Alex and Raul are business partners. They started a bicycle repair business with their own savings as the bank would not give them a loan. Raul does most of the repair work, while Alex manages the accounts. Alex is surprised that the business has made a small profit in the first year. 'We can use this profit to expand. I don't know why people think we would benefit from having a business plan. Much of the demand for our repair business comes from our friends who own bicycles.' Table 2: Extract from balance sheet as at 31 March 2016 ($) Non-current assets | 3000 Current assets | 2500 Current liabilities | 2000 Non-current liabilities | 1500

Mark scheme

Marking points from the official mark scheme (May/June 2016). The mark or mark type is shown in brackets.

1. [2] Good knowledge – e.g. Debts/loan repayable in more than one year's time.
2. [1] Some knowledge – e.g. Long-term debts or money owed.
3. [2] Good Application: 500.
4. [1] Some application e.g. Current assets – current liabilities OR 2500-2000.
5. [1] Knowledge [2 × 1] – award 1 mark for each relevant reason [max 2].
6. [1] Application [2 × 1] – award 1 mark for each explanation in context.
7. [1] Points might include: Necessary to finance the day to day activities (only once) e.g. Pay suppliers [k] for bike parts [app]
8. [1] Know they are solvent/can meet short-term debts/avoid cash flow problems [k]
9. [1] Too much working capital could mean not making best use of resources [k] which could negatively impact on expansion plans [app]
10. [1] Can take advantage of special offers from suppliers [k]
11. [1] Can help attract potential investors/support loan applications [k] to help expand the business [app]
12. [1] Cover unexpected costs [k].
13. [1] Knowledge [2 × 1] - identification of relevant benefit [max 2].
14. [1] Application [2 × 1] – award 1 mark if relevant reference made to this business.
15. [1] Analysis [2 × 1] – award 1 mark for each relevant explanation. Relevant points might include: Injection of more capital [k] to fund expansion [app] so don't have to borrow as much/reduce the cost of interest [an]
16. [1] Share work load/decision making [k] so Raul does the repairs [app] so Alex is able to focus on his job [an]
17. [1] New/more ideas [k] so can help business increase sales [an]
18. [1] Greater range of expertise/skills/specialisation [k] so can offer a better service [an]
19. [1] Share risk/losses [k] as have unlimited liability [app] would have someone to share financial burden [an].
20. [1] Knowledge [1] – award 1 mark for identification of relevant issue(s) [max 1].
21. [1] Application [1] – award 1 mark if relevant reference made to this business.
22. [2] Analysis [2] – award up to 2 marks for relevant development of point(s).
23. [2] Evaluation [2] – justified decision made as to whether Alex and Raul's business needs a business plan to be successful in the future.
24. [1] Relevant points might include: Have some knowledge already [k] as have friends with bikes [app]
25. [1] Business already successful [k] as made small profit in first year [app]
26. [1] Gets out of date quickly [k] so time spent preparing it is wasted [an]
27. [1] Support loan applications/attract investors [k] so don't have to use own savings [app] show they are able to repay [an]
28. [1] Guide business/help set objectives/checklist/monitoring [k] to help decision making/see what action they need to take [an] in order to expand [app]
29. [1] Provide an estimate of costs/what type of finance they need [k] so better able to raise necessary funds [an]
30. [1] Motivate [k].