Practice 3.1 Introduction to finance 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
NeuroTech Ltd. is a European health technology company that develops wearable brain-monitoring devices for medical research institutions. The firm has invested heavily in research and development (R&D) to remain at the forefront of innovation, allocating nearly 18% of annual revenue toward new product development.
Recently, NeuroTech faced a major crisis after a software malfunction in one of its products caused data losses at several hospitals. Although no patients were harmed, the incident received significant media coverage. The firm initiated its crisis management plan, issuing public statements, recalling affected devices, and offering free replacements. Internally, the board has asked for a review of the company’s contingency planning and operational risk mitigation procedures.
Despite the crisis, NeuroTech is evaluating a new R&D investment in a second-generation neural interface. The project is expected to generate significant returns if successful. The finance department has prepared the following data to assist the board in evaluating its financial health and the viability of the investment.
Table 1: Financial Data – NeuroTech Ltd (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 12,000,000 |
| Cost of goods sold | 6,800,000 |
| Operating expenses | 4,400,000 |
| Net profit | 800,000 |
| Capital employed | 6,000,000 |
| Average stock | 1,200,000 |
| Initial investment (R&D project) | 2,500,000 |
| Net cash inflow (Years 1–4) | 850,000 p.a. |
1.[2]
Explain one way contingency planning may have helped NeuroTech Ltd. manage the product failure crisis.
2.[2]
Calculate the return on capital employed (ROCE)
Show all your working.
3.[2]
Calculate the payback period for the proposed R&D project.
Show all your working.
4.[2]
Analyse how NeuroTech’s current financial efficiency may influence its ability to manage R&D risk.
5.[2]
Suggest one way NeuroTech can ensure its future R&D strategy balances innovation with operational risk management.
Question 2
HLPaper 3
LuminaCare
Resource 1 – Company profile and financial context
LuminaCare is a Ghana-based, for-profit social enterprise that manufactures solar-powered medical devices for rural clinics and maternal health centers across Sub-Saharan Africa. Its flagship product is a solar fetal heart monitor, which allows midwives to detect complications during pregnancy without relying on grid electricity. The company raised seed capital from impact investors but has now reached an inflection point: demand has grown by 300%, and LuminaCare must decide whether to pursue a $2.5M Series A equity round or take on $1.2M in concessional debt from a development bank.
Resource 2 – CFO’s internal memo (Finance)
“Our burn rate is steady, but we’ve reached our credit limit with suppliers. We operate on 90-day payment terms with clinics, so cash flow is always tight. Series A equity gives us the scale to meet demand and build a second facility—but would dilute founder control and introduce board-level oversight. The concessional loan is low-interest and non-dilutive but comes with covenants: quarterly EBITDA targets, strict capex limits, and donor-style reporting. Any miss could trigger loan restructuring or early repayment.”
Resource 3 – HR performance dashboard (Q1–Q2 2025)
| Metric | Value |
|---|---|
| Staff turnover (last 6 months) | 22% |
| Time to fill technical roles | 49 days (↑ 24%) |
| % of roles with formal job descriptions | 58% |
| Managerial span of control | Avg. 12 direct reports |
| Avg. team engagement score | 67/100 (↓ from 78) |
| The head of HR notes that burnout and unclear career paths are leading to attrition, especially among product engineers and field deployment staff. |
Resource 4 – Marketing team proposal
“Clinics love our mission—but most have no idea who we are until we show up at trade shows. We need to invest in inbound marketing, including a multilingual website, CRM tools, and a referral rewards program for midwives. More crucially, we’re perceived as a donor-funded nonprofit, not a serious tech company. To attract hospital procurement officers and larger buyers, we must reposition the brand to emphasize product quality, not just affordability and ethics.”
Resource 5 – Email thread: CEO to CFO and Marketing Lead
Resource 6 – Feedback from key field partners
“We rely on LuminaCare’s devices, but their response time for repairs has worsened.” “Sometimes we get different pricing from different reps. There’s no standard process.” “I love the mission—but our procurement officer wants a brand that feels serious. A logo change isn’t enough.”
1.[2]
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
2.[6]
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
3.[17]
Using all the resources provided and your knowledge of business management tools and theories, recommend a possible plan of action for LuminaCare over the next five years.
Question 3
SLPaper 2
BeanBar Ltd.
BeanBar Ltd. is a medium-sized company that sells gourmet coffee beans online and in retail stores. The business recently launched a new premium coffee blend and carried out primary market research to better understand customer preferences before the launch. The findings helped inform the company’s updated marketing plan, which included promotional discounts and revised packaging.
Although initial sales were strong, the marketing manager is concerned that poor internal communication between the finance and sales teams may be affecting financial performance. The finance team has noted rising costs, while the operations team wants to reinvest in product development.
Table 1 shows selected financial data for the past two months.
Table 1: Selected financial data for BeanBar Ltd. for 2024
| Item | Month 1 ($) | Month 2 ($) |
|---|---|---|
| Revenue | 100,000 | 90,000 |
| Cost of goods sold | 40,000 | 42,000 |
| Expenses | 30,000 | 35,000 |
| Net profit | ? | ? |
| Current assets | 60,000 | 50,000 |
| Current liabilities | 30,000 | 40,000 |
1.[2]
Calculate the net profit for Month 1 and Month 2. Show all your working.
2.[2]
Calculate the current ratio for Month 2. Show all your working.
3.[2]
Explain one reason why a fall in net profit might concern the finance team.
4.[2]
Identify one method of primary market research used by businesses like BeanBar Ltd.
5.[2]
Outline one problem that may arise from poor internal communication between departments.
Question 4
HLPaper 2
Question 18: AlpineWare Ltd.
AlpineWare Ltd. is a manufacturer of high-quality outdoor cookware and portable kitchen gear, operating primarily in the European market. After a successful five-year period of growth, the company has seen a decline in staff productivity and an increase in employee turnover. The HR department attributes this to a lack of staff recognition and clarity in day-to-day operations.
To address these issues, AlpineWare appointed a new operations manager with a democratic leadership style, who introduced team-based decision-making and revised performance appraisal systems to enhance employee motivation. The finance director, however, has raised concerns that productivity remains below target and the business may need to raise additional funds for a planned investment in automation.
The finance department has compiled final accounts and key data for 2024 to assess AlpineWare’s operational performance and evaluate its financial options.
—
Table 1: Selected Financial Data – AlpineWare Ltd. (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 3,600,000 |
| Cost of goods sold | 1,950,000 |
| Operating expenses | 1,380,000 |
| Net profit | 270,000 |
| Capital employed | 2,400,000 |
| Average stock | 325,000 |
Question 5
HLPaper 2
2.3 Leadership and management 2.4 Motivation and demotivation 3.4 Final accounts 3.6 Efficiency ratio analysis (HL only) 3.2 Sources of finance 3.1 Introduction to finance
Question 18: AlpineWare Ltd.
AlpineWare Ltd. is a manufacturer of high-quality outdoor cookware and portable kitchen gear, operating primarily in the European market. After a successful five-year period of growth, the company has seen a decline in staff productivity and an increase in employee turnover. The HR department attributes this to a lack of staff recognition and clarity in day-to-day operations.
To address these issues, AlpineWare appointed a new operations manager with a democratic leadership style, who introduced team-based decision-making and revised performance appraisal systems to enhance employee motivation. The finance director, however, has raised concerns that productivity remains below target and the business may need to raise additional funds for a planned investment in automation.
The finance department has compiled final accounts and key data for 2024 to assess AlpineWare’s operational performance and evaluate its financial options.
—
Table 1: Selected Financial Data – AlpineWare Ltd. (2024)
| Item | Amount (€) |
|---|---|
| Revenue | 3,600,000 |
| Cost of goods sold | 1,950,000 |
| Operating expenses | 1,380,000 |
| Net profit | 270,000 |
| Capital employed | 2,400,000 |
| Average stock | 325,000 |
1.[2]
Explain how democratic leadership may help address motivation issues at AlpineWare Ltd.
2.[2]
Calculate the return on capital employed (ROCE) Show all your working.
3.[2]
Comment on what this figure suggests about AlpineWare’s financial performance.
4.[2]
Suggest one internal and one external source of finance that AlpineWare Ltd. could use to fund automation investments.
5.[2]
Analyse how motivation and financial efficiency could work together to support AlpineWare’s long-term success.
Question 6
HLPaper 2
2.3 Leadership and management 2.4 Motivation and demotivation 2.5 Organizational (corporate) culture (HL only 3.4 Final accounts 3.6 Efficiency ratio analysis (HL only) 3.2 Sources of finance 3.1 Introduction to finance
Question 17: BrightPath Ltd.
BrightPath Ltd. is a private limited company that provides digital career coaching platforms to secondary schools and universities. The business is at a transitional stage: after rapid early growth, profits have started to plateau. In response, the board has appointed a new CEO with a highly authoritarian leadership style and a focus on efficiency and results.
However, this shift in management approach has clashed with BrightPath’s historically person-oriented corporate culture, which emphasised innovation, inclusivity, and autonomy. Employee morale has declined, and recent internal surveys suggest that staff are increasingly demotivated due to perceived lack of recognition and limited input in decision-making.
The finance department has provided the final accounts and key data from 2024, and the company is also considering raising capital to fund an AI-integrated platform upgrade. The CEO has asked for a financial and cultural analysis to support future strategic decisions.
Table 1: Selected Financial Data – BrightPath Ltd. (2024)
| Item | Amount (£) |
|---|---|
| Revenue | 2,200,000 |
| Cost of goods sold | 1,000,000 |
| Operating expenses | 950,000 |
| Net profit | 250,000 |
| Capital employed | 1,800,000 |
| Average stock | 200,000 |
1.[2]
Explain how a mismatch between leadership style and corporate culture might affect employee motivation.
2.[2]
Calculate the return on capital employed (ROCE) for BrightPath Ltd.
Show all your working.
3.[2]
Comment on how BrightPath Ltd.'s financial performance may affect its ability to raise external finance.
4.[2]
Suggest one internal and one external source of finance BrightPath could consider to fund its AI platform upgrade.
5.[2]
Analyse how leadership style could influence BrightPath Ltd.’s financial efficiency
Question 7
SLPaper 2
GlowBar
GlowBar is a newly opened skincare business run by two friends. The business offers handmade soaps and facial products using natural ingredients. Before launching, the owners conducted primary market research by interviewing potential customers at local health food stores.
GlowBar’s co-founders use a democratic leadership style, encouraging their small team to participate in decisions. To keep staff motivated, they offer flexible working hours and recognition for good performance.
To finance the launch, the owners used their own savings and borrowed money from a microfinance provider.
Table 1 shows GlowBar’s financial data for its first month.
Table 1: Financial data for GlowBar (Month 1)
| Item | Amount ($) |
|---|---|
| Fixed costs | 4,000 |
| Variable costs | 3,000 |
| Revenue | 12,000 |
1.[2]
State two features of a democratic leadership style.
2.[2]
Identify two non-financial methods of motivation used at GlowBar.
3.[2]
Calculate GlowBar’s profit for the first month.
Show all your working.
4.[2]
Identify two elements of the marketing mix that GlowBar used when launching its products.
5.[2]
State one primary and one external source of finance mentioned in the case.
Question 8
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 9
HLPaper 2
[5] Explain one financial challenge that EcoFreight Solutions may face as a result of relying on long-term corporate contracts with 90-day payment terms.
1.[2]
Explain one financial challenge that EcoFreight Solutions may face as a result of relying on long-term corporate contracts with 90-day payment terms.
Question 10
HLPaper 2
EcoFreight Solutions
EcoFreight Solutions is a private limited company (Ltd) specializing in zero-emission urban logistics and electric vehicle (EV) fleet management. The firm prioritizes environmental sustainability while aiming for a target return on capital employed (ROCE) of 8% to reinvest in next-generation battery technology.
Table 1: Statement of Profit or Loss for EcoFreight Solutions for the year ending 31 December 2024 (figures in $000)
| Item | Amount ($000) |
|---|---|
| Sales revenue | 4,200 |
| Cost of sales | 2,400 |
| Operating expenses | 1,100 |
| Depreciation expense | 150 |
| Interest expense | 60 |
| Tax | 80 |
Table 2: Additional Financial Information
| Item | Amount ($000) |
|---|---|
| Capital employed | 5,500 |
| Current assets | 920 |
| Current liabilities | 800 |
| Initial investment for new project | 1,200 |
| Net annual cash inflow from project | 300 |
1.[2]
Calculate the gross profit for EcoFreight Solutions. Show all your working.
2.[2]
State one reason why EcoFreight Solutions, as a specialized EV logistics firm, might be eligible for government R&D tax credits.
3.[2]
Calculate the current ratio for EcoFreight Solutions based on the financial data provided. Show all your working.
4.[2]
Calculate the payback period for the new automated sorting hub project. Show all your working.
5.[2]
Explain one financial challenge that EcoFreight Solutions may face as a result of relying on long-term corporate contracts with 90-day payment terms.