Many candidates correctly defined it as being an

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Unformatted text preview: or future investment. Many candidates correctly defined it as being an internal source of finance. Weaker answers seemed to confuse ‘net profit’ with ‘retained profit’ or gave very vague descriptions. Most candidates did however achieve at least 1 mark for a partial definition of retained profits. 1 © UCLES 2008 9707 Business Studies November 2008 (b) Most candidates had some knowledge of balance sheets with the majority making reference to assets and liabilities and in some cases actually listing them. Good candidates went on to discuss how the balance sheet might be used e.g. by shareholders to see if the capital value of the business was increasing or decreasing in order to determine whether or not to invest. Many candidates recognised that a balance sheet shows the net worth of a business but then did not say what purpose that served. Weaker candidates showed that they were perhaps confused between the content of a balance sheet and that of a profit and loss account. Question 3 Many candidates had some knowledge of the payback method of investment appraisal although weaker candidates were confused and their answers often referred to the repayment of debts and the problems of interest payments. Good answers gave a clear definition of the payback method and then clearly explained possible advantages and disadvantages. The most common answers were that the method is very easy and quick to use and therefore does not require any mathematical or accounting knowledge. Good answers also recognised that it is useful if a business is worried about liquidity rather than profitability. The most common weakness identified was that it does not take account of projects that might have a longer payback period but which in the total life of the project would actually be more profitable. Weaker answers identified relevant advantages and/or disadvantages but did not explain how or why they were a positive or a negative point. A significant minority of candidates had little understanding of investment appraisal and were unable to approach this question with any degree of confidence. Question 4 (a) Most candidates scored full marks on this part of this question. Many candidates stated more than two ways or measuring a business, demonstrating that many candidates had a very good knowledge of such facts. The main weakness in answers to this question was that lengthy explanations were often given whereas the question merely instructed candidates to “state” two ways. Such an approach wastes valuable time and could detract from time needed later when answering the essay question. (b) This was generally well answered with any candidates referring to alternative objectives such as survival, and profit maximisation. Strong answers developed a context such as the development stage of a business, the characteristics of the market or the aspirations of the owners. Question 5 (a) Various approaches were used in answer to this part of this question. Some candidates saw it simply as a motivation question and described how managers m...
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