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Student number: Teacher:

SECTION I: Multiple Choice Questions (20 marks)
Attempt all 20 questions. Write your answers on the separate answer sheet provided.

1. Which of the following is an example of long-term borrowing?
(A) Overdraft
(B) Bank bill
(C) Mortgage
(D) Share issue

2. Holden has funded an expansion in its operations through the use of debentures.
Which of the following Balance Sheet elements are debentures?
(A) Owners Equity
(B) Current Assets
(C) Non- current Liabilities
(D) Non - current Assets

3. A business purchases a new piece of machinery to improve its operations and
become more efficient. It also needs to retain its staff to use this new technology.
The decision to purchase the new machine indicates the interdependence between:
(A) Operations and Finance
(B) Operations and Marketing
(C) Operations and Human Resources
(D) Marketing and Finance

4. In implementing e-commerce in a business, what ethical responsibility does the
business have?
(A) Maximising the returns to shareholders
(B) Protecting customer details
(C) Training the current workforce in the new technology
(D) Accessing mass markets

5. Top management decides to shift production overseas. Which two stakeholders
interests would conflict THE MOST as a result?
(A) Employees and customers
(B) Shareholders and suppliers
(C) Customers and government
(D) Shareholders and employees

6. In winter the number of beach lifeguards employed by a local council is reduced.
What has influenced the transformation process in this situation?
(A) Variation in demand
(B) Variation in visibility
(C) Variety
(D) Volume

7. Which of the following best indicates the solvency of a business?
(A) Current ratio
(B) Expense ratio
(C) Net profit ratio
(D) Debt to equity ratio

Use the following data to answer Question 8
Selected financial data for Karibaa Coffee Imports Pty Ltd
Ratio 30 June 2011 30 June 2012 Industry Average
Net profit ratio 9% 9% 18%
Expense ratio 76% 82% 77%
Return on owners equity 15% 14% 18%

8. Which of the following statements is correct?
(A) Net profit ratios compare favourably with the industry average
(B) There has been an improvement in the expense ratio from 2011 to 2012
(C) The expense ratio in 2012 compares favourably with the industry average
(D) Each of the profitability ratios indicates performance below industry

9. A balance sheet includes which of the following?
(A) Expenses
(B) Return on owners equity
(C) Sales revenue
(D) Creditors

10. What is the function of management that involves comparing sales figures for a
financial period to the forecast of sales for the same period?
(A) Collecting market research data
(B) Comparing cash and credit sales
(C) Implementing financial plans
(D) Monitoring the achievement of marketing plans

11. W C Paper Supplies decides to use factoring to improve cash flow. This strategy
would involve which of the following?
(A) Selling accounts receivable to a collection agency.
(B) Selling goods on credit but with a specified date for payment.
(C) Selling its stationery for cost, plus a small mark-up.
(D) Selling unused factory equipment to make up for the short-fall in cash

12. Which of the following is the best indicator of the profitability of a business?
(A) Return on investment ratio
(B) The debt to equity ratio
(C) Working capital ratio
(D) Solvency ratio

13. Big Harrys electrical store needs more stock for the expected surge in sales at
Christmas. Which of the following would be the best way for Big Harry to
finance the purchase of this extra stock?
(A) Mortgage
(B) 90 day bank bill
(C) Leasing
(D) Factoring

Use the following information to answer question 14.

Profit and Loss Statement for the year ended June 30, 2012

Sales Revenue $2000
Cost of goods sold W
Gross Profit X

Other information
Net Profit Ratio 5%
Gross Profit Ratio 70%

14. What are the values for W and X respectively?
(A) $1400 $600
(B) $100 $1900
(C) $600 $1400
(D) $1900 $100

15. Which term is used to describe a business that is no longer able to pay its debts as
they fall due?
(A) Insolvent
(B) Bankrupt
(C) Liquid
(D) Negative cash flow

16. Lara owns a florist business and has a main performance objective of developing
products that are exactly matched to her customers needs. Which term describes
Laras main performance objective?
(A) Cost
(B) Speed
(C) Quality
(D) Customisation

17. Which of the following is a strategic decision of supply chain management?
(A) Improving quality
(B) Assessing performance
(C) On-the-spot decision-making
(D) Developing a network of suppliers

18. Which alternative describes a business that is most likely to be a cost leader?
(A) It has a high variation in demand
(B) It has a high level of customer contact
(C) It has a low volume and produces customised products
(D) It has the least amount of input possible to produce a given output

19. What is the definition of Corporate Social Responsibility
(A) Managers understand value systems and morality
(B) The business ensures that laws are strictly observed
(C) The business meets present needs, leaving resources for the future
(D) A business tries to improve the quality of life of community members

20. What kind of operations process is it where the equipment is general purpose and
workers are skilled at working the equipment in their particular section?
(A) Task design
(B) Process layout
(C) Production line
(D) Computer aided design

Student number: Teacher:

SECTION II: Short Answer Questions

Total marks: 30
Attempt all questions

Answer the questions in the spaces provided.

Question 21 (10 marks) Marks

(A) State and calculate the working capital ratio. 2

Working capital ratio = Current assets
Current liabilities

Maddas Limited Financial Statement as at 30.06.2012


Current Assets Current Liabilities
Cash 40 000 Overdraft 20 000
Accounts receivable 20 000 Accounts payable 100 000
Inventory 80 000

Non Current Assets Non Current Liabilities
Fittings 100 000 Mortgage 380 000
Buildings 700 000

Owners Equity
Shareholders funds 400 000
Net Profit 2001-02 40 000

Additional information
Industry average gearing 80%
Industry average return on equity 12%
Industry average current ratio 1.0:1.0

Number: Teacher: ..

Question 21(continued) Marks

(B) Comment on the working capital ratio for Maddas Ltd in comparison to the 2
industry average.

(C) Use ratios to compare the performance of Maddas Ltd to that of the industry 4
in terms of gearing and profitability.

(i) Gearing calculation Debt to equity ratio = Total liabilities
Total equity

Comparison with the industry

(ii) Profitability calculation Gross profit ratio = Gross profit

Comparison with the industry

Number: .. Teacher:

Question 21 (continued) Marks

(D) Recommend TWO strategies that could be used to effectively manage current
liabilities for Maddas Limited. 2

End of question 21

Student number: . Teacher

Question 22 (12 marks) Marks

ABC Pty Ltd is a womens clothing brand that specializes in clothing for females aged 18 -30
years. ABC Pty Ltd prides itself on its quality products and excellent use of technology.
ABC Pty Ltd is now changing its focus. It wants to improve its transformation processes and it
wants to sell its products overseas.
ABC Pty Ltd has three basic objectives for 2013-2014:
Implement improved transformation processes
Access new markets by selling its products overseas
Maintain superior technological practices throughout the business

(A) Outline TWO issues in the transformation process that ABC may have to deal with.

(B) Discuss the effects on both their inputs and outputs if ABC expands to overseas markets.


(C) Explain the impacts of technology on the operations function of the business. 6

End of question 22


Number: . Teacher:

Question 23 (8 marks) Marks

(A) How might a business encounter problems when an operations manager acts in an unethical
and socially irresponsible manner? Support your answer with relevant examples. 3

(B) Outline TWO performance objectives COCHLEAR have and explain the strategies they use
to meet the outputs required by their customers. 5

End of question 23


Number: . Teacher:

SECTION III: Business Report

Question 24 (20 Marks)

Write your answer to this question in the separate booklet provided.

Your answer will be assessed on how well you:
use your knowledge and the information provided
communicate using relevant business terminology and concepts
present a logical, well-structured answer to the question in the form of a business

HOLLANDS BOOKS Ltd has been the largest retailer of books and music in NSW for the
past 10 years. Until recently HOLLANDs BOOKS has had 50% market share and its two
main domestic competitors have each had approximately 25% of the market share.
In the past year HOLLANDS BOOKS Ltd has faced increased threat from its domestic
competitors and been affected by changes in the business environment resulting in:
a. Reduced market share
b. Cash flow problems
c. Declining profits.

HOLLANDS BOOKS Ltd would like to regain its market share.

Businesses operate in a dynamic business environment, which means success is
dependent on a managers ability to cope and respond to changes in this environment

You have been employed as a consultant by HOLLANDS BOOKS Ltd. With reference to
the above information, prepare a report to be given to HOLLANDs BOOKS Ltds
management team.
In your report, you should:
Outline THREE external influences that could have been sources of change in this
Outline how the business could adjust their operations processes to respond to these
Propose and justify ONE effective cash flow management strategy and ONE effective
profitability management strategy to solve the problems of HOLLANDS BOOKS