Identify and explain two possible business objectives Fabian and his new partner could set for their business.

Mark scheme

Marking points from the official mark scheme (May/June 2014). The mark or mark type is shown in brackets.

1. [8] Content: • Survival/break-even • To make a profit • Growth/expansion • Customer satisfaction/quality of service • Creating a good brand image/reputation The marks available for this question are as follows: 2 marks for knowledge; 2 marks for application and 4 marks for explanation/analysis. 1 mark for each objective identified (2 marks maximum). Up to two further marks are available for explaining how the objective will be relevant to the new business. 2 application marks are also available. Possible application marks: flowers; flower shop; partnership; hotels and restaurants; flower arrangements; weddings/Valentine's Day/birthdays; imported supplies of flowers. There may be other examples in context which have not been included here. 1 knowledge mark + up to 2 explanation marks + 1 application mark for each objective (4 marks x 2 objectives) Objective: Survival (1 mark for knowledge) Developed explanation: Survival (1) as the business is new and small the partners may not have much experience in the flower market (2). So they want the business to start to get customers and get established in the first year as many businesses fail in their first year (3). Application: The application mark could be achieved as the answer makes reference to flower market (1 application mark).
2. [12] Content: Option A – demand all year round; regular orders each week; regular work for employees; reduced price for bulk orders; business customers pay after payment for stock of flowers – possible cash flow problems; gross profit = $160,000(L1); net profit = $40,000 (L2); NPM = 20% (L2); GPM = 80% (L2) Option B - large potential sales for special occasions; higher prices; cash paid so no delay in payment; low sales at certain times of the year; varying demand for labour; gross profit = $90,000(L1); net profit = $30,000 (L2); NPM = 25% (L2); GPM = 75% (L2) Level 1 – 1 mark for each statement. E.g. Option A – Payments for the flower arrangements are made after payment for stock of flowers have been ordered and paid for (1 mark). Level 2 – 5 marks for the first level 2 answer and then one extra mark for each additional level 2 answer up to maximum of 8 marks. E.g. Option A – Payments for the flower arrangements are made after payment for stock of flowers have been ordered and paid for. Therefore it is possible this will cause cash flow problems for Fabian leading to increased costs from interest payments on an overdraft. 5 marks for level 2 answer. Level 3 – Detailed discussion of at least two level 2 answers and then a recommendation at the end which justifies which is the best option to choose compared to the other option. The answer must include some comparison of profitability ratios. Knowledge/Analysis/Evaluation: Level 3: 9-12 marks - At least 2 x Level 2 + Well justified recommendation as to the best option to choose compared to the other option. The answer must include some comparison of profitability ratios. Level 2: 5-8 marks - Good discussion of advantages/disadvantages of each option. OR balanced argument. Or calculation of profitability ratios. Level 1: 1-4 marks - Outline of advantages/disadvantages of each option.