Identify and explain one advantage and one disadvantage of GS being a partnership.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [8] Identify and explain one advantage and one disadvantage of GS being a partnership.
2. [2 × 1] Knowledge - award one mark for each advantage/disadvantage
3. [2 × 1] Analysis - award one mark for a relevant explanation of each advantage/disadvantage
4. [2 × 2] Application – award two application marks for each advantage/disadvantage
5. Award one mark for each advantage/disadvantage (maximum of two), such as:
6. ∞ Advantages: Increased capital investment
7. ∞ Advantages: Share responsibilities/specialise/more skills/more ideas
8. ∞ Advantages: Share risks/losses
9. ∞ Disadvantages: Unlimited liability
10. ∞ Disadvantages: No separate legal identity
11. ∞ Disadvantages: Share profit
12. ∞ Disadvantages: Lack of continuity
13. ∞ Disadvantages: Arguments between partners
14. Award a maximum of three additional marks for each explanation – 2 of which must be applied to this context – of the advantage/disadvantage.
15. Indicative response: More capital can be invested by each partner than if the business was a sole trader. (k) In this case the partners each invested $5000. (ap) This meant that less capital was borrowed therefore reducing interest payments. (an) This will make it easier for GS to expand. (ap)
16. Possible application marks: set-up last year; set up by 2 brothers; grows plants and trees; partners invested $5000 each; looks after the gardens of luxury hotels; want to buy more land to expand; information from Appendix 1; information from Appendix 2.
17. There may be other examples in context that have not been included here.
18. [12] Consider the advantages and disadvantages of the following three sources of finance for the new equipment. Recommend the best source for GS to choose. Justify your answer.
19. Relevant points might include:
20. Advantages: Bank loan: Raise large amounts of capital; Repay in instalments
21. Advantages: Lease: No capital to find; Maintenance covered by leasing company
22. Advantages: Retained profit: No interest paid; Not repaid
23. Disadvantages: Bank loan: Interest paid; Adds to expenses; Need for security/collateral
24. Disadvantages: Lease: Not an asset of the business; Expensive
25. Disadvantages: Retained profit: May not be enough as only been in business for one year; Reserves not available for alternative uses
26. Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.
27. Level 3: At least 2 x Level 2 + 9-10 marks for well justified recommendation of which source of finance to choose and why not the alternative sources. 7-8 marks for limited recommendation of which source of finance to choose.
28. Level 2: 4-6 marks Detailed discussion of advantages and/or disadvantages of each source of finance.
29. Level 1: 1-3 marks Outline of each advantages and/or disadvantages of each source of finance.
30. Level 1 - 1 mark for each L1 statement (max of 3 marks) e.g. Retained profit is readily available and does not have any interest payments to be made.
31. Level 2 - 1 x L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Retained profit is readily available and does not have any interest payments to be made. However, as the business is only small and a partnership, it may not have enough profit in reserves to pay $10 000 for the new equipment. (4 marks for one Level 2 answer plus one application mark for referring to the cost of the new equipment)
32. Level 3 - For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation of which source of finance to choose.
33. Award up to 2 additional marks for relevant application.
34. Possible application marks: Partnership; set-up last year/new business; set up by 2 brothers; grows plants and trees; partners invested $5000 each; $5000 profit; looks after the gardens of luxury hotels; new gardening equipment; cost $10 000 to purchase new equipment; information on the three sites in the case; information from Appendix 1; information from Appendix 3.
35. There may be other examples in context that have not been included here.