Practice IB Business Management Topic 3.1 Introduction to Finance with authentic exam-style questions for both SL and HL students. This question bank focuses on the exact syllabus content for 3.1 Introduction to Finance and mirrors Paper 1, 2, 3 style where relevant.
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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 $1.2M in concessional debt from a development bank.
With reference to Resource 3, describe one HR issue that may be impacting LuminaCare’s ability to scale sustainably.
Explain one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.
Using the resources and relevant business management tools and theories, recommend a plan of action for LuminaCare over the next five years. Your plan must make a clear recommendation on financing (choose Series A now, choose the concessional loan now, or propose a staged sequence using both at different times) and justify your choice.
BeanBar Ltd.
BeanBar Ltd. is a medium-sized company that sells gourmet coffee beans online and in retail stores. The business recently launched a new premium coffee blend and carried out primary market research to better understand customer preferences before the launch. The findings helped inform the company's updated marketing plan, which included promotional discounts and revised packaging.
Although initial sales were strong, the marketing manager is concerned that poor internal communication between the finance and sales teams may be affecting financial performance. The finance team has noted rising costs, while the operations team wants to reinvest in product development.
Table 1 shows selected financial data for the past two months.
Table 1: Selected financial data for BeanBar Ltd. for 2024
| Item | Month 1 ($) | Month 2 ($) |
|---|---|---|
| Revenue | 100,000 | 90,000 |
| Cost of sales | 40,000 | 42,000 |
| Expenses | 30,000 | 35,000 |
| Net profit | ? | ? |
| Current assets | 60,000 | 50,000 |
| Current liabilities | 30,000 | 40,000 |
Calculate the net profit for Month 1 and Month 2. Show all your working.
Calculate the current ratio for Month 2. Show all your working.
Explain one reason why a fall in net profit might concern the finance team.
Identify one method of primary market research.
Outline one problem that may arise from poor internal communication between departments.
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 sales | 1,950,000 |
| Operating expenses | 1,380,000 |
| Net profit | 270,000 |
| Capital employed | 2,400,000 |
| Average stock | 325,000 |
Explain how democratic leadership may help address motivation issues at AlpineWare Ltd.
Calculate the return on capital employed (ROCE) Show all your working.
Comment on what this figure suggests about AlpineWare’s financial performance.
Suggest one internal and one external source of finance that AlpineWare Ltd. could use to fund automation investments.
Analyse how motivation and financial efficiency could work together to support AlpineWare’s long-term success.
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.
Table 1: Selected Financial Data – BrightPath Ltd. (2024)
| Item | Amount (ÂŁ) |
|---|---|
| Revenue | 2,200,000 |
| Cost of sales | 1,000,000 |
| Operating expenses | 950,000 |
| Net profit | 250,000 |
| Capital employed | 1,800,000 |
| Average stock | 200,000 |
Explain how a mismatch between leadership style and corporate culture might affect employee motivation.
Calculate the return on capital employed (ROCE) for BrightPath Ltd. Give your answer as a percentage (%) to 2 d.p. Show your working.
Using Table 1 and your ROCE, comment on how BrightPath Ltd.'s financial performance may affect its ability to raise external finance.
Suggest one internal and one external source of finance BrightPath could consider to fund its AI platform upgrade.
Explain how leadership style could influence BrightPath Ltd.’s financial efficiency.
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 |
State two features of a democratic leadership style.
Identify two non-financial methods of motivation used at GlowBar.
Calculate GlowBar’s profit for the first month. Show all your working.
Identify two elements of the marketing mix and state how GlowBar used each.
State one internal and one external source of finance mentioned in the case.