Evaluate the most effective method WS could use to improve investor return.

Mark scheme

Marking points from the official mark scheme (May/June 2025). The mark or mark type is shown in brackets.

1. [K1] Identification of investors with shareholders.
2. [K1] Understanding of investor return measures: dividend cover (Profit for year/annual dividend), earnings (net profit), dividend per share, dividend yield (dividend per share/market share price), P/E ratio.
3. [K1] Knowledge that shares may be held for long term or short-term reasons.
4. [K1] Directors decide on dividends.
5. [K1] Methods to increase investor return: Increase revenue relative to costs.
6. [K1] Methods to increase investor return: Decrease costs.
7. [APP1] Application to WS by making use of relevant case information once (e.g., nature of CP's products: medium to high price, value for money leather footwear, shareholders take an active interest, recognition of changes in investment indicators in last three years (Table 1.4), operating profit has risen, EPS has risen, share price has increased, P/E ratio has increased, shareholders intend to use the AGM to seek methods to increase their returns, possible changes cited in case: environmental audit, ERP research, marketing plan, increased employee performance).
8. [AN1] WS has plans for investing in ERP which would increase efficiency resulting in a reduction in unit costs and therefore an increase in profit margins. With increased operating profit there would be more profits available for distribution to shareholders as dividends.
9. [AN1] Strategies to increase profit including investing in ERP, marketing and improving the performance of employees will make WS more attractive to investors resulting in an increase in the share price and therefore a potential capital gain for shareholders.
10. [AN1] P/E ratio has risen indicating that shareholders are receiving less value for their shares, but it could mean there is an expectation for future growth.
11. [AN1] Possibility of producing products increasingly demanded by the market so revenue and profit increase.
12. [AN1] Marketing plan likely to increases sales and profits.
13. [AN1] Employee performance increases, lowering costs and raising profit.
14. [AN1] Shareholders take an active interest so likely to engage with managers on implementation.
15. [AN1] Other measures WS might introduce to raise investor return could include: More machinery/automation to reduce labour costs.
16. [AN1] Other measures WS might introduce to raise investor return could include: Price increases to raise markup.
17. [AN1] Other measures WS might introduce to raise investor return could include: Cutting spending where this can be done so lowering costs.
18. [AN1] Other measures WS might introduce to raise investor return could include: Focusing a marketing plan on highest profitable products.
19. [EVAL1] Considered judgement based on argument.
20. [EVAL1] Short term v long term.
21. [EVAL1] Changes in profit ratio in last two years suggest that management strategies are working and indicate that returns to shareholders will continue to increase.
22. [EVAL1] Changes being considered/implemented may increase sales and profits and sales. Directors would need to actively use these increases to pay more dividends.
23. [EVAL1] Effect of these changes is to make more money available for investors BUT will the cost of implementation actually lead to increased profit? Will WS increase dividends? Will the changes increase the share price?
24. [EVAL1] What timescales are the changes going to occupy?
25. [EVAL1] The changes that benefit investors will also be beneficial to WS, its managers and employees, so high probability of them succeeding.