Refer to Appendix 1.

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. [4(a)(i)] Non-current liabilities / (Shareholder Equity + NCL) × 100 1 mark
2. [4(a)(i)] OR Long term liabilities / capital employed × 100 1 mark
3. [4(a)(i)] 60 x 100/70 = 85.7% or 86% 2 marks
4. [4(a)(i)] OR 60 x 100/110 = 4.5% or 55% (2)
5. [4(a)(i)] 85.7 or 54.5 (1)
6. [4(a)(ii)] ROCE = (operating profit / capital employed) × 100 1 mark if no calculation
7. [4(a)(ii)] OR (Net income/CE) × 100
8. [4(a)(ii)] Capital employed = 60 + 10 + 40 = 110 1 mark
9. [4(a)(ii)] = 10/110 × 100% 2 mark
10. [4(a)(ii)] = 9.1% or 9% 3 marks
11. [4(a)(ii)] 9.1 (2)
12. [4(a)(ii)] With working shown 0.091 (2)
13. [4(b) Knowledge] Role of shareholders in accepting/rejecting offer
14. [4(b) Knowledge] Factors to consider
15. [4(b) Knowledge] Current / future profitability of the business
16. [4(b) Knowledge] Offer price
17. [4(b) Application] Reference to jewellery,
18. [4(b) Application] Results from 4a; ROCE 9.1% relative to interest rates
19. [4(b) Application] Reference to data in Appendix,
20. [4(b) Application] The takeover offer - $50m in cash and $50m in Gonfo shares
21. [4(b) Application] The offer in cash is worth $50m equal to the net assets, though there are additional shares
22. [4(b) Application] Different shareholders views bank v Janice as MD. Some shareholders wish to take the money, others do not
23. [4(b) Application] Operating profit of $10m, OPM = 1.25% – low?
24. [4(b) Application] GPM 37.5%
25. [4(b) Application] Current ratio = 2.5. No threat of insolvency.
26. [4(b) Application] Difficult market conditions and impact on future of BSJ
27. [4(b) Application] Future prospects from bulleted points in 'the future' paragraph
28. [4(b) Analysis] GPM is 37.5%, NPM is 1.25% indicating an issue of high costs
29. [4(b) Analysis] Future indicates difficulty in raising prices due to market conditions
30. [4(b) Analysis] Consequences of accepting or not accepting the offer for family shareholders
31. [4(b) Analysis - Advantages] Cash 'windfall' including value of Gofo shares
32. [4(b) Analysis - Advantages] Successful transition from work and uncertainty to retirement
33. [4(b) Analysis - Advantages] Possibility of influence on a larger business
34. [4(b) Analysis - Advantages] Finance for a new venture
35. [4(b) Analysis - Disadvantages] Loss of control of their own business
36. [4(b) Analysis - Disadvantages] End of family business, uncertainty of new life
37. [4(b) Analysis - Disadvantages] Little influence on the larger business
38. [4(b) Evaluation] Justified recommendation based on analysis
39. [4(b) Evaluation] Need for further evidence
40. [4(b) Evaluation] Dividends paid to shareholders in recent years
41. [4(b) Evaluation] Value of Gonfo shares is critical
42. [4(b) Evaluation] Bank likely to be more interested in money as a factor
43. [4(b) Evaluation] Would shareholders take into account the impact on employees?
44. [4(b) Evaluation] Uncertainty exists, whatever decision is made
45. [4(b) Evaluation] Qualifications to implications given in analysis
46. [4(b) Evaluation] Suggestion that more negotiation needed to get an improved offer.