Business management · 2002 · November · Paper 2 · HL · Markscheme

MARKSCHEME November 2002 BUSINESS AND MANAGEMENT Higher Level Paper 2 21 pages N02/370/H(2)M+ INTERNATIONAL BACCALAUREATE BACCALAURÉAT INTERNATIONAL BACHILLERATO INTERNACIONALc 1. (a) Use the Cadbury-Schweppes Company Report Summary to calculate the following. Ensure that you show your workings: (i) Gross Profit for 1997. Gross Profit = sales – cost of sales: $ 4220 – $ 2037= $ 2183 ($000s) (ii) Expenses for 1997. Expenses = Gross Profit – Operating Profit: $ 2183 – $ 608=$ 1575 ($000s) [3 marks](iii) Gross profit margin for 1997. Gross Profit 2183Gross Profit margin = = = 51.7 %turnover 100 4220 100 ×× Allocate [1 mark] for a correct answer and clear calculations up to [3 marks]. Do not double penalise for mistakes carried forward. [6 marks] (b) Using the ratios give n in Figure 1 analyse Cadbury-Schweppes ’ performance and liquidity position. For a company that is primarily a manufact uring operation, its liquidity ratios – current assets and acid test are quite impressive. An acid test of 0.8 or even less should not be a concern as there is a fast turnover of fini shed goods – although the number of days it takes to sell the stock have in creased. Profit, probably from the sale of businesses, has supported the fall in sales. Consequently, retained prof it is considerably higher. Despite a fall in asset tur nover and Return on Net Assets, the company increased its profit margin. Still, some attempt should be made to improve efficiency. EPS, dividend cover, and interest cover – all improve considerably and are rather impressive. However, DPS increased marginally. Shareholders might be unsatisfied but are unlikely to sell their shares. Gearing has improved. Any other relevant point. Overall, Cadbury-Schweppes is in a good financial position. The liquidity ratios as well as shareholders ratios can make up curren tly for some of the weaknesses mentioned above. However, for full analysis “industry norm” has to be referred to as well as looking at Cadbury-Schweppes’ performance over a longer period of time. – 3 – N02/370/H(2)M+