CambridgeIGCSE BusinessStudies Workbook Answers●1 Business activity1 a labour [1];land salon is built on [1]buy the same quality products at lower pricesb The next most desired [1]alternative given upfrom another supplier.when a decision is made (1.2 a Either:Finance used in a business [1]such asc Skilled receptionist [1]to keep accurate recordsworking capital [1].of appointments/treatments [1].Or:Machinery and equipment needed [1]forSpecialist hair stylist [1]able to offer all styles/the production of goods/services [1].hair colouring,etc.[1].b new hairdressers'chairs [1];new hairdryers [1]d Employs workers [1].These three workers willc Scarcity of capital [1],for example,if she buysearn wages paid by Farah [1]which they willthe computer she will have to give up buyingthen spend in other local shops,boosting thenew hairdressers'chairs 1.economy [1].Scarcity of finance [1l,if she recruits theFS is a customer for other businesses [1].specialist hairdresser she will not be able toIt buys supplies of products such asafford to recruit the non-specialist hair andshampoo [1].This will lead to the expansionbeauty job applicant [1].of these businesses and possibly the creationof more jobs 1.d (Up to6 marks are available.)e (Up to 6 marks are available.)able to deal with customers quickly andYes:cheaper products and materials such aseffectively/able to offer all hair services/mayshampoos will allow FS to create more addedcreate good image for business.value/become more profitable.Non-specialist:able to be flexible andNo:customers might notice the cheaperundertake a number of beauty/hair jobs.products,for example,less effective hairproducts,and this might lead to reducedOverall conclusion/judgement needed,demand.for example,might depend on the level ofdemand that Farah predicts from customersOverall conclusion/judgement needed,forfor specialist hairdressing services.example,Farah should only do this if she canO 2 Classification of business1 a Businesses that produce services (1/for eitherconsumers or other businesses (1.chairs for hairdressing [1].b (Other answers are possible,2 marksMaker of shampoos and creams [1]to supplyavailable.)the beauty products that FS depends on [1].window cleaning [1];insurance company(insuring the salon)[1].d Deindustrialisation/decline of manufacturingdue to lack of efficiency /1.The countryc (Other answers are possible,4 marksindustrialised over 100 years ago [1]so theavailable.)industries might not have kept updating theirCambridge IGCSE Business Studies Workbook Hodder Stoughton Ltd 2017Answersequipment and become less competitive as anationalised transport business did not aim toresult [1].maximise profit.As incomes are high in country X [1]manyNo:Taxes will have to rise,reducinghouseholds will now be spending a highindividual incomes/FS retained profit;state-proportion of income on services [1]so thecontrolled industries can be inefficient if theyrelative importance of manufacturing hasaim for social/political objectives.declined 1]Overall condusion/judgement needed,fore (Up to 6 marks are available.)example,unlikely to be beneficial if taxes areYes:FS could gain if the nationalised industriesincreased to pay for the inefficient operation ofput a limit on price rises for essential services/these industries.utilities,e.g.transport costs might be lower if aO 3 Enterprise,business growth and size1 a Someone prepared to take risks [1]by settingthis would be backward vertical integrationup own business with own capital 1.and will ensure FS's supplies.b (Other answers are possible,2 marksCondusion/justification needed,for example,available.)External as it spreads business risk away fromCommitment-works long hours [1].women's beauty services-as long as one of theseCreative-has lots of ideas for expanding thebusinesses can be bought for the'right'price.business [1].2a Detailed document containing businessc (Other answers are possible,4 marksobjectives [1]and important details about financeavailable.)and marketing of the expansion plans [1].Number of employees [1]-comparing thebTo be independent [1];because she isnumber of hairdressers and beauty salon staffambitious 1.employed [1].c There could be a finance problem [1]especiallyValue of capital employed [1],for example,inif she pays too much to take over eitherterms of money invested in salon and beautyequipment [1].There could be a management problem [1]d Helps potential investors decide whether toespecially if Farah does not employ anotherinvest [1]in FS's expansion,for example,bymanager to look after the other branch/giving details of the cost of buying Business Abusiness [1][1]and whether FS will require a bank loan [1].d (Up to 6 marks are available.)Helps Farah plan the stages she will haveA:Develops the business in another relatedto follow when expanding FS [1].Such asarea of the hairdressing market;Farah knowsundertaking market research before buyingabout hairdressing;owner wants to sellBusiness B to gauge the demand [1]for organicquickly so might sell at low prices.beauty products to see if buying this businesswill be worthwhile [1].B:Able to control supply of and price ofmajor supplies for FS;able to control qualitye (Up to 6 marks are available.)of supplies;able to stop selling to competingInternal:New salon would offer same serviceshairdressing businesses.and this is what Farah knows best.She canConclusion/justification needed,for exampledecide where to locate it,decor,etc.Business A because Business B is involved inExternal:Business A:Men's salon-does Farahactivities-such as harvesting-that Farahhave the skills/knowledge to operate thisknows nothing about.business?Business B:Cosmetic manufacturer2Cambridge IGCSE Business Studies Workbook Hodder Stoughton Ltd 2017Answers●4 Types of business organisation1 aA business owned [1]and controlled by a2 aA shareholder in a company [1]cannot losesingle person [1].more than their original investment/all ofb limited sources of capital/finance [1];their personal possessions [1].unlimited liability [1.b owned by the state [1l;often have objectivesc She seems to be independently minded [1]andother than profit [1].being a sole trader means that she can take allc Loss of control 1)as more shares are sold todecisions herself [1.the public this dilutes the ownership/controlShe can keep all of the profits [1]and thisof existing shareholders such as Farah [1].probably increases the level of Farah'sCost of converting to public limited companycommitment to the business 1.[1],for example,the advertising of sharesd It is too small [1]to justify the costs of settingfor sale to the public/issuing of prospectusup a public limited company [1]such asreduces the finance available for investing,inadvertising shares for sale to the public [1].this case,in the salons [1].Farah is an independent person [1]and sellingd (Up to 6 marks are available.)shares in her business to members of theYes:Can potentially raise large sums frompublic 1]will reduce her overall control overselling shares to family /friends/businessher business [1].colleagues;no interest paid on bank loan toe (Up to 6 marks are available.)finance FS expansion.Yes:Could provide finance to allow FS toNo:Some loss of control to other shareholders;expand without paying interest on bank loan;share of profits will be expected to be paid outcan consult for advice when taking decisions.as dividends.No:Farah will lose some control:One partnerOverall conclusion/judgement needed,forlikes being in control';the other one is'oftenexample,if interest rates are very low it mightaway on holiday.Will she gain much frombe better to raise the finance from a bank loantaking on one of these as partners?Better toand then Farah can keep complete control overraise finance from other sources.her business.Overall conclusion/judgement needed,forexample,if she just wants finance and to keepfull control then her friend might be the betterpartner(with no interest costs on bank loan).●5 Business objectives and shareholder objectives1 a Individuals who own shares [1]in a limitedd Local community (one example of acompany [1].b receive dividends [1];benefit from a risingas Farah plans to create'many new jobshare price 1.opportunities'[1).These new workers willc When FS was first set up Farah aimed for it toearn income which might be spent locally tosurvive [1]as the risk of new businesses failingbenefit other local businesses 1).is high [1].Local community-might suffer noise andNow that FS is a private limited companypollution [1]as the existing building will bewith shareholders 1)Farah will have to aim todemolished and a large new apartment blockmake profits to satisfy the investors with highwill be built [1].These apartments will createdividends 1].extra traffic to add to local pollution [1].3Cambridge IGCSE Business Studies Workbook Hodder Stoughton Ltd 2017