O-LevelBusiness StudiesFinancial information and decisions7115/22 · May/June 2016 · Q320 Marks

Identify four stakeholder groups who would want to see FF's accounts and explain why each group would want to see them.

(a)Identify four stakeholder groups who would want to see FF's accounts and explain why each group would want to see them.[8]
(b)Consider the income statement extracts for the two businesses in Appendix 3. Include profitability ratio calculations in your answer. Recommend which business FF should take over. Justify your answer. Business A: Business B: Recommendation:[12]

Mark scheme

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

[8] Application [4 × 1] award one application mark for each relevant stakeholder group (maximum of 4)
Analysis [4 x 1] for explaining why each stakeholder group would want to see the accounts
Award one mark for each relevant stakeholder group (maximum of four), such as:
• Owners/shareholders
• Bank manager
• Potential investors
• Government
• Employees
• Managers
• Creditors/suppliers
• Competitors
• Trade Union.
Award a maximum of one additional mark for each explanation of why they will want to see the accounts.
Indicative response: Bank manager (ap) because the bank will want to be certain that if it gives a loan to FF that the company will be able to pay it back (an).
Possible application marks: private limited company; profitable and grown over last 5 years; provides excellent customer service; photographs; photographers; photography; getting married; weddings, birthdays, family photographs; business customers as well as private individuals; employed 2 additional photographers; 8 photographers; 2 part-time office workers deal with administration and accounts; taking over another photography business; growing externally rather than internally; pay existing photographers 50% above minimum wage; information in Appendix 3.
[12] Relevant points might include:
Business A: 2 years old; $250000 to take over; Same market segment/competitor plus additional market segment/growing market; Less sales revenue than Business B; Gpm = 50%; Npm = 25%
Business B: 20 years old; $500000 to take over; Same market segment/competitor; 5 x times higher sales revenue; Gpm = 75%; Npm = 25%
Knowledge/Analysis/Evaluation – award up to ten marks using the levels-based mark scheme below.
Level 1 Outline of differences in the figures or comments on the differences between the two businesses.
Level 2 Correct profitability ratios calculated.
Level 3 At least 2 × Level 2+; 9-10 marks for well justified recommendation as to the best company to take over and why not the other company.
Award up to two additional marks for relevant application.
Possible application marks: Company A - $250000 to take over – 2 years old – same market segment/competitors plus additional market segment – growing market – for photographs of families, children and pets; Company B - $500000 to take over – 20 years old/well-established business – same market segment/competitor; private limited company; photographs; photographers; photography; getting married; weddings, birthdays, family photographs; business customers as well as private individuals; sales revenue for 2015 – $500000; profit for 2015 - $125000; growing externally rather than internally.