Analyse two benefits to a business of government grants as a source of finance.

Mark scheme

Marking points from the official mark scheme (May/June 2023). The mark or mark type is shown in brackets.

1. [1-2] (a) A01 Knowledge and understanding: Knowledge of two relevant points is used to answer the question.
2. [1-2] (a) AO2 Application: Application of two relevant points to a business context.
3. [3-4] (a) AO3 Analysis: Developed analysis that identifies connections between causes, impacts and/or consequences of two points.
4. [1-2] (a) AO3 Analysis: Limited analysis that identifies connections between causes, impacts and/or consequences of two points.
5. [0] (a) No creditable response.
6. [1] (a) A01 Knowledge and understanding: Government grants/subsidies often do not need to be paid back.
7. [1] (a) A01 Knowledge and understanding: Government grants/subsidies are often the only source of finances available to a business.
8. [1] (a) AO2 Application: Government grants/subsidies do not add to the debt burden of the business.
9. [1] (a) AO2 Application: They do not normally need to be paid back – regarded as 'free money'.
10. [1] (a) AO2 Application: The business may not qualify for a bank loan.
11. [2] (a) AO3 Analysis (Benefit 1 example - derived from: Government grants are often the only source of finances available to a business.): If the analysis of this benefit is developed analysis, e.g. – ‘This may mean a business does not have to rely on banks, loans, share issues, venture capital, and as a result the business does not have to surrender equity or control.’ then 2 analysis marks should be awarded.
12. [1] (a) AO3 Analysis (Benefit 1 example - derived from: Government grants are often the only source of finances available to a business.): If the analysis of this benefit is limited analysis – 'This may mean a business does not have to rely on banks, loans, share issues, venture capital' then 1 analysis mark should be awarded.
13. [2] (a) AO3 Analysis (Benefit 2 example - derived from: Government grants often do not need to be paid back.): If the analysis of this benefit is developed analysis – 'Government grants, unlike other sources of finance such as loans do not have to be paid back with interest. Therefore, the debt burden of the business is not increased.' then 2 analysis marks should be awarded.
14. [1] (a) AO3 Analysis (Benefit 2 example - derived from: Government grants often do not need to be paid back.): If the analysis of this benefit is limited analysis – ‘Government grants, unlike other sources of finance such as loans do not have to be paid back with interest.' then 1 analysis mark should be awarded.
15. [2] (b) A01 Knowledge and understanding: Developed knowledge of reasons for failure of a small business – small businesses have limited resources, especially in relation to short term cash/working capital – they are also susceptible to slow payment of goods supplied – not enough attention is paid to managing working capital – other reasons for failure may include lack of profitability.
16. [1] (b) A01 Knowledge and understanding: Limited knowledge of reasons for failure of a small business – small businesses pay insufficient attention to cash flow forecasting.
17. [2] (b) AO2 Application: Developed application – a poor business model may mean that a small clothes shop pays insufficient attention to managing its working capital – payment to the suppliers of clothes may be delayed or the wrong market is targeted e.g. coats sold in summer.
18. [1] (b) AO2 Application: Limited application – small clothes shop pays insufficient attention to cash flow forecasting e.g. different clothes sold at different times of the year.
19. [2] (b) AO3 Analysis: Developed analysis – the working capital of a small retailer is inadequate. Late payments are made to suppliers resulting in business relationships breaking down, as suppliers lose confidence in a business. Supplies may be stopped, meaning that a business is unable to trade.
20. [1] (b) AO3 Analysis: Limited analysis – the working capital of a business is inadequate as the business becomes illiquid and unable to purchase supplies.
21. [5-6] (b) AO4 Evaluation: Developed evaluation in context. A developed judgement/conclusion is made in the business context. Developed evaluative comments which balance some key arguments in the business context.
22. [3-4] (b) AO4 Evaluation: Developed evaluation. A developed judgement/conclusion is made. Developed evaluative comments which balance some key arguments.
23. [1-2] (b) AO4 Evaluation: Limited evaluation. A judgement/conclusion is made with limited supporting comment/evidence. An attempt is made to balance the arguments.
24. [0] (b) No creditable response.