IB Business Management Topic 1.5 Growth and Evolution…

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

(a) one reason why CleanCurrent Ltd. may have changed from a sole trader to a private limited company.

(b) the net cash flow and closing balance for August 2024. Show your working.

(e) Using Figure 1, the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.

(e) one possible advantage of internal growth for FitFuel.

(c) one conflict caused by the recent expansion (e.g. due to late payments or backlogs) that might arise between two stakeholder groups.

(d) how cash flow challenges in August 2024 could affect CleanCurrent’s ability to meet its business objectives.

(e) one short-term strategy CleanCurrent Ltd. could implement to manage cash flow more effectively.

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

(a) Using Figure 1, the break-even level of output for FreshBurst Ltd.’s new product.

(b) one advantage of using batch production for FreshBurst Ltd. as it grows.

(d) one way the company’s objective to increase market share could influence operational decisions.

Elevate Health Tech (EHT)

Resource 4 – Excerpt from EHT’s financial summary (unaudited, 2024)

Item	Amount (USD)
Current assets	$230,000
Current liabilities	$180,000
Non-current liabilities	$50,000
Retained profit	$40,000
Total equity	$100,000

Note: Fixed assets are fully depreciated and no longer productive.

(a) With reference to the stimulus, one internal issue that might arise from EHT’s current ownership structure.

(b) one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up

(c) 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.

UrbanSpice Café is a private limited company that operates a single café in the city centre. It is owned by two siblings who each invested $25,000 to start the business. Their aim is to provide a cosy environment with high-quality, locally sourced food and drinks. The café has become increasingly popular, and the owners are now planning to open a second location. As part of this growth plan, they are reviewing financial data and considering how expansion may affect different stakeholders.

Table 1 shows UrbanSpice Café's financial data for the most recent year (2024). Table 1: Financial data for UrbanSpice Café for 2024

Item	Amount ($)
Revenue	300,000
Cost of sales	120,000
Expenses	100,000
Net profit	?
Current assets	90,000
Current liabilities	45,000

(a) two features of a private limited company (Ltd).

(b) two stakeholder groups that may be affected by UrbanSpice Café’s expansion.

(d) one benefit of business growth for UrbanSpice Café.

FitFuel Ltd.

FitFuel is a partnership that produces healthy, ready-to-eat meals for gym-goers. The business was started by two personal trainers who each invested $15,000 to get the business up and running. FitFuel's popularity has grown through word of mouth and social media, and it is now planning to open a second kitchen in a nearby city.

To fund this expansion, FitFuel is considering applying for a bank loan. One of the partners also suggested asking a wealthy family member to invest in the business.

Table 1 shows a summary of FitFuel's costs and revenue from October 2024.

Table 1: Costs and revenue for FitFuel (October 2024)

Item	Amount ($)
Fixed costs	6,000
Variable costs	4,000
Total revenue	15,000

(a) two features of a partnership.

(b) FitFuel's total costs and profit for October 2024. Show all your working.

(d) two stakeholder groups who might be affected by FitFuel's plan to open a second kitchen.

(c) one internal and one external source of finance explicitly mentioned in the case (internal may include the partners’ own investment; external may include the bank loan or the wealthy family member investing).

Opening balance	10,000
Cash inflows	82,000
Cash outflows	96,000
Closing balance	—

IB Business Management 1.5 Growth and Evolution Questionbank

IB Business Management 1.5 Growth and Evolution Questionbank

IB Business Management 1.5 Growth and Evolution Questionbank

IB Business Management 1.5 Growth and Evolution Questionbank

IB Business Management Topic 1.5 Growth and Evolution Questionbank