Mark Scheme (selected)

1. C; 2. B; 3. B; 4. B. (4) 5. dividing customers into groups (1) with similar characteristics/needs (age, income, location, lifestyle) (1). 6. any two: advertising, sales promotion, sponsorship, social media, PR (2). 7. break-even = fixed costs ÷ (price − variable cost) = 4000 ÷ (20 − 12) = 4000 ÷ 8 = 500 units (1 method, 1 answer). 8. cash flow = money in and out of the business (1); profit = revenue − total costs (1); a firm can be profitable but still run out of cash (1). 9. benefit (reduces risk / identifies customer needs / informs decisions) (1) explained (1) applied (1). 10. internal (retained profit, selling assets, owner's savings) ×2; external (loan, overdraft, shares, crowdfunding, trade credit, leasing, grant) ×2 (4).

11 (a) £180,000 − £150,000 = £30,000 (2). (b) (30,000 ÷ 180,000) × 100 = 16.7% (1 formula, 1 calculation, 1 answer) (3). 12 (4): explains using the life cycle (introduction, growth, maturity, decline) and extension strategies applied to the juice range. 13 (6, analysis): wider market reach, lower overheads, 24/7 sales, customer data — developed chains. L3 5–6, L2 3–4, L1 1–2. 14 (9, recommendation): penetration (low price, gain market share, but low margin) vs skimming (high price for a premium product, higher margin, but fewer sales); justified choice for a premium juice. L4 7–9, L3 5–6, L2 3–4, L1 1–2. 15 (6, analysis): research identifies demand/competition/price points → reduces risk of the expansion failing. 16 (5, evaluate): supermarkets give volume/reach but low margins and loss of control vs other growth routes; judgement.

17 (a) any two outflows: wages, rent, raw materials, loan repayments, utilities (2). (b) two of: reduce outflows, delay payments to suppliers, chase customer payments, arrange an overdraft, lease rather than buy (4). 18 (6, analysis): loan gives a lump sum, spread repayments, retain ownership, but interest and must be repaid regardless of performance. 19 (6): explains how product, price, promotion and place must be consistent/integrated for the target market. 20 (9, recommendation): loan (keep control, interest cost, repay regardless) vs shares (no repayment, but loss of control/ownership and dividends); justified for an Ltd. 21 (8, evaluate): cash flow (survival/liquidity now) vs profit (long-term success); justified short-term priority — typically cash flow to avoid running out of money.

Sample Answers with Examiner Commentary

Question 20 — Sample Answers

Grade 9 answer "Orbit Sports could finance the factory with a bank loan. A loan provides a large lump sum quickly, and the repayments can be spread over several years, which suits a long-term investment like a factory. Crucially, the existing owners keep full control of the company. The drawback is that interest must be paid, increasing costs, and the loan must be repaid even if sales are poor — a risk given the forecast cash-flow shortfall.

Alternatively, Orbit could sell shares. This raises finance without the burden of repayments or interest, which would protect the weak cash flow. However, as a private limited company, selling more shares means the original owners give up some ownership and control, and they must share future profits through dividends.

In my judgement, because Orbit Sports already has a cash-flow problem, taking on a loan with fixed repayments is risky in the short term. Selling shares avoids adding to the cash outflows and brings in money without repayment pressure, so I would recommend selling shares — provided the owners are willing to give up some control. If keeping full control were essential, a loan with a carefully planned repayment schedule would be the alternative." Mark: 9/9. Examiner commentary: Develops both options with advantages and disadvantages, applies them to Orbit's specific cash-flow situation, and reaches a justified, conditional recommendation. Top of the level.

Grade 6 answer "A bank loan gives Orbit the money they need and they keep control, but they have to pay interest. Selling shares means no repayments but they lose some control. I think they should use a bank loan because they keep control of the company." Mark: 5/9. Examiner commentary: Correct core pros and cons of each source and a clear recommendation, but it does not apply the decision to Orbit's cash-flow shortfall, which is the key context. Linking the choice to the forecast would lift it into the top band.

Question 7 — Sample Answer

"Break-even = fixed costs ÷ (selling price − variable cost) = 4000 ÷ (20 − 12) = 4000 ÷ 8 = 500 units." Mark: 2/2. Examiner commentary: Correct formula and answer.