Explain four reasons why it is important that Zane prepares a cash-flow forecast before starting ET.

Mark scheme

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

1. [8] (a) One mark for each reason (max 4). Award a maximum of one additional mark for each explanation of the reason which must be applied to this context. Relevant answers might include: To manage the cash flows in and out of the business – so that Zane and Zaara will be aware of how much cash they may have available when operating the theatre; To ensure there is cash/working capital available to pay for day-to-day expenses/short term debts – or they may be unable to put on performances; To show the bank to gain a bank loan/overdraft – without a loan performances may be of poor quality if costumes cannot be purchased; To show if the business is likely to run short of cash – avoid having a lack of liquidity for the 2 partners or shareholders; To help plan ahead – to make decisions about which price to charge so that all 100 seats are sold; To see whether the business is achieving its financial objectives; May need to include it in the business plan. For example: To manage the cash flows in and out of the business (1) so that Zane and Zaara will be aware of how much cash they may have available to spend at the theatre (app). Application could include: theatre; performances; 100 seats; costumes; 2 partners/shareholders; pay fair wages; tourists; low-income area; 24 part-time employees; costumes produced in the local area; refreshments from suppliers that do not pollute the environment.
2. [12] (b) Level 3 (9-12 marks): Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more roles of marketing. Well-justified conclusion. Candidates discussing all three roles of marketing in detail, in context and with a well-justified conclusion including why the alternative roles of marketing are rejected should be rewarded with the top marks in the band. Level 2 (5-8 marks): Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one role of marketing. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more roles of marketing in detail and applying them to the case should be rewarded with the top marks in the band. Level 1 (1-4 marks): Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the roles of marketing with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining three roles of marketing in context should be rewarded with the top marks in the band. Level 0 (0 marks): No creditable response. Relevant points might include: Identifying customer needs: The Marketing Manager needs to find out what types of performances will be popular with audiences – this is to ensure that the shows that are planned will attract enough customers to buy tickets for most of the seats - increasing/maximising revenue for the theatre; Find out what price customers are willing to pay for seats at the theatre for a performance - if too high a price is charged then many seats may not be sold - leading to a loss for that performance; To find out what types of refreshments customers wish to buy at the interval – this will help to raise these sales and provide additional revenue for the theatre. Satisfying customer needs: Ensuring that the performances are what the audience expects – this improves the reputation of the theatre – so customers tell their friends about the theatre - increasing sales of seats for performances; If performances are on days which are not convenient for customers then fewer seats will be sold so it ensures the performances are put on during days that most suit local people and tourists. Maintaining customer loyalty: Having links with customers to ensure they keep coming back to the theatre to watch performances – rather than go to other theatres as regular visits to the theatre will maintain its revenue – enabling them to keep putting on performances/provide liquidity for the next performance/avoid cash flow problems; Keeping existing customers is preferable to attracting new ones – as it is often cheaper to market to existing customers than to find new ones – makes the theatre's marketing budget more efficient. Conclusion Justification may include: Identifying customer needs is most important because if these needs are not understood then the theatre may plan and pay to put on a performance that will not attract customers, leading to a loss. Satisfying customer needs is less important to the success of the theatre as if the needs have been identified then it is more likely that these will be met by the chosen performance. As theatres may keep attracting new audiences such as tourists then maintaining customer loyalty may be less important as long as the different needs of these audiences have been identified. Satisfying customer needs is most important because if customers are disappointed with the performance, then they will tell their friends and family about it and ET will gain a poor reputation. This may lead to fewer sales of seats for future performances leading to ET being less successful. Maintaining customer loyalty is most important as without this it will mean the theatre will need to keep attracting new customers and this is expensive to research suitable plays and shows that they will want to see. Marketing costs will therefore be lower if regular customers keep coming back to watch the shows.