SF is a private limited company that develops and maintains large-scale solar farms in country X. SF operates as a capital intensive business. Bob is an entrepreneur and the majority shareholder of SF. He invested into SF's first solar farm. SF took out high-interest bank loans to cover initial cash flow problems and provide working capital. SF used internal (organic) growth over the next 10 years. SF rents fields from farmers. Its main capital expenditure is solar panels, which are installed on the rented fields. The solar panels generate electricity, which SF sells to energy providers. Solar panel technology is constantly improving. SF operates five solar farms in country X. A team of seven engineers maintain all of SF's solar farms. Table 1.1 shows SF's budgeted and actual data for 2024. Table 1.1 SF's annual budgeted and actual data for 2024 Budget (m) Actual (m) Revenue 5 4 Total costs 3 3.75 Profit 2 0.25 Bob has identified that SF can increase its revenue by using batteries to store electricity generated by the solar panels. This electricity can then be sold at peak times for premium prices. This will require significant investment into battery technology. Bob wants to retain control of SF but is concerned about the investment required for further growth. In 2024 the cost of renting new farmland and purchasing solar panels increased significantly. ZB is a multinational battery manufacturer that is keen to start a joint venture with SF. If the joint venture goes ahead, ZB will insist that SF uses ZB batteries in all future solar farms.

Mark scheme

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

1. [1] Ambitious / inner drive
2. [1] Risk taker
3. [1] Confident
4. [1] Inquisitive
5. [1] Adaptability / flexible
6. [1] Resilience / persistence / determination
7. [1] Innovative / creative
8. [1] Communication
9. [1] Leadership
10. [1] Decision making
11. [1] Builds trust
12. [1] Current assets minus current liabilities
13. [1] Money / cash / funds / finance (to run the business)
14. [1] Ability to run the business
15. [1] Day-to-day / general operations / current / short-term / immediate / trading
16. [2] Examples of short-term financial commitments, e.g. stock, salaries, utilities, suppliers, debts, financial obligations, bills etc.
17. [2] Reference to current ratio and/or acid test ratio (ideals of 2:1 or 1:1)
18. [2] Benefit of maintaining sufficient working capital, e.g. survival, avoid liquidation
19. [2] Ways to improve working capital, e.g. use of a bank overdraft
20. [2] Managing trade receivables, e.g. stopping/reducing trade credit to customers, debt factoring
21. [2] Managing trade payables, e.g. taking/prolonging trade credit from suppliers
22. [2] Example from a business concept
23. [1] (Positive feedback / Total feedback) × 100 (formula only)
24. [1] (80 + 40) / (40 + 80 + 120 + 160 + 400) OR (80 + 40) / 800 (use of correct figures)
25. [1] 15 (%) (correct answer, % not necessary but correct rounding applies)
26. [1] Only as good as the figures used
27. [1] Do not take into account actual market conditions / external factors
28. [1] Ignores qualitative factors
29. [1] Can be manipulated to show desired rather than realistic outcomes / bias
30. [1] Time consuming to research / predict data
31. [1] Can hinder flexibility / innovation
32. [1] Less accurate in unstable times / long-term predictions
33. [1] Risk of internal conflict / managers competing for resources
34. [2] (Application to SF context, e.g.) Could lead to inappropriate decision regarding SF's five solar farms.
35. [2] (Application to SF context, e.g.) Budgeted figures are less accurate in the long-term as conditions are more likely to change which could affect SF's plans to form a joint venture.
36. [2] (Application to SF context, e.g.) Budgets may hinder flexibility such as using batteries to store electricity.
37. [1] High cost / expensive
38. [1] Cost of financing
39. [1] High maintenance costs
40. [1] The need for skilled workers for maintenance
41. [1] Need to train workers to use / maintain the capital equipment
42. [1] The quick pace of technological change
43. [1] Obsolescence of equipment
44. [1] Reliance on machines that might break-down
45. [1] Reduced employee motivation due to repetitive work
46. [1] Lack of flexibility
47. [2] (Application to SF context, e.g.) The high costs of initial investment could hinder Bob's wish to retain control.
48. [2] (Application to SF context, e.g.) Obsolescence of fixed assets could lead to profit reducing to below $0.25m.
49. [4] (Analysis of high fixed costs, e.g.) High fixed costs, due to the increase in solar panel prices, may require unplanned sources of expensive finance, potentially reducing capital available for future investment.
50. [4] (Analysis of cost of financing, e.g.) The cost of financing equipment with high-interest bank loans will increase expenses, reducing SF's profits.
51. [4] (Analysis of high maintenance costs, e.g.) High maintenance costs for SF's solar farms will increase cash outflows, threatening liquidity and survival.
52. [4] (Analysis of skilled maintenance staff, e.g.) The need for skilled maintenance staff (7 engineers) may require above average wages to travel across country X, adding to fixed costs and reducing profitability.
53. [4] (Analysis of technological change, e.g.) Solar panels may become inefficient compared to newest products due to technological improvements, leading to higher operating costs relative to competitors and making SF less competitive.
54. [4] (Analysis of training workers, e.g.) The need to train workers to use/maintain capital equipment incurs training costs, reducing profits.
55. [4] (Analysis of obsolescence, e.g.) The quick pace of technological change leading to obsolescence means SF needs to purchase upgraded machinery to maintain competitiveness, incurring high costs and potentially reducing market share if competitors have newer equipment.
56. [4] (Analysis of machine breakdown, e.g.) Reliance on machines that might break down could cause disruption and delays to production, resulting in dissatisfied customers.
57. [4] (Analysis of reduced motivation, e.g.) Reduced employee motivation due to repetitive work might lead to lower efficiency and reduced profitability.
58. [4] (Analysis of lack of flexibility, e.g.) Lack of flexibility means production could be stopped whilst machines are reset, leading to inefficiency.
59. [2] Two (or more) parties; Work towards a shared task/objective
60. [2] Maintain distinct identities; Can be equity or non-equity based
61. [2] Shared profits/losses/responsibilities; Pool resources/skills/experience/capabilities
62. [2] (Application to SF context, e.g.) SF can increase revenue by using batteries, which requires significant investment into battery technology.
63. [2] (Application to SF context, e.g.) Bob wants to retain control of SF but is concerned about investment.
64. [2] (Application to SF context, e.g.) ZB is a multinational battery manufacturer keen on a joint venture, insisting SF uses ZB batteries.
65. [2] (Analysis - Appropriate, e.g.) Pooling resources/skills/experience/capabilities with ZB could increase efficiency and improve overall profitability.
66. [2] (Analysis - Appropriate, e.g.) A joint venture could facilitate fast growth, generate more finance for SF, and reduce the risk/cost of borrowing compared to high-interest bank loans.
67. [2] (Analysis - Appropriate, e.g.) SF can maintain its distinct identity, brand name, and reputation, supporting future growth.
68. [2] (Analysis - Not appropriate, e.g.) Sharing profits/losses with ZB could result in lower profit for SF than if it worked on the project alone, reducing funds for future growth.
69. [2] (Analysis - Not appropriate, e.g.) Bob may lose control of operations, and SF's aims and objectives might change, affecting decision-making.
70. [2] (Analysis - Not appropriate, e.g.) The condition that SF uses ZB batteries may mean they are not the most appropriate type, potentially increasing long-term costs or decreasing profit potential.
71. [6] (Evaluation, e.g.) The relative importance of control versus other issues like market share, economies of scale, or specific industry/technology experience from ZB must be considered.
72. [6] (Evaluation, e.g.) The choice depends on SF/Bob's long-term goals; whether Bob prioritises retaining sole control or is willing to share workload/risk for faster growth and access to technology.
73. [6] (Evaluation, e.g.) A comparison with other growth methods, such as further internal growth or seeking different external finance, is needed.
74. [6] (Evaluation, e.g.) External influences and the specific choice of partner (ZB) are crucial, especially given ZB's insistence on using their batteries.
75. [6] (Evaluation, e.g.) A developed judgement on whether a joint venture is the most appropriate way for SF to grow, considering both benefits and drawbacks in the context of SF's situation (e.g., need for investment vs. Bob's desire for control).