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 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 2
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 ($) |
|---|---|---|
| Revenue | 100,000 | 90,000 |
| Cost of goods sold | 40,000 | 42,000 |
| Expenses | 30,000 | 35,000 |
| Net profit | ? | ? |
| Current assets | 60,000 | 50,000 |
| Current liabilities | 30,000 | 40,000 |
1.[2]
Calculate the net profit for Month 1 and Month 2. Show all your working.
2.[2]
Calculate the current ratio for Month 2. Show all your working.
3.[2]
Explain one reason why a fall in net profit might concern the finance team.
4.[2]
Identify one method of primary market research used by businesses like BeanBar Ltd.
5.[2]
Outline one problem that may arise from poor internal communication between departments.
Question 3
SLPaper 2
GlowBar
GlowBar is a newly opened skincare business run by two friends. The business offers handmade soaps and facial products using natural ingredients. Before launching, the owners conducted primary market research by interviewing potential customers at local health food stores.
GlowBar’s co-founders use a democratic leadership style, encouraging their small team to participate in decisions. To keep staff motivated, they offer flexible working hours and recognition for good performance.
To finance the launch, the owners used their own savings and borrowed money from a microfinance provider.
Table 1 shows GlowBar’s financial data for its first month.
Table 1: Financial data for GlowBar (Month 1)
| Item | Amount ($) |
|---|---|
| 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 4
HLPaper 2
ZenMoto Ltd.
ZenMoto Ltd. is a Japanese company that manufactures electric scooters designed for city commuting. To improve operational efficiency, ZenMoto has implemented lean production techniques such as just-in-time (JIT) inventory management, kaizen (continuous improvement), and quality circles across its factories. It is also reviewing its production planning processes to better match seasonal demand fluctuations.
The company plans to expand into new Southeast Asian markets and needs funding for a new manufacturing plant. The finance department has provided key efficiency data and is evaluating whether internal cash flows are sufficient or if external sources of finance are needed.
Table 1: Selected Financial Data – ZenMoto Ltd. (2024)
| Item | Amount (¥) |
|---|---|
| Revenue | 8,500,000,000 |
| Cost of goods sold | 5,200,000,000 |
| Operating expenses | 2,700,000,000 |
| Net profit | 600,000,000 |
| Capital employed | 5,000,000,000 |
1.[2]
Explain one way lean production techniques could improve ZenMoto Ltd.'s operational efficiency.
2.[2]
Calculate the return on capital employed (ROCE) for ZenMoto Ltd. Show all your working.
3.[2]
Comment on how ZenMoto Ltd.’s ROCE result might influence its decision to use internal or external finance for expansion.
4.[2]
Suggest one internal and one external source of finance ZenMoto Ltd. could consider for the new manufacturing plant.
5.[2]
Suggest how improvements in production planning could contribute to better financial performance at ZenMoto Ltd.
Question 5
SLPaper 2
AromaTech Ltd.
AromaTech Ltd. is a company that manufactures essential oil diffusers. As the company expanded, it shifted from a flat to a tall organizational structure to improve coordination and oversight. The operations director follows a paternalistic leadership style, often making decisions based on what he believes is best for employees while still seeking limited input.
In response to declining productivity, the business introduced a recognition program to reward top-performing staff, aiming to increase motivation without raising wages.
Table 1 shows selected financial data for the most recent quarter.
Table 1: Financial data for AromaTech Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 500,000 |
| Cost of goods sold | 300,000 |
| Expenses | 120,000 |
| Net profit | ? |
| Current assets | 150,000 |
| Current liabilities | 100,000 |
1.[2]
Identify two features of a tall organizational structure.
2.[2]
Calculate the net profit for the quarter. Show all your working.
3.[2]
Calculate the current ratio. Show all your working.
4.[2]
Explain one benefit of using a paternalistic leadership style in a growing business.
5.[2]
Explain one way non-financial motivation can improve employee performance.
Question 6
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 7
SLPaper 2
CraftCore Ltd.
CraftCore Ltd. is a company that produces handmade wooden furniture. The company has grown rapidly in recent years and now employs over 100 staff. To manage this growth, CraftCore adopted a tall organizational structure, with multiple layers of management to improve oversight and communication.
The production manager uses a democratic leadership style and encourages team input in decision-making. Recently, management introduced a non-financial motivation scheme that includes job enrichment and employee involvement in quality control. These changes were made in response to a decline in staff engagement.
The finance department has provided the following data for the last quarter.
Table 1: Financial data for CraftCore Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 420,000 |
| Cost of goods sold | 250,000 |
| Expenses | 100,000 |
| Net profit | ? |
| Current assets | 75,000 |
| Current liabilities | 50,000 |
1.[2]
Identify two features of a democratic leadership style.
2.[2]
Calculate the net profit for the quarter. Show all your working.
3.[2]
Calculate the net profit margin. Show all your working.
4.[2]
Calculate the current ratio. Show all your working.
5.[2]
Explain one way that job enrichment could improve staff motivation at CraftCore Ltd.
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
AutoFlex Ltd (AF)
AutoFlex Ltd (AF) is a UK-based car manufacturing company specializing in electric vehicles (EVs). The company has seen strong domestic growth and is now planning to expand into Germany and Mexico, where demand for EVs is increasing.
AF faces multiple challenges in this expansion:
- Raising finance to fund its international operations.
- Marketing strategies to attract customers in new markets. -** Industrial relations issues**, as AF’s UK workforce has threatened to go on strike due to concerns over job security with automation.
- Calculating break-even output to assess the financial feasibility of the expansion.
AF is also considering whether to standardize or adapt its marketing strategy for Germany and Mexico. Some managers argue that a global brand image is essential, while others believe that local adaptation will be more effective.
1.[2]
Define the term ‘multinational company (MNC)’.
2.[4]
Explain two sources of finance AF could use to fund its international expansion.
3.[4]
Calculate the break-even output for AF’s expansion if the company’s fixed costs are USD 10 million, the selling price per unit is USD 50,000, and the variable cost per unit is USD 30,000. Show all working.
4.[4]
Explain two ways AF could manage industrial relations issues related to automation in its UK workforce.
5.[10]
Recommend whether AF should use a standardized or an adapted marketing strategy in its expansion into Germany and Mexico.
Question 10
HLPaper 2
SwiftTech Ltd (ST)
SwiftTech Ltd (ST) is a UK-based technology manufacturer specializing in smart home devices. The company recently experienced a product defect crisis, where a software bug in its flagship security system led to customer complaints and negative media coverage. As a result, ST had to issue refunds and recalls, leading to financial strain and reputational damage.
To improve efficiency and reduce future risks, ST is considering adopting lean production methods, such as Just-in-Time (JIT) and Kaizen, to minimize waste and improve product quality. However, some managers worry that JIT may leave the company vulnerable to supply chain disruptions.
ST is also evaluating the implementation of a management information system (MIS) to enhance decision-making and financial planning. Currently, ST’s finance department struggles with budgeting inconsistencies and poor forecasting, affecting investment decisions.
To recover from the crisis and regain financial stability, ST's senior management is reviewing its budgeting process, ensuring tighter cost control and improved financial planning.
1.[2]
Define the term ‘budget’.
2.[4]
Explain two reasons why crisis management is important for ST following the product defect crisis.
3.[4]
Explain two benefits for ST of using lean production methods.
4.[4]
Explain two advantages for ST of implementing a management information system (MIS).
5.[10]
Examine how ST should improve its budgeting process to strengthen financial planning.