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25 Statement of Financial Position- Sample Answers to Short Answer and Data Response Question 1

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30 views

25 Statement of Financial Position- Sample Answers to Short Answer and Data Response Question 1

Uploaded by

Aariish Singhi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Cambridge IGCSE™ and O Level Business Studies

Section 5: Financial information and Chapter 25: Statement of


financial decisions financial position

Sample answers to exam-style


questions: Short answer and data
response
The answers, marks awarded and comments that appear in this material were written by the authors. In
examination, the way marks would be awarded to answers like these may be different.

a Assets owned by the business [1] likely to be kept for more than one year. [1]

b
i Stocks of bricks and other building materials.
ii Debtors, for example, customers being allowed time to pay for building work.

c
i The business made retained profits and these increased shareholder equity.
ii The business sold a new issue of shares during the year and the value of these was
added to shareholders’ equity.

d
i The increase in long- term loans or debentures might have been used to expand
the business by buying more land on which to build houses in future. Once the
houses are built and sold the loans can be repaid.
ii The finance raised by the long- term loans or debentures might have been used to
pay for a long- term increase in working capital because of a large building
project, for example, more inventories stocks and debtors need to be financed for
a long period of time.

e Quite useful: loans increased last year, so is now a good time to increase loans
further to take overut the other business; Current assets have increased: could these
be reduced to help raise some of the capital needed for the takeover?
Not very useful: much more information needed, for example, is Acme holding much
cash? Is the other business profitable? Could Acme issue more shares? What is the
total asset and total liability value of this other business?
Student’s overall conclusion, e.g. Even though a high current asset total suggest the
business might be quite liquid enough to raise the finance, there is just not enough
information to allow a take-over decision to be made so Acme should obtain the full
accounts of the other business first because the information is not very useful on its
own.

Cambridge IGCSE™ and O Level Business Studies Online Teacher Guide, Hodder & Stoughton Ltd 1
© Karen Borrington and Peter Stimpson 2018
Cambridge IGCSE and O Level Business Studies Chapter 25 Answers to exam‐style questions

Up to 2 marks for identification of relevant issues.


Up to 2 marks for relevant development of points.
Up to 2 marks for justified decision.

Cambridge IGCSE™ and O Level Business Studies Online Teacher Guide, Hodder & Stoughton Ltd 2
© Karen Borrington and Peter Stimpson 2018

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