of comprehensive income be used in decision making

4.1 Investment decision

: A business might use the statement of comprehensive income to decide
how much money to invest to the business.

4.2 Cost analysis

: The statement of comprehensive income will show what has happened to
costs during the year.

4.3 Basis for future forecasts

: Businesses can therefore use the statement of comprehensive income as
a basis on which to make forecasts,,

4.4 Making comparison

: Investors may use the statement of comprehensive income when deciding
where to invest their funds.

5. The nature and importance of profit

: Normal profit - minimum profit a business to make to retain the interest of the
owners
: Profit is also important as measure of business performance.
 Unit 30
Statement of financial position

1. What is a statement of financial position?

•
Statement of financial position : summery at a point in time of business
assets, liabilities and capital (often called the balance sheet)
-
Asset : are the resources owned by a business. Example include building ,
machinery, equipment, vehicle etc.
-
Liabilities : are the debts of the business, that is, what is owes to others.
Liabilities are a
source of funds for a business. They might be short term, such as overdraft or
longterm eg. Mortgage.
-
Capital : is the money put into the business by the owners. For limited
companies this
will be share capital.

2. Features of a statement of financial position

1 Asset
1.1 Non current asset
: assets that last for more than one year
: For example : Property, Factors, fixtures and fitting
1.2 Current asset
: assets that will be changed into cash within one year. (Liquid asset)
: Liquidity of an asset is how easily and how quickly it can be changed into
cash.
-
Inventories of raw materials, cash and trade receivable

1.3 Current liabilities

: debts that have to be repaid within 1 year
-
Trade payables : money owned to supplier.
-
Leases and hire purchase are other forms of borrowing
-
Short-term loans and overdrafts are money owed to banks repayable within
12 months.

1.4 Net current assets (Working capital)

: Current asset- Current liabilities
: is the value of liquid resources that can be used to meet running costs of a
business.

2 Non-current liabilities
: debts that are payable after 12 months.
: eg. Mortgage is long-term secured loan usually taken out to buy property.

3 Net assets
: Total asset - Total liabilities

4 Shareholders’ equity
: This is all the money that is owned to the owners. It may also be called
shareholders’ funds or capital and reserves. It also included share capital,
retained profit
2.5 Capital employed
: is the amount of money that the owners have invested in the business. (= Net
asset)
3. Interpreting the
statement of financial
position?
: It shows
-
Value of all business
assets, capital,
liabilities
-
Asset structure of
business, which
means how the
money raised by
business has been
spent on different
types of asset
-
Capital structure of a
business, which is an
analysis of the
different types of
funding the
business has used
-
Value of net
current assets,
which is how
much working
capital a
business has-
indicating
whether a
business has
enough liquid
resources to pay
its immediate
bills
1. What is ratio analysis RATIO ANALYSIS

: mathematical approach to investigating accounts by comparing two related

figures
•
Profitability ratio : measures the performance of the business and focus
on profit, revenue, the amount invested in the business.
•
Liquidity ratio : measure how easily a business can pay its short-term debts,
such as wages or suppliers.

2. Profit margin

2.1 Gross profit margin (Or mark-up)

: gross profit expressed as a percentage of turnover
: Formula gross profit margin = Gross profit x 100
Revenu
e
2016 2017

: = 11,000 x 100 : = 8,300 x 100

23,500 18,400
46.8% 45.1%

Analyst
: The gross profit margin for Economies has improved slightly over the two
years from 45.1 % to 46.8%
2.2 Operating profit margin
: operating profit expressed as a percentage of turnover.
: helps to measure how well a business controls its expenses and costs of
sales. If the difference between the gross profit margin and the operating
profit margin is small, this suggest that expenses are low. The operating
profit margin can be calculated by
: Formula gross profit margin = Operating profit x 100
Revenu
e
2016 2017

: = 4,600 x 100 : =3,200 x 100

23,500 18,400
19.5% 17.4%

Analyse
: The operating profit margin fell from 19.5% in 2016 to 17.4% in 2017.
Higher operating profit margins are better than lower ones.

2.3 Mark-up
: Some businesses are interested in the profit made per item sold. This is called
the mark- up and is calculated by

: Formula Mark-up = Profit per item x 100

Cost per item

For example - If company sells one of its properties for 236,000 US. Dollar and
the cost of building it was 200,000 US. Dollar, the profit made on the sale would
be 36,000. The
mark-up is given by
•
Mark - up = 36,000 x100
200,000
= 18%
3. Concept and importance of liquidity
: Liquidity refers to the ease and speed with which assets can be converted into
cash.

3.1 Current ratio

: assesses the firm’s liquidity by driving current liabilities into current assets.
: Current ratio = Current assets
Current liabilities
2016 2017

: = 13,600 : = 11,900
8,700 7,800
1.56 1.53

Analyse :
: The current ration for company rose very slightly from 1.53 to 1.56 in 2016.
It is suggested that a business will have enough liquid resources.
: If the ratio is below 1.5, it might be argued that a business might run short
of liquid assets.
: Operating above 2 may suggest that too much money is tied up
unproductively.

3.2 Acid test ratio

: similar to the current ratio but excludes stocks from current assets
(sometimes called the quick ratio)
: Acid test ratio = Current assets - inventory
Current liabilities
2016 2017

: = 13,600-4,900 : = 11,900-5,000
8,700 7,800
1 0.88

Analyse:
: Over the two years, the acid test ratio for company has improved slightly
from 0.88 to 1. If the acid test ratio is less than 1, it means that current assets
(less inventory) do not cover current liabilities-this might be a problem.
4. Return on capital employed (ROCE)
: profit of a business as a percentage of the total amount of money used to
generate it.
: Formula ROCE = Operating profit x 100
Capital employed
2016 2017

: = 4,600 x100 : = 3200x100

20,000 18,000
23% 17.8%

Analyse
: Over the two years, Company has seen its ROCE increase from 17.8 % to 23%.

5. Using ratios to making comparison

5.1Ratios can be used to assess the performance and the liquidity of a
business at a particular point in time.
5.2Ratios can also be used to make comparisons between businesses in
the same industry.

End of year Examination /June 2024 / Revision Document / Year 10 Business

 2

End of year Examination /June 2024 / Revision Document / Year 10 Business

 SAMPLE QUESTIONS AND ANSWERS

Data Response NEXT is a well-known clothing retailer that operates in 70

countries and employs over 43,000 employees. Since NEXT commenced trading
it has introduced many other products to its range such as home interiors,
flowers and a wedding list service. In 1999 NEXT launched its own online
shopping platform, enabling customers to purchase its products where ever they
live. It continues to improve its customer service by introducing new initiatives
such as next day delivery. NEXT mainly uses its own factories for production.
However, it does purchase some clothes such as ladies’ dresses from Turkish
factories.

a) What do you mean by training? [1]

Training is a process that involves increasing the knowledge and skills of a
worker to enable them to do their job more effectively.

b) b) What do you mean by motivation? [1]

Motivation is the desire to work harder. Motivation is the reason why
employees work hard in their jobs.

c) What do you mean by communication barriers? [1]

Communication barriers are obstacles that prevent effective
communication between the sender and the receiver.

d) What do you mean by shortlisting? [1]

Shortlisting is the process of sorting through application forms to select a
small group of candidates for interview.

End of year Examination /June 2024 / Revision Document / Year 10 Business

e) What do you mean by labor turnover? [1]
Labor turnover is the frequency with which or the rate in which the
employees of an organization leave their jobs. It can be because of
resignations, dismissal or retirement.

f) What do you mean by delegation? [1]

Delegation is the process of handing over the authority from superior to
subordinate to perform some tasks.

g) What do you mean by fringe benefits? [1]

Fringe benefits are perks provided to employees over and above the
normal wage or salary.

h) What do you mean by span of control? [1]

Span of control is the number of people, or subordinates, a person directly
controls in a business.

i) What do you mean by centralized organization structure? [1]

Centralized organization structure is where the decision making is done by
the senior management. Employees do not have much authority in
centralized structure.

j) Explain one barrier to communication within NEXT? [3]

You may choose any one from the following by applying to case.
· Technological breakdown – if communication is done electronically, there
is a chance that technology might be faulty making messages to break
down or be unclear. For example, emails cannot be sent if broadbacnd
connections are lost.
· Long chain of command – if there are too many levels or layers in an

End of year Examination /June 2024 / Revision Document / Year 10 Business

 organisation, the chain of command will be longer. This means messages
take longer to pass through the chain and may become unclear or
inaccurate on the way.
· Different languages – in multinational companies people may be working
in different countries where languages and cultures vary. Such differences
may make communication more challenging as employees may be in
different time zones which can delay replies or responses.

k) Explain one benefit to a business of using internal recruitment to

appoint senior managers. [3]
Internal recruitment is when the vacancy is filled by an existing employee
of the business. One benefit is that the organisation knows how the
employee works and employee knows the policies of the organisation. Thus
the time spent on induction can be saved.

l) Explain one benefit to NEXT of providing induction training to

newly joined staff. [3]
Induction training helps new employees to settle in and become familiar
with their new surroundings. Without induction training workers may feel
anxious about their new jobs. This might lead to poor productivity.

m) Explain one Hygiene factor according to Herzberg’s Two

Factor Theory. [3]
Pay Working conditions Job security Quality of supervision Staff
relationships Company policy Hygiene factors must be present in an
organisation, otherwise employees may be demotivated. For example, if
employees are not provided a satisfactory pay, they may not be able to
satisfy their basic needs and this might lead to demotivation.

n) Explain one motivator according to Herzberg’s Two Factor Theory.

End of year Examination /June 2024 / Revision Document / Year 10 Business

 [3]
Achieving aims Promotion Responsibility Interesting work Recognition
Personal development Motivators are things at work that results in
employee motivation. For example, chance of promotion provides
employees an opportunity to deal with much higher responsibilities. This
makes a worker perform exceptionally well in order to win promotion.

o) Explain one reason why employees keep their curriculum vitae

(CV) up to date. [3]
If employees keep their CVs up-to-date, they can apply for a job staright
away. They do not have to spend their time updating a CV which avoids
missing out on job opportunities.

p) Explain one benefit for a business of having full-time employees.

[3]
Full-time employees are more committed and loyal to the organisation as
they spen more time in the work place. As a result, they are more familiar
with the working procedures of the business.

q) Explain one reason for a business using seasonal staff. [3]

Employing seasonal staff may be beneficial to a business that has seasonal
demand. This means they do not have demand for products through out
the year. Employing seasonal workers only to meet demand during busy
times will reduce the cost of labor in off-peak seasons.

r) Explain one reason why employees should be undertaken health

and safety training as part of their induction programme. [3]
Employees undertake health and safety training because it could be the
law in that country. This way, employees are aware of the hazards within
their job so they know how to protect themselves when using equipment.

End of year Examination /June 2024 / Revision Document / Year 10 Business

s) Explain one benefit to a business of having a short chain of
command. [3]
One benefit to a business of using short chain of command is that
communication between different levels of heirarchy will take place faster.
This is because communication will only pass through a few levels before
reaching the intended employee. This helps the employees to respond
quickly to orders and instructions from the top levels

t) Analyse why NEXT would want to remove any communication

barriers within its organisation. [6]
Differences in language could a barrier to communication in NEXT as it
operates in 70 countries and so employees working in 70 countries are
required to speak the language of that country. By speaking the language
of the customer the staff can communicate and make it easier to increase
sales. Another barrier could be long chains of command. If NEXT has long
chain of command it could mean that messages from head office take too
long to reach shop assistants. The communication could become
unclear/inaacuarte on its way through the chain of command leading to
errors.

u) Analyze the benefits to NEXT of training all its employees [6]

If NEXT trained all its employees, then they are trained in a consistent
fashion. As a result, all the employees of NEXT can work in the same way
across 70 countries. This means that all employees work to the same
standards set by NEXT. Employees attending training sessions will gain
customer service skills they can use in NEXT shops. This way employees
gain necessary skills and knowledge to deal with customers. These new
customer service skills allow employees to improve their sales techniques
and this could lead to increased sales for NEXT.

End of year Examination /June 2024 / Revision Document / Year 10 Business

v) Analyze the benefits to NEXT of motivating its employees. [6]
If employees of NEXT are motivated they will work hard to provide good
customer services. Motivated employees of NEXT will try to meet the needs
of customers who want to buy a range of products such as home interiors,
flowers, wedding service, clothing etc. The employees will be happier
working there and will be willing to answer any customer queries. If
employees are not motivated, it could lead to lower sales of a wide range
of products such as home interiors, flowers, wedding service, clothing etc.
Less motivated employees can lead to a reduction in productivity making it
harder for NEXT to achieve any goals they may have.

w) Analyze two ways in which NEXT might motivate its employees. [6]
NEXT could give bonuses for the workers who has achieved highest sales of
clothing within a month. This might encourage workers to work harder and
compete against each other to gain the highest sales for the bonus. NEXT
could use job enrichment to give their employees greater responsibilities
within the each department or divisions or region as it operates in 70
different countries. This will motivate employees as they can see that they
are being given the opportunity to use their abilities within the department
as they are trusted by NEXT

End of year Examination /June 2024 / Revision Document / Year 10 Business

 SHORT ANSWER QUESTIONS

Define the follwowing key terms

1. Sole trader
A business owned by one owner.

2. Partnership
Business owned by between 2 and 20 people.

3. Franchise
A structure in which a business allows another operator to trade under their
name.

4. Stakeholder
An individual or group with an interest in the operation of a business.

5. Primary sector
Production involving the extraction of raw materials from the earth.

6. Secondary sector
Production involving the conversion of raw materials into finished and semi-
finished product.

7. Inventory
Inventories are stock of raw materials, components, semi-finished goods and
finished goods.

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 1. Crowdfunding
It is where a large number of inviduals invest in a business venture using an
online platform and therefore avoiding using a bank.

2. Profitability
Measures the ability of the business to make a profit compared to revenue or
capital employed.

3. Liquidity
Measures the ability of a business to convert the assets to cash; to pay short-
term debts.

4. Delegation
Authority to pass down work from superior to subordinate.

5. Span of control
The number of people a person is directly responsible for in a business.

6. Motivation
It is the desire to achieve a goal.

7. Multinational business
Large business with significant production or service operations in at least two
different countries.

8. Break-even
The point where total revenue and total costs are the same.

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End of year Examination /June 2024 / Revision Document / Year 10 Business

 9. Current assets
Assets likely to be changed into cash within a year.

10. Non-current liabilities

Debts that are paayble after 12 months.

11. Cost of sales

For a manufacturer, cost of sales would include cost of raw materials and the
wages of factory workers. For a retailer, cost of sales would be the cost of buying
inventory for resale.

12. Profit
Profit is the difference between total revenue and total cost.

13. Cash flow

Cash flow shows the money coming in and money going out of a business.

8. Bank overdarft
An agreement with a bank where a business spends more money than it has in
its account.

9. Bank loan
Bank loan is a sum of money borrowed from bank, which has to be repaid and on
which interest is payable.

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End of year Examination /June 2024 / Revision Document / Year 10 Business

Question 2 – Short answer questions
1. State one benefit of on-the-job training and one benefit of off-the-
job training.
On-the-job training is cheaper, and more relevant as employees learn company
specific skills.
Off-the-job training is provided by experts, and learner cannot be distracted by
work.

2. State one function of human resource department.

Recruitment, training, employer-employee relations

3. State one financial method of motivation and one non-financial

method of motivation.
Financial – salary, bonus, commission, profit sharing
Non-financial – job rotation, job enrichment

4. State two contents of the following financial records:

 Statement of comprehensive income
Sales revenue, costs of sales, operating expenses
 Statement of financial position
Current assets, non-current assets, current liabilities, capital employed

5. Outline one benefit of employing part-time staff

It is cheaper to employ part-time staff as they work feweer hours. More flexible
as they can be employed only when the demand is high.

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End of year Examination /June 2024 / Revision Document / Year 10 Business

 1. Outline one method of on-the-job training.
Watching another worker – a newly recruited employee may watch and copy the
actions of an experienced and competent employee.
Job rotation (workers spending a period of time in different tasks), mentoring

2. Explain one internal stakeholder of a business.

Owners are nternal stakeholders who invest capital into the business. They
expect a return for their investment. They take risk by investing capital as there
is no guarantee of business succeeding.

3. Explain one way of increasing profitability of a business.

Increasing gross profit margin – Gross profit margin can be increased by reducing
cost of sales. A business could negotiate deals with suppliers at a cheaper rate
this will keep costs as low as possible meaning that the business can look to
reduce the prices of their products/services to encourage more sales.

4. Explain one-benefit of employing casual staff.

Employing casual workers provides a great deal of flexibility to the buisness. This
is because their hours of work are variable. Some are ‘on call’, which means that
an employer can call them to work at very short notice.

5. Analyse one benefit and one drawback of using crowdfunding to

raise additional finance.
One benefit of using crowdfunding is that it could be a quick way to raise the
finance needed for expansion/buying assets/mention the reason. Investors do not
need to be given any financial reward in return for their money but could instead
be offered access to the services provided by the business.
One drawback to a business of using crowdfunding is that the business may be a
small business and so may not have enough presence to gain the funding
needed and if they don’t meet the target they set then they may end up with
nothing.

11. Anlayse the impact of an increase in price and an increase in

variable cost on the break-even point.
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End of year Examination /June 2024 / Revision Document / Year 10 Business

An increase in selling price may lead the business to break-even quickly. This is
because, when the selling price increases and the variable and fixed costs
remain the same, contribution per unit increases. As a result, break-even is
reduced and break-even point shifts to left.
An increase in variable cost may lead the business to break-even slowly. This is
because, when the variable cost increases and the selling price remain the same,
contribution per unit falls. As a result, break-even is incraesed and break-even
point shifts to right.

Question 3 – Long answer questions

Manisha owns a successful t-shirt printing enterprise. She needs to buy a new printer
machine to allow her to increase production. She is considering the following source of
finance:
 Bank loan
 Retained profit
Discuss the advantages and disadvantages to Manisha of using any three of
the above sources of finance.
Retained profit is an internal source of finance whereas bank loan is an external source
of finance. Retained profit is the part of profit that is reinvested in the business after
owners have taken their share of profits. Bank loan is a sum of money obtained from
bank which has to be repaid and on which interest charges are to be paid.
If Manisha use retained profit she can immediately buy the printer machine to start
producing in the most efficient way. As a result, Manisha does not have to wait for the
approval of the loan application where the bank manager has to check the business plan
to decide whether to lend loan or not. Also, this method does not need to be paid back
to any external parties so any profits made due to the introduction of new printing
machine will go back into the business. However, Manisha can only use retained profits
if they have any in the first place as it can take some time to build up profits to use in
investing in new machine.
On the other hand, Manisha will have more finance from a bank loan than using retained
profit. If Manisha has taken more profit as a return to her investment, the business will
be left with less retained profit which is insufficient to buy the printer. However, taking a
bank loan means Manisha will have to wait for a decision to be made by the bank before
being able to buy the printer to produce more efficiently. Also, interest has to be paid
back to the bank so this adds an additional cost to the business which has to be paid
back over a long period of time.
Overall, (your decision with justification applying to case).

Extra Questions:

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End of year Examination /June 2024 / Revision Document / Year 10 Business

The LEGO Group is a privately-owned business in Denmark. The business was

founded in 1932 by the Kristiansen family. The family still owns it. The name

LEGO is an abbreviation of two Danish words, ‘leg godt’ which means ‘play well’.

It is now one of the world’s largest manufacturers of toys with 15 factories and

over 18,000 employees around the world. LEGO manufactures toys, games and

art materials for boys and girls of all ages, and products from films such as Star

Wars and Harry Potter. It believes that children are the role models of the future

and playing with LEGO can support children in a developing and complex world.

In 2019 LEGO had current assets of 34 946 million DKK and current liabilities of

12 763 million DKK.

(a) Calculate, to two decimal places, the current ratio in 2019. You are
advised to show your working.
Current ratio = Current assets ÷ current liabilities
= 34946 ÷ 12763 = 2.74:1
b. Analyse the usefulness of ratio analysis to a business.

Use of profitability ratios

A business can see how it is performing and can calculate the gross profit margin/net
profit margin (mention the value). Business can use this information to assess the
direction that it will take in the future.
This calculation helps them to see the sales they are making are currently sufficiently
covering costs of running their services and selling their products. This helps the
business to judge how much profit they are making against the cost of running their
business and if any changes need to be made to make the business more profitable.

Use of liquidity ratios

A business can see its ability to pay off short-term debts by converting their assets to
cash and can calculate the current ratio/acid test ratio (mention the value). The ratio
says that for every current asset, business has ___ current liabilities. This means that the
liquidity position of the business is ________. Business can use this information to assess
the working capital. If the current assets are not enough to pay off short-term debts, the
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End of year Examination /June 2024 / Revision Document / Year 10 Business

business will face cash flow issues. Working capital is the capital required to direction
that it will take in the future.

c) Ensuring that all employees are fully trained is important to LEGO. LEGO

makes sure that all employees are fully trained and skilled to carry out the work.

All employees have induction training when they start at LEGO. Additional

training is undertaken by employees as they progress through the business.

LEGO is considering the following two options to carry out this additional training.

Option 1: on-the-job training

Option 2: off-the-job training.

(b) Justify which one of these two options LEGO should choose. [9]

On-the-job training takes place while doing the job. Off-the-job training is when training
takes place away from the work area.

One benefit to LEGO of using on-the-job training is that it is much cheaper. This is
because the cost of training is reduced as employees remain on the premises producing
the Princess Leia toy whilst being trained. Employees gain in confidence as they are
trained by staff they know whilst at LEGO. However, this can be time consuming and
prevents the skilled employees from carrying out their job efficiently. This is because
employees are working while being trained. This might affect the productivity of the
trainer as the trainer is demonstrating or explaining while training the trainee.
On the other hand, one benefit of off-the-job training is that the workers can gain
new skills and knowledge. This is because when employees are trained by
experts off site, they gain new skills and see new production methods not seen in
the 15 LEGO factories. Also training is conducted by experts and so employees
can gain
new skills from experts, resulting in fewer errors thus improving the number of toys
produced in each factory. However, the problem is that the training may not be
company specific or related to task carried out by the worker. The new employees may
not gain the specific skills and knowledge which are needed for designing the new Star
Wars toys for LEGO. If the employees are not using the knowledge and skills gained
within LEGO, then it might lead to a waste of money for the business.

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End of year Examination /June 2024 / Revision Document / Year 10 Business

 LONG ANSWER QUESITONS

Question 1
The Alternative Drum School (TADS) was set up in the wealthy area of Cricklade,
England in 2008 by Ollie Tanner who had a passion for and enjoyed drumming.
Ollie invested all of his savings into the drumming school. He saw the potential of
being located away from other drumming schools. Ollie promotes his business by
writing columns in local papers, performing at local music festivals and by word
of mouth recommendations. He has invested heavily in computer technology to
allow students to produce the music they enjoy playing. Ollie finds it difficult to
maintain a good work-life balance. Ollie currently works 60 hours a week in a
business that does not have reliable profits. At the moment TADS operates as a
sole trader. As it becomes more successful Ollie is considering becoming a
private limited company.

Evaluate whether TADS should consider becoming a private limited

company. You should use the information provided as well as your own
knowledge of business. [12]

Answer:
A private limited company is a suitable type of ownership for small and medium-
sized businesses. In a private limited company, the shareholders can only lose
the money they invest.
· As a one-man business becoming a private limited company means Ollie could
raise more funds from family and friends by selling shares to them. This can be
used to expand his business by offering lessons in other musical instruments.
· TADS will have a separate legal identity meaning the business could carry on if
anything happened to Ollie. As a sole trader, Ollie will be personally responsible
for the debts of his business.
· If TADS become a private limited company Ollie will lose only the money

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End of year Examination /June 2024 / Revision Document / Year 10 Business

invested by him if there are external debts for the company. Having Ltd status
means that Ollie’s personal possessions are protected as are those of his
shareholders. The benefit of this is that the risk for shareholders is reduced.
· If TADS opts for a private limited company, then Ollie can control who the other
owners will be, allowing him to choose people who have an interest in music and
can invest in the business.
· However, Ollie may not get a lot of interest so cannot raise large amounts of
money and this can slow down his expansion plans. He may find it easier to opt
for another source of finance such as a bank loan rather than change the legal
ownership of the business, so he does not lose any control of the business.
· However, becoming a Ltd will involve an increase in paperwork and some
information will have to be shared publicly and this could be of some interest to
Ollie’s competitors.

Question 2
The Better Toy Store (TBTS) is a children’s toy shop. TBTS has three shops in
Singapore. Two of the shops are located in busy shopping malls and the third is
located at the Jewel Changi Airport. TBTS has a website for customers looking to
buy toys online. TBTS selects toys to sell that are excellent for play, value, design
and quality. All TBTS toys are environmentally friendly.

Evaluate the importance of good internal and external communication to

TBTS. You should use the information provided as well as your own
knowledge of business.

Answer :
Internal communication can be between owners and employees. External
communication can be between owners and various stakeholders such as
suppliers and customers. · Internal communication is important to TBTS as the

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End of year Examination /June 2024 / Revision Document / Year 10 Business

business need to make sure all employees are aware of the toys it sells and the
aims of the business. It can create better relationships leading to lower staff
turnover and making them feel more valued and part of a team. · TBTS can use
various external methods to communicate with its suppliers of toys and wooden
materials. Good communication with its suppliers could lead to improved
relationship between TBTS and its suppliers as it keeps them up to date with its
business activity. · However, communication has to be good for all employees or
some may feel left out leading to animosity between the employees. · However, if
the communication is poor the relationship would not work and TBTS could find
that it loses suppliers.

Question 3
Tata Motor Company began trading in 1868, and is now part of a large group of
companies that is estimated to be worth $100 billion. Tata Motor Company
manufactures a wide range of cars, buses and trucks. It is India’s largest maker of
vehicles with manufacturing centres in many countries including Korea, Italy and
the UK. One of the main aims of Tata Motor Company is to produce goods that the
public want and need. It is currently working on electric cars that are more
environmentally friendly. Tata Motor Company plays an active role in community
development such as building schools, houses and investing in the health and
welfare of local people. Tata Motor Company is always looking to find the right
location for its new factories.

Evaluate the factors Tata Motor Company would have to take into
account when making decisions about where to locate new factories.
You should use the information provided as well as your own knowledge
of business

Answer:
One factor that TMC should consider is to find a location that has a skilled labour.

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End of year Examination /June 2024 / Revision Document / Year 10 Business

The Tata Motor Company needs a range of skilled employees, e.g. engineers and
designers. If they are near to the skilled labour force that is required to run the
factory/operation this could reduce the overall costs of the new factory. However,
by locating near a skilled labor force, the cost of land/infrastructure may be
higher thereby adding to the cost of the location · Another factor is making sure
that the location is accessible so that deliveries can be made. It may need to be
located either near to a port or where there is easy access to motorways or
railway lines so that the vehicles can be transported to their next destination. The
factory will need a continuous supply of materials and the finished vehicle will
need to be transported for sale. Infrastructure is one of many factors affecting the
choice of location and other factors may be more important.

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End of year Examination /June 2024 / Revision Document / Year 10 Business