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 ($000) |
|---|---|
| Capital employed | 3,500 |
| Current assets | 480 |
| Current liabilities | 400 |
| Initial investment for new project | 800 |
| Net annual cash inflow from project | 220 |
1.[2]
Calculate the gross profit for FreshSteps Foundation. Show all your working.
2.[2]
State why FreshSteps Foundation is tax exempt.
3.[2]
Calculate the current ratio for FreshSteps Foundation. Show all your working.
4.[2]
Calculate the payback period for the new project. Show all your working.
5.[2]
Explain one financial challenge that FreshSteps Foundation may face by relying on project-based cash inflows.
Question 2
SLPaper 2
VerdeLeaf
VerdeLeaf is a worker co-operative that produces compostable packaging for small food businesses. All employees are members who share in profits and help make decisions. As the business grew, VerdeLeaf introduced a more formal functional organisational structure, which has created friction between departments.
The business’s original objective was to remain local and values-driven, but it has recently started supplying national chains. While some members support this shift, others worry it goes against VerdeLeaf’s founding purpose. Recent feedback suggests rising demotivation in the production team, especially due to poor communication across departments and inconsistent involvement in decision-making.
The finance team has provided partial data for Q1 2024 and tasked a trainee to complete the statement of profit or loss.
Table 1: Financial data for VerdeLeaf – Q1 2024
| Item | Amount ($) |
|---|---|
| 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 3
SLPaper 2
FreshBurst Ltd.
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]
Using Figure 1, identify the break-even level of output for FreshBurst Ltd.’s new product.
2.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
3.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
4.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
5.[2]
Using Figure 1, calculate the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
Question 4
HLPaper 2
UrbanNest Ltd.
UrbanNest Ltd. is a UK-based furniture company that designs and sells compact, modular pieces for urban apartments. Originally founded as a partnership, it restructured into a private limited company (Ltd.) to raise capital for growth. Its business objectives include increasing market share by 10% annually and maintaining a ROCE of 15%. Following strong domestic sales, UrbanNest is planning to launch a new e-commerce platform to support international expansion into Southeast Asia.
While revenue growth remains steady, rising marketing spend and inventory costs have placed pressure on liquidity. The finance team has shared final account data for 2024, revealing tight cash reserves and slower inventory turnover due to new customisable product lines. The company is now exploring funding options to support its expansion plan.
Table 1: Selected Financial Data – UrbanNest Ltd. (2024)
| Item | Amount (£) |
|---|---|
| Revenue | 2,800,000 |
| Cost of goods sold | 1,600,000 |
| Operating expenses | 900,000 |
| Net profit | 300,000 |
| Capital employed | 2,000,000 |
| Average stock | 320,000 |
1.[2]
Explain one advantage for UrbanNest Ltd. in changing from a partnership to a private limited company.
2.[2]
Calculate the return on capital employed (ROCE) and for UrbanNest Ltd. Show all your working.
3.[2]
Comment on whether UrbanNest Ltd. has achieved its financial objective based on your ROCE calculation.
4.[2]
Suggest one internal and one external source of finance UrbanNest Ltd. could use to fund its e-commerce platform investment.
5.[2]
Explain how UrbanNest Ltd.'s type of business entity and financial performance may influence its access to finance.
Question 5
HLPaper 2
CleanCurrent Ltd.
CleanCurrent Ltd. is a renewable energy start-up that installs solar panels for residential and small business clients. Initially formed as a sole trader, the business recently transitioned into a private limited company (Ltd) to scale operations and attract investment. Its primary business objectives are to increase market share in suburban regions, reduce customer acquisition costs, and achieve positive monthly cash flow by the end of the fiscal year.
The business recently launched a referral programme and expanded into two new districts. While customer inquiries have increased, installation capacity has been strained, leading to delays in payments and project backlogs. This has created tension with certain stakeholders, including installers and suppliers, who are now facing late payments.
The finance manager has prepared a simple cash flow forecast for August 2024 to assess the immediate impact of CleanCurrent’s growth and financial decisions.
Table 1: Cash Flow Forecast – August 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 10,000 |
| Cash inflows | 82,000 |
| Cash outflows | 96,000 |
| Closing balance | — |
1.[2]
Explain one reason why CleanCurrent Ltd. may have changed from a sole trader to a private limited company.
2.[2]
Calculate the net cash flow and closing balance for August 2024. Show all your working.
3.[2]
Suggest one conflict that might arise between two stakeholder groups as a result of CleanCurrent’s recent expansion.
4.[2]
Analyse how cash flow challenges could affect CleanCurrent’s ability to meet its business objectives.
5.[2]
Suggest one short-term strategy CleanCurrent Ltd. could implement to manage cash flow more effectively.
Question 6
SLPaper 2
FreshBurst Ltd.
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]
Using Figure 1, identify the break-even level of output for FreshBurst Ltd.’s new product.
2.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
3.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
4.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
5.[2]
Using Figure 1, calculate the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
Question 7
SLPaper 2
NatureNest Ltd.
NatureNest Ltd. is a small private limited company that produces eco-friendly packaging materials. The business was founded with the aim of reducing plastic waste and supporting environmental sustainability. It currently employs 20 staff and uses a tall organizational structure, with clear lines of authority and control.
NatureNest’s CEO follows an autocratic leadership style and prefers to make most decisions without consulting the team. The company has been experiencing cash flow problems due to late payments from customers and an increase in raw material costs.
Table 1 shows selected cash flow data for NatureNest for the month of March.
Table 1: Cash flow data for March ($)
| Item | Amount ($) |
|---|---|
| Cash inflows | 25,000 |
| Cash outflows | 30,000 |
| Opening balance | 10,000 |
| Closing balance | ? |
1.[2]
State two features of a private limited company (Ltd).
2.[2]
Identify NatureNest’s business objective based on the case.
3.[2]
Calculate the closing balance for the month of March. Show all your working.
4.[2]
State one feature of a tall organizational structure and one characteristic of an autocratic leadership style.
5.[2]
Explain one reason why cash flow problems can be an issue for NatureNest.
Question 8
HLPaper 3
Elevate Health Tech (EHT)
Resource 1 – Background of the organization
Elevate Health Tech (EHT) is a social enterprise based in Peru. Founded in 2021 by two biomedical engineers, it develops low-cost, portable diagnostic devices (such as digital stethoscopes and glucose meters) for use in rural and underserved communities across Latin America. EHT reinvests all profits into R&D and local employment programs.
EHT has grown quickly, scaling from 5 to 38 employees in two years. It operates as a private limited company, with both founders holding equal ownership and decision-making authority.
Resource 2 – Statement from the HR Director
"Our team is motivated by our mission, but we’re facing growing pains. We’ve recently hired 12 new staff, many with limited technical background. We have no formal training programme or organizational structure. Employees report confusion about job roles, and productivity varies significantly across teams. The co-founders are very hands-on, but this is becoming unsustainable."
Resource 3 – Loan proposal from the Development Impact Bank (DIB)
DIB is prepared to offer EHT a $750,000 low-interest loan to expand production and distribution across four Andean countries. The loan would cover machinery upgrades and recruitment but requires EHT to submit quarterly financial statements and maintain a current ratio of at least 1.5 throughout the term.
A grace period of 18 months will apply before repayments begin.
Resource 4 – Excerpt from EHT’s financial summary (unaudited, 2024)
Note: Fixed assets are fully depreciated and no longer productive.
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
Resource 5 – Email from the Head of R&D
"To remain competitive, we need to launch two new diagnostic products within the next 18 months. The current design lab is at capacity. We either need to lease a second lab or invest in automation. The team is overworked and we’ve lost two engineers to burnout. I’m also concerned about our lack of appraisal or performance review systems."
Resource 6 – Mission statement (from company website)
We believe affordable diagnostics are a human right. We exist to empower healthcare workers and communities with reliable tools, local jobs, and dignity-driven innovation.
1.[2]
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
2.[6]
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for EHT over the next five years.
Question 9
HLPaper 2
WKM
WKM is a fast-growing agritech company that produces modular irrigation systems for small-scale farms. The company is exploring international expansion through partnerships with cooperatives in developing countries.
As part of this move, the board is reviewing WKM’s current vision and mission statements to ensure they reflect its long-term goals and social impact values. Some directors have raised concerns about how operations in lower-income regions could affect the brand’s reputation and stakeholder expectations.
WKM is also considering changing its accounting method for depreciation—from straight-line to units of production—to better reflect asset usage across regions. This change could impact financial statements, employee bonuses, and decision-making around asset replacement.
Management is evaluating whether the shift aligns with its strategic goals and provides more accurate cost control as the company scales globally.
1.[2]
Define the term mission statement.
2.[2]
Outline one feature of a cooperative as a for-profit social enterprise.
3.[2]
Suggest one impact on a host country if WKM expands as a multinational company (MNC).
4.[2]
Explain how the units of production method of depreciation would apply to WKM's vacuum cleaners.
5.[2]
Apply your knowledge of depreciation methods to suggest why the units of production method might be more appropriate for WKM than the straight-line method.
Question 10
SLPaper 2
SwiftFix Ltd.
SwiftFix Ltd. is a small repair company that offers home appliance servicing. The company uses a tall organizational structure with clearly defined levels of authority and job roles. Its founder, who is also the managing director, follows a paternalistic leadership style and often makes decisions based on what he believes is best for his employees.
SwiftFix recently set a new business objective: to improve profitability over the next 12 months. One of the strategies includes reducing unnecessary expenses while maintaining high service quality.
Table 1 shows selected financial information from last year.
Table 1: Selected financial data for SwiftFix Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 160,000 |
| Gross profit | 80,000 |
| Net profit | 30,000 |
| Current assets | 60,000 |
| Current liabilities | 40,000 |
1.[2]
Identify two features of a tall organizational structure.
2.[2]
State two characteristics of paternalistic leadership.
3.[2]
Calculate the net profit margin for SwiftFix Ltd.
Show all your working.
4.[2]
Calculate the current ratio.
Show all your working.
5.[2]
Explain one reason why increasing profitability might be an important business objective for SwiftFix Ltd.