AllPlay is a toyshop, set up by Vince in 2012. Each year Vince has met his business objectives including making a profit in 2017. AllPlay imports all of its products. Vince wants to expand by opening a second shop so he can sell a wider range of products. The cost of buying the shop is $20000. One option for finance is a bank loan. Vince's bank manager will want to see AllPlay's Income statement, and other financial documents. Table 1: Extract from AllPlay's Income Statement for the year ending 30 September 2018 $ 000s Revenue X Less cost of sales 63 Gross profit 52 Expenses (including rent and marketing) Y Profit 12

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [2] Clear understanding: e.g. a statement of a specific target that a business works towards
2. [1] Some understanding: e.g. target or goal
3. [1] X = 115000 or 115
4. [1] Y = 40 000 or 40
5. [2] Advantage: Access to a wider range of products which he needs for the new shop
6. [2] Advantage: Lower priced products so might be able to increase his revenue
7. [2] Disadvantage: Import quotas reducing the number of toys
8. [2] Disadvantage: Exchange rate movements might mean cost of sales rises above $63 000
9. [2] Disadvantage: Tariffs / Import Tax increasing the costs of sales
10. [2] Disadvantage: Different legal OR quality standards / Can't be sure of quality
11. [2] Disadvantage: Transport may take longer
12. [3] To decide whether to give the loan of $20 000 because they can see if they can repay it
13. [3] To identify assets for security such as the existing shop to reduce the risk of non-payment
14. [3] Calculate liquidity / cash flow so they know the business can pay its short-term debts of $63 000
15. [3] To offer advice on whether a bank loan is the best source of finance
16. [3] To compare financial documents over time such as their income statement to help them to improve
17. [1] Knowledge: identification of relevant issue(s)
18. [1] Application: relevant reference made to this business
19. [2] Analysis: relevant development of point(s)
20. [2] Evaluation: justified decision made as to whether a bank loan is the best source of capital for Vince. Either viewpoint is acceptable.
21. Loan: Can repay over a long period
22. Loan: Interest payable on the $20 000 so will add to costs
23. Loan: Time to convince bank as need to produce financial documents
24. Other options: Retained profits – no need to repay which reduces its expenses
25. Other options: Lease - but will not be an asset it can sell
26. Other options: Obtain funds from a partner