Practice 1.3 Business objectives with authentic IB Business Management exam questions for both SL and HL students. This question bank mirrors Paper 1, 2, 3 structure, covering key topics like systems and structures, human behavior and interaction, and sustainability and ethics. Get instant solutions, detailed explanations, and build exam confidence with questions in the style of IB examiners.
Paper
Level
Question 1
HLPaper 2
FreshSteps Foundation
FreshSteps Foundation is a non-profit social enterprise based in Kenya that installs small-scale water filtration systems in rural communities. It operates as a private limited company (Ltd) but reinvests all surplus profits to expand its social impact rather than paying dividends.
Its business objectives include achieving financial sustainability and maintaining a minimum return on capital employed (ROCE) of 5% to fund future installations without relying heavily on grants.
Table 1: Statement of Profit or Loss for FreshSteps Foundation for the year ending 31 December 2024 (figures in $000)
| Item | Amount ($000) |
|---|---|
| Sales revenue | 2,600 |
| Cost of sales | 1,300 |
| Operating expenses | 1,050 |
| Depreciation expense | 100 |
| Interest expense | 40 |
| Tax | — (tax-exempt) |
Table 2: Additional Financial Information
| Item | Amount ($000) |
|---|---|
| Capital employed | 3,500 |
| Current assets | 480 |
| Current liabilities | 400 |
| Initial investment for new project | 800 |
| Net annual cash inflow from project | 220 |
1.[2]
Calculate the gross profit for FreshSteps Foundation. Show all your working.
2.[2]
State why FreshSteps Foundation is tax exempt.
3.[2]
Calculate the current ratio for FreshSteps Foundation. Show all your working.
4.[2]
Calculate the payback period for the new project. Show all your working.
5.[2]
Explain one financial challenge that FreshSteps Foundation may face by relying on project-based cash inflows.
Question 2
SLPaper 2
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector. Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
1.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
2.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
3.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
Question 3
SLPaper 2
LynxJet PLC (LJ)
LynxJet PLC (LJ) is a public limited company operating short-haul domestic flights in East Africa. LJ was founded by former military pilots and is known for its punctuality, strict safety protocols, and no-frills service.
Its low prices and reliable schedule make it especially popular with commuters and small business owners. LJ is listed on the Nairobi Securities Exchange and is majority-owned by institutional investors.
1.[2]
Define the term public limited company.
Question 4
SLPaper 2
VerdeLeaf
VerdeLeaf is a worker co-operative that produces compostable packaging for small food businesses. All employees are members who share in profits and help make decisions. As the business grew, VerdeLeaf introduced a more formal functional organisational structure, which has created friction between departments.
The business’s original objective was to remain local and values-driven, but it has recently started supplying national chains. While some members support this shift, others worry it goes against VerdeLeaf’s founding purpose. Recent feedback suggests rising demotivation in the production team, especially due to poor communication across departments and inconsistent involvement in decision-making.
The finance team has provided partial data for Q1 2024 and tasked a trainee to complete the statement of profit or loss.
Table 1: Financial data for VerdeLeaf – Q1 2024
| Item | Amount ($) |
|---|---|
| Units sold | 4,000 |
| Selling price per unit | 6.50 |
| Variable cost per unit | 2.10 |
| Salaries (production + sales) | 38,000 |
| Marketing and promotion | 14,000 |
| Office rent and overheads | 16,000 |
| Tax rate | 25% |
| Dividends paid to members | 12,000 |
Figure 1: Statement of profit or loss (partially completed)
VerdeLeaf Statement of profit or loss
for the quarter ended 31 March 2024
| Item | $ |
|---|---|
| Sales revenue | __________ |
| Cost of sales | __________ |
| Gross profit | __________ |
| Expenses: | |
| - Salaries | (38,000) |
| - Marketing and promotion | (14,000) |
| - Office rent and overheads | (16,000) |
| Profit before tax | __________ |
| Tax (25%) | __________ |
| Profit for period | __________ |
| Dividends | (12,000) |
| Retained profit | __________ |
1.[2]
Outline one challenge VerdeLeaf may face as it grows from a local co-operative to a national supplier.
2.[2]
Identify one external stakeholder and who may be interested in VerdeLeaf’s current situation.
3.[2]
Using the data in Table 1, calculate the blanks in the profit and loss account shown in Figure 1. Show all your working.
4.[2]
Explain what the profit and loss account suggests about VerdeLeaf’s cost and revenue structure.
5.[2]
Suggest one way VerdeLeaf could improve internal communication to support motivation among staff.
Question 5
HLPaper 2
BloomBites Ltd.
BloomBites Ltd. is a company specializing in healthy café food. After strong success in its home market, the company has recently begun franchising internationally. As part of its growth strategy, BloomBites is evaluating its financial performance and expansion model.
The management has set a strategic objective to achieve 100 outlets worldwide within five years, and tactical objectives focused on improving average customer spend.
Below are extracts from BloomBites Ltd.'s final accounts for 2024:
| Statement of Profit and Loss 2024 (in $'000) |
|---|
| Revenue |
| Cost of goods sold (COGS) |
| Gross profit |
| Expenses |
| Net profit before tax |
| Statement of Financial Position 2024 (in $'000) |
|---|
| Non-current assets |
| Current assets |
| Current liabilities |
| Net assets |
Additional data:
- 30% of BloomBites Ltd.'s revenue comes from franchising fees and royalties.
- The company is facing minor tensions between franchise owners and senior management regarding pricing strategies.
Answer all the questions.
1.[2]
Calculate the missing figures for: (i) Revenue (ii) Net profit before tax
2.[2]
Outline one internal growth method and one external growth method BloomBites Ltd. could pursue.
3.[2]
Identify one internal economy of scale and one external economy of scale relevant to BloomBites Ltd.
4.[2]
Explain one example of stakeholder conflict that may arise in BloomBites Ltd.’s franchising model.
5.[2]
Distinguish between a strategic objective and a tactical objective for BloomBites Ltd.
Question 6
SLPaper 2
FreshFusion Ltd. FreshFusion Ltd. is a multinational company (MNC) that produces bottled fruit juices. It operates in over 20 countries and is known for its focus on health and wellness. Although it started as a partnership, FreshFusion is now a public limited company (PLC), allowing it to raise capital by selling shares to the general public. The business recently launched a new product and is reviewing financial data to evaluate its performance. One of its main business objectives is to increase profitability across all international markets by reducing unnecessary costs and improving efficiency.
Table 1 shows FreshFusion Ltd.’s financial data from the past year.
Table 1: Financial data for FreshFusion Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 2,000,000 |
| Cost of goods sold | 1,100,000 |
| Expenses | 600,000 |
| Net profit | ? |
| Current assets | 300,000 |
| Current liabilities | 200,000 |
1.[2]
Identify two features of a public limited company (PLC).
Question 7
HLPaper 2
Question 14: ClearWave Ltd.
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
1.[2]
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024.
Show all your working.
2.[2]
Calculate the actual net profit for Q2 2024.
Show all your working.
3.[2]
Analyse how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
4.[2]
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
Question 8
HLPaper 2
TechCare Solutions (TS)
TechCare Solutions (TS) is a tech company that provides software solutions to improve accessibility for people with disabilities. The company’s vision is "Empowering lives through technology." Its mission is to create innovative and affordable products that help individuals with disabilities access technology.
TS has business objectives that include expanding globally, maximizing shareholder value, and setting ethical objectives related to digital inclusion.
1.[4]
Explain how TechCare Solutions’ vision statement influences its business objectives.
2.[4]
Identify one tactical objective that TechCare Solutions could pursue to support its mission.
3.[6]
Analyze the impact of setting ethical objectives on TechCare Solutions' growth strategy.
4.[10]
Discuss the potential conflicts that may arise between TechCare Solutions' strategic objectives to maximize shareholder value and its commitment to ethical objectives.
Question 9
HLPaper 3
GreenTech Innovations
Resource 1 - Company Overview
GreenTech Innovations is a renewable energy firm founded in 2018, focusing on developing and deploying solar and wind energy solutions for both residential and commercial clients. With a mission to combat climate change and promote sustainable energy consumption, the company has seen significant growth due to increasing demand for green technologies.
CEO Rachel Thompson emphasizes, "Our goal is to make renewable energy accessible and affordable for everyone, but we face challenges in maintaining profitability while expanding our operations." Despite positive market reception, rising operational costs and competition in the renewable energy sector are pressing issues for GreenTech.
Resource 2 - Financial Performance Report (2023)
GreenTech Innovations
Financial Performance Summary for 2023
| Metric | Amount |
|---|---|
| Revenue | £5,000,000 |
| Gross Profit | £2,000,000 |
| Operating Expenses | £1,200,000 |
| Net Profit | £800,000 |
| Total Assets | £3,500,000 |
| Total Liabilities | £1,500,000 |
| Equity | £2,000,000 |
The company's revenue has increased by 25% from the previous year, but operating expenses have also risen due to investments in new technology and increased staffing costs, raising concerns about long-term profitability.
Resource 3 - Letter from the CFO
Subject: Financial Strategy Update
Dear Rachel,
As we analyze our current financials, it’s essential to develop strategies that balance our growth with profitability.
Here are my suggestions:
Streamline Operations: Assess areas where we can reduce costs without compromising service quality.
Explore New Markets: Consider expanding into regions with lower competition for renewable energy.
Invest in Technology: Leverage automation to enhance operational efficiency and reduce labor costs.
Looking forward to discussing this at our next meeting.
Best,
John Miller, CFO
Resource 4 - Interview with the CEO
In an interview with Eco Business News, CEO Rachel Thompson discussed GreenTech's vision and challenges. "The renewable energy sector is rapidly evolving, and while we are excited about our growth, we must remain vigilant about our operational efficiency.
Our commitment to sustainability and customer satisfaction drives our decisions, but profitability is critical for our long-term success. We're considering partnerships with other tech firms to innovate further."
Resource 5 - Social Media Announcement
1.[2]
Using an appropriate business management theory, identify a human need that GreenTech Innovations products satisfy for their target consumers.
2.[6]
Outline two challenges GreenTech Innovations faces in maintaining profitability. Support your answer with evidence from the resources.
3.[17]
Based on the resources and your business knowledge, recommend a comprehensive strategy to enhance GreenTech Innovations profitability and sustainability over the next five years. Your strategy should consider cost management, market expansion, technological innovations, and consumer engagement initiatives.
Question 10
SLPaper 2
FlexiFreeze Ltd.
FlexiFreeze Ltd. is a medium-sized business that manufactures portable solar-powered refrigeration units for off-grid medical and disaster relief use. It was originally set up as a partnership but restructured into a private limited company (Ltd) after receiving a contract from an international NGO. The company’s business purpose is to deliver low-cost, high-impact refrigeration solutions to underserved communities while achieving sustainable long-term growth.
In Q2 2024, the business launched a new production facility to meet rising demand. While this supported its growth and evolution, it also strained liquidity. Some stakeholders, including suppliers and staff, have expressed concerns about delayed payments and overtime demands.
The finance team has provided the final income statement for Q2 2024 and a comparison with budgeted figures, alongside a cash flow forecast to assess short-term financial pressures.
Table 1: Budgeted vs Actual Income Statement – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 950,000 | 900,000 |
| Cost of goods sold | 520,000 | 580,000 |
| Operating expenses | 310,000 | 330,000 |
| Net profit | 120,000 | — |
Table 2: Cash Flow Forecast – July 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 40,000 |
| Cash inflows | 250,000 |
| Cash outflows | 295,000 |
| Closing balance | — |
—
1.[2]
Calculate the actual net profit for Q2 2024 Show all your working.
2.[2]
Comment on how the company’s cash flow and profit results might affect its relationship with stakeholders.
3.0
Suggest one risk FlexiFreeze Ltd. may face as it expands.
4.[2]
Analyse how the company’s business purpose may influence strategic financial decisions as it grows.