AA Ltd is a private limited company that manufactures running shoes to sell in the home market. It employs over 70 workers who specialise in different parts of the production process.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [2] 1 mark for each feature
2. [2] Minimum of two shareholders
3. [2] No upper limit of shareholders
4. [2] Owned by shareholders/private individuals
5. [2] In private sector
6. [2] Controlled by Board of Directors
7. [2] Transfer of shares is restricted/can sell shares to family/cannot sell shares to the general public
8. [2] Limited liability
9. [2] Legal entity
10. [2] Register with registrar of companies
11. [2] Published accounts
12. [2] Certificate of incorporation needed before trading
13. [2] Perpetual succession/continuity
14. [2] Family business
15. [4] Any 2 differences and explanation of each to a maximum of 4 marks
16. [4] Home trade is buying/selling within one country / internal trade (1) overseas trade is buying/selling to other countries / globally /external trade (1)
17. [4] Home trade has wholesalers/retailers (1) overseas trade has imports(ers)/exports(ers)/merchants/agents (1)
18. [4] Overseas trade has customs duties/quotas (1) tariffs are added to price / quotas imposed (1)
19. [4] Home trade uses the same weights/units/voltage etc (1) overseas trade may be different / more complex (1)
20. [4] Home trade uses the same/local currency (1) whereas overseas trade use different/other currencies (1)
21. [4] Home trade has same more straightforward means of payment (1) whereas overseas trade may be more complex e.g. documentary credits (1)
22. [4] More documents in overseas trade than in home trade (1) allow example, e.g bill of lading, certificate of origin for overseas trade (1)
23. [4] Different forms of transport used, e.g. road/rail/land transport in home trade (1) air/sea in overseas trade (1)
24. [4] Home trade uses one language (1) overseas trade may involve different languages (1)
25. [4] Home trade has excise duties (1) overseas trade has customs duties/tariffs (1)
26. [3] Up to 3 marks for justified reasoning of yes and/or no responses
27. [3] Yes - It increases output (1) it makes greater use of machinery / mass production (1) greater efficiency (1) speeds up production (1) higher quality/better goods (1) less waste (1) fewer mistakes/errors (1) easier to train workers (1) cost of training is reduced (1) less/saves time (1) wasted by workers moving from job to job (1) increases the skill of workers (1) by repeating tasks (1) workers become experts (1) allows the business to take advantage of economies of scale (1)
28. [3] No – Boredom (1) may lead to loss of quality / lower output (1) morale of workers may suffer (1) production may be disrupted (1) if a worker is absent / if specialist parts are not delivered (1) affects output (1) as each part of production depends on the performance of other parts of the company (1)
29. [2] 1 mark for reason plus 1 mark for relevant explanation
30. [2] Documentation (1) there may be incomplete details (1) ensure the details on the delivery note are correct (1) to check the goods are what they state they are (1)
31. [2] Customs duties/tariffs (1) to ensure the correct amount of duty is being charged (1) to demand payment (1) to raise revenue (1)
32. [2] Enforce quotas (1) on amounts of imported goods (1)
33. [2] To prevent smuggling (1) of any illegal goods/contraband (1) demerit goods (1) e.g. drugs inside the running shoes / packaging (1)
34. [2] To keep records (1) imports or exports (1)
35. [2] To prevent goods coming from a country not sanctioned (1) example (1)
36. [6] Up to 2 marks for describing public limited companies / business ownership
37. [6] Up to a further 2 marks for analysing the benefits of a public limited company than being a private limited company
38. [6] Up to a final 2 marks for evaluating whether a public limited company is a better form of business ownership than being a private limited company
39. [6] A public limited company is a large company (L1) owned by many shareholders (L1) who have bought shares through a stock exchange (L1)
40. [6] Changing to a public limited company enables a company to raise capital (L1) from potential shareholders buying shares through a stock exchange L1)
41. [6] May make it easier to borrow money from banks (L1) seen as less risky (L2)
42. [6] Shareholders have limited liability (L1) attracts outside investors (L2)
43. [6] Although ownership of the shares may change, the company is assured of continuity of existence.
44. [6] With opportunities to acquire large amounts of capital, a plc can benefit from economies of scale such as bulk buying and the latest technology.
45. [6] A plc will be able to take advantage of specialist management and directors from a wide range of expertise.
46. [6] Improved image/higher profile/more well-known (L1) which can lead to increased sales (L2)
47. [6] Increased capital (L1) more opportunities for growth (L2)
48. [6] Potential loss of control (L1) as may be subject to takeover bids from other companies (L2)
49. [6] There is no restriction on ownership of shares and shares can be transferred without the consent of the other shareholders.
50. [6] Separation of ownership from management can be an issue, with some shareholders interested in short-term profits and not in long-term strategic gains.
51. [6] Loss of personal contact between management and workers and between customers and the company.
52. [6] Evaluation: The main consideration is about stability and risk. If a company is well established and has the financial backing and growth potential to become a public limited company, then the advantages of a public limited company can result in greatly improved prospects. However, if it is a small business with limited reach, or a new company still establishing, such a big undertaking is unlikely to be the better form of business ownership. Instead, it might be better for the business to remain with private investors and maintain greater levels of control.