PJA make fashion clothing for 16-25 year olds. Many of its competitors are multinational companies. PJA produce new products every 3 weeks. All PJA's products are made in a local factory because of import quotas. The Managing Director is reviewing PJA's financial statements using ratio analysis. An extract is shown in Table 2.1. [Table 2.1] Extract from PJA's financial statements for 2020 Revenue (m) 7400 Gross profit (m) 3330 Profit ($m) 1100 Current ratio 1.5 Return on Capital Employed (ROCE) 8%

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

1. [2] Limit on the number of goods into a country
2. [1] Partial definition e.g. limit on number of imports
3. [2] Correct answer 45(%)
4. [1] Correct method but incorrect answer
5. e.g. gross profit / revenue ×100 OR 3330 / 7400 *100
6. Benefit: [K] Attract new customers / sales / growth [app] for its clothes
7. Benefit: [K] Need to replace products in decline / keep up with changing customer tastes [app] of 16-25-year-olds
8. Benefit: [K] Retain customers / to maintain market share
9. Benefit: [K] Spread risk / attract new markets / have other products to rely on for sales
10. Benefit: [K] Charge a higher price
11. Benefit: [K] Improve reputation
12. Benefit: [K] Can create a unique selling point
13. Limitation: [K] No guarantee customers will like the new product [app] as fashion changes
14. Limitation: [K] Competitors might introduce rival products / reduce prices [app] as most of competitors are multinational companies
15. Limitation: [K] High cost
16. Limitation: [K] Production issues, e.g. is there sufficient capacity [app] within factory
17. Limitation: [K] Having access to suitable materials [app] as trying to avoid import quotas
18. [K] Able to see trends over time [app] for its clothing [an] to see where / whether performance has improved or not
19. [K] See trends between competitors [app] such as whether revenue is higher than $7400m [an] to assess how / whether they are as competitive as they think
20. [K] Able to measure financial performance / profitability / success [app] as if last year ROCE was lower than 8% [an] profitability has improved
21. [K] Help make investment/expansion decisions [app] such as developing new products
22. [K] Check / manage liquidity OR working capital [app] as if last year the current ratio was higher than 1.5 [an] then they know liquidity has got worse
23. [K] Creates jobs / provides income [an] so improving living standards
24. [K] Technical knowhow increased [an] which could help improve production methods / efficiency / output
25. [K] Orders for local suppliers [an] increasing local incomes / GDP
26. [K] Improve international reputation of country
27. [K] Increased investment / infrastructure development in country
28. [K] Companies pay taxes [an] which increases government income
29. [K] Competition for local businesses [an] leading to lower demand / lower prices [an] which could lead to the closure of local businesses
30. [K] Profits are often repatriated [an] limiting the countries growth
31. [K] Offer higher wages [an] reducing supply of workers for local business
32. [K] Use up limited resources [an] so there is less available for other local businesses
33. [K] Jobs created may be unskilled
34. [Eval] Companies pay taxes [k] which increases government income [an]. However, reduced sales for local businesses [k] may lead to lower revenue [an]. A multinational always benefits a country to some extent, because of the money invested. [eval] The overall impact depends upon the effect on local businesses. [eval]