Practice 3.4 Final accounts 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
HLPaper 2
TerraVolt Ltd.
TerraVolt Ltd. is a European company specialising in the production of modular battery storage systems for renewable energy projects. After identifying an opportunity to expand into off-grid African markets, TerraVolt invested heavily in a new research and development (R&D) project to develop a lightweight, durable battery model.
However, unexpected production delays caused by supply chain disruptions forced TerraVolt to activate parts of its contingency plan, including outsourcing key components at higher costs. The finance team has prepared the company's final accounts and depreciation schedules to assess the financial impact and to plan for future investment needs.
Table 1: Statement of Profit or Loss for TerraVolt Ltd. for the year ending 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Sales revenue | 10,200 |
| Cost of sales | 6,300 |
| Gross profit | 3,900 |
| Operating expenses | 2,400 |
| Depreciation expense | 400 |
| Interest | 150 |
| Profit before tax | — |
| Tax | 150 |
| Profit for the year | — |
Table 2: Statement of Financial Position for TerraVolt Ltd. as at 31 December 2024 (figures in €000s)
| Item | Amount (€000) |
|---|---|
| Non-current assets (at cost) | 2,000 |
| Accumulated depreciation | (800) |
| Current assets | 1,100 |
| Current liabilities | 750 |
| Long-term borrowings | 600 |
| Share capital | 700 |
| Retained earnings | — |
Additional information:
- The initial investment in machinery was €2,000,000.
- Machinery has an expected useful life of 5 years and a residual value of €0.
1.[2]
Calculate the profit before tax in 2024 for TerraVolt Ltd. Show all your working.
2.[2]
Calculate TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024. Show all your working.
3.[2]
Using the straight-line depreciation method, calculate TerraVolt Ltd.’s annual depreciation expense based on the machinery investment. Show all your working.
4.[2]
Calculate the current ratio for TerraVolt Ltd. as at 31 December 2024. Show all your working.
5.[2]
Comment on what the financial statements reveal about TerraVolt Ltd.’s profitability and liquidity position.
Question 3
HLPaper 2
RadiantSkin Ltd.
RadiantSkin Ltd. is a UK-based skincare brand that sells eco-conscious beauty products through both retail and e-commerce channels. The company launched a new product line in early 2024 and used a promotional mix focused on social media campaigns, influencer partnerships, and limited-time bundle pricing. The marketing team forecasted strong Q2 sales but actual sales figures fell short.
RadiantSkin Ltd. is now reviewing its budgeting process and sales forecasts, while the finance team prepares the company’s final accounts and evaluates its profitability and liquidity ratios.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,000,000 | 880,000 |
| Cost of goods sold | 400,000 | 420,000 |
| Expenses (incl. promo) | 300,000 | 350,000 |
| Net profit | 300,000 | 110,000 |
Table 2: Balance Sheet Extract – as at 30 June 2024
| Item | Amount (£) |
|---|---|
| Current assets | 220,000 |
| Current liabilities | 160,000 |
| Capital employed | 950,000 |
1.[2]
Suggest one possible reason why RadiantSkin’s sales forecasts may have been inaccurate
2.[2]
Suggest one adjustment to the marketing mix that RadiantSkin Ltd. could make to improve financial outcomes in future quarters.
Question 4
HLPaper 2
Question 52 AstraPod Ltd.
AstraPod Ltd. is a growing company that designs and sells interactive educational tablets aimed at a niche market: schools and tutoring centres. The firm recently launched a marketing campaign that combined online influencer-led explainers with national education magazine ads. After steady early growth, the company now plans to scale into broader B2B contracts with public schools. It is considering adjusting its strategy from design-led innovation to more feedback-driven development.
Below is AstraPod Ltd.'s Statement of Financial Position as of 31 December 2024.
Statement of Financial Position: AstraPod Ltd. (as at 31 December 2024) (All figures in $m)
| Non-current assets | |
|---|---|
| Property, plant and equipment Accumulated depreciation ** Non-current assets ** | 1,200 (200) 1,000 |
| Current assets Cash Debtors Stock **Current assets ** I ** Total assets ** | 250 300 150 700 1,700 |
| Current liabilities Trade creditors Bank overdraft Short-term loan ** Current liabilities ** | 150 50 200 400 |
| Non-current liabilities Long-term borrowings I ** Total liabilities ** | 300 700 |
| ** Net assets ** Retained earnings | 1,000 1,000 |
| Total equity | 1,000 |
Additional information:
-
Annual credit purchases = $1,200 million
-
The factory and production machinery was purchased for $1,500 million and is expected to last 15 years.
-
AstraPod's marketing campaign generated widespread social media engagement and national coverage.
-
Product development has historically been led by the engineering team with limited market feedback.
1.[2]
(a) Calculate:
(i) Creditor days
(ii) Depreciation expense using the straight-line method
2.[2]
(b) Using the information provided, distinguish between a market-oriented and product-oriented approach.
3.[2]
(c) Identify one feature of through the line promotion and explain how AstraPod's campaign reflects this.
4.[2]
(d) Outline whether AstraPod is currently operating in a niche market or mass market
5.[2]
(e) Explain one limitation of AstraPod Ltd.'s current depreciation method
Question 5
HLPaper 2
EcoFreight SolutionsEcoFreight 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) || :--- | :--- || 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.
Question 6
HLPaper 2
3.4 Final accounts
3.5 Profitability and liquidity ratio analysis
3.8 Investment appraisal
5.3 Lean production and quality management (HL only)
5.4 Location
Question 54 EcoBlade Ltd.
EcoBlade Ltd. produces biodegradable razors aimed at environmentally conscious consumers. The company is deciding whether to invest in a second production site closer to its largest market. Management is considering two investment projects and recently reviewed its operational performance.
Table 1 shows income and expenses for the year ended 20XX. Table 2 presents data for two expansion projects under consideration.
Table 1: Income and Expenses for EcoBlade Ltd. – Year Ended 20XX (All figures in $m)
| Revenue | 14.0 |
|---|---|
| Cost of goods sold | 9.0 |
| Operating expenses | 3.0 |
| Net profit before tax | ______ |
| Current assets | 4.0 | | Current liabilities | 2.0 |
Table 2: Investment Appraisal Data - Project A and Project B (All figures in $m)
| Project | A | B |
|---|---|---|
| Initial investment | 5.0 | 5.0 |
| Net cash inflows: Y1 | 2.0 | 1.0 |
| Net cash inflows: Y2 | 2.0 | 2.0 |
| Net cash inflows: Y3 | 1.5 | 2.5 |
| ARR (over 3 years) | ||
| NPV (@10% discount) | 0.7 | 0.5 |
Additional context:
-
EcoBlade currently uses quality control to catch faulty razors at the packaging stage, but rejects remain high.
-
The proposed new site would reduce delivery times by 50% and is near suppliers of plant-based plastic.
1.[2]
(a) Calculate:
(i) Net profit before tax
(ii) Current ratio
2.[2]
(b) Calculate the ARR for both Project A and Project B.
3.[2]
(c) Explain one advantage of using NPV instead of payback period alone for investment decision-making.
4.[2]
(d) Distinguish between quality control and quality assurance using EcoBlade Ltd. as an example.
5.[2]
(e) Outline one operational reason why EcoBlade Ltd. is considering its second factory near suppliers.
Question 7
HLPaper 3
SparkFit Apparel Ltd.
Resource 1 - Newspaper Article
"Local Apparel Brand, SparkFit, Strives to Compete in the Global Activewear Market"
Resource 2 - Financial Statement (Income Statement 2023)
Income Statement for the Year Ending December 31, 2023
Operating Expenses:
| Item | Amount |
|---|---|
| Sales Revenue | £1,200,000 |
| Cost of Sales | £800,000 |
| Gross Profit | £400,000 |
| Expense | Amount |
|---|---|
| Marketing | £50,000 |
| Administrative Expenses | £100,000 |
| Total Operating Expenses | £150,000 |
| Item | Amount |
|---|---|
| Operating Profit | £250,000 |
| Interest | £20,000 |
| Retained Profit | £230,000 |
Despite a 20% increase in revenue compared to 2022, SparkFit faces pressure from production and marketing expenses, impacting profitability.
Resource 3 - Marketing Strategy Flowchart
Market Research - Identify target demographics interested in eco-friendly activewear.
Product Development - Focus on sustainability and quality in material sourcing.
Digital Advertising - Emphasis on social media platforms like Instagram and TikTok.
Influencer Partnerships - Engage with eco-conscious influencers for brand authenticity.
Customer Feedback Loop - Integrate customer feedback for continuous product improvement.
Resource 4 - Consumer Research Summary
A survey conducted by MarketWatch Research among 5,000 UK-based consumers aged 18-34 reveals that 73% of respondents favor brands with sustainable practices. However, only 45% are willing to pay a premium for these options. For SparkFit, this signals both opportunity and challenge, as the eco-conscious market may not guarantee increased sales without pricing strategies that resonate with young buyers.
Competitors have also increased eco-friendly offerings, emphasizing SparkFit’s need for a compelling brand identity and distinct positioning.
Resource 5 - Marketing Campaign Report
1.[2]
Using an appropriate business management theory, identify a human need that SparkFit’s products satisfy for their target consumers.
2.[6]
Outline two challenges SparkFit faces in scaling their digital marketing efforts. Support your answer with evidence from the resources.
3.[17]
Based on the resources and your business knowledge, recommend a comprehensive marketing strategy to improve SparkFit’s brand awareness and competitiveness over the next five years. Your strategy should consider product positioning, digital marketing channels, pricing, and brand partnerships.
Question 8
HLPaper 2
Question 51 PulseFuel Ltd.
PulseFuel Ltd. is a startup producing high-performance energy drinks aimed at endurance athletes. The company prides itself on its proprietary electrolyte formula, which forms the basis of its USP. Although sales have grown rapidly, production costs remain high and most sales are made on credit. PulseFuel Ltd. is considering adjusting its pricing strategy to gain market share in the short term.
Table 1 shows PulseFuel Ltd.'s cash flow forecast for the first quarter of 2025.
Table 1: Cash flow forecast for PulseFuel Ltd. for the first three months of 2025 (All figures in $000)
| January February March | |||||
|---|---|---|---|---|---|
| Opening balance | 3 | 1 | (2) | ||
| **Cash inflows ** | |||||
| Credit sales collected | 250 | ||||
| Crowdfunding contributions 25 | |||||
| Investor seed funding | 100 | ||||
| Total cash inflows | |||||
| Cash outflows | |||||
| Packaging and ingredients 120 120 120 120 | 1 130 | ||||
| Wages | 30 | ||||
| Equipment leasing | 10 10 | 10 | |||
| Distribution and marketing 17 | 50 | ||||
| Total cash outflows | 220 | ||||
| Net cash flow | (2) | 130 | |||
| Closing balance | (2) | 128 |
Answer all the questions.
1.[2]
Using Table 1, calculate:
(i) The total net cash flow for the quarter
(ii) The closing balance at the end of March
2.[2]
Explain one reason why PulseFuel Ltd. might be profitable but still experience negative cash flow in its first two months.
3.[2]
Suggest one external source of finance, other than crowdfunding or seed investment, that would help PulseFuel Ltd. smooth early cash flow problems. Justify your answer.
4.[2]
Identify the pricing strategy PulseFuel Ltd. may be considering and explain how this could affect its short-term and long-term positioning.
5.[2]
Explain how PulseFuel Ltd.'s USP could help support a move toward premium or contribution-based pricing in future.
Question 9
HLPaper 2
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.
Question 10
HLPaper 3
FreshFusion Ltd
Resource 1 - Industry Article
“FreshFusion Tackles High Turnover in the Health Food Sector”
Resource 2 - Balance Sheet (2023)
FreshFusion Ltd. Balance Sheet - As of December 31, 2023
| Item | Amount |
|---|---|
| Cash | £500,000 |
| Inventory | £250,000 |
| Property, Plant & Equipment | £3,000,000 |
| Other Current Assets | £100,000 |
| Total Assets | £3,850,000 |
| Item | Amount |
|---|---|
| Accounts Payable | £1,000,000 |
| Accrued Salaries | £200,000 |
| Long-Term Debt | £2,500,000 |
| Shareholders’ Equity | £1,150,000 |
| Total Liabilities & Equity | £3,850,000 |
FreshFusion’s equity has steadily increased, thanks to its brand appeal and expanding customer base. However, accrued salary expenses reveal the strain on payroll, and accounts payable remains high, indicating potential cash flow challenges in meeting obligations.
Resource 3 - Excerpt from Employee Satisfaction Survey (2023)
Summary of Employee Feedback:
Positive Comments: Employees appreciate FreshFusion’s commitment to sustainability, especially through using local suppliers and eco-friendly packaging. They feel aligned with the company’s values and are proud of their work.
Negative Comments: Concerns were raised about long hours, inconsistent scheduling, and lack of growth opportunities. Employees express a need for career progression and better work-life balance.
Resource 4 - Social Media Post (Instagram) @FreshFusionUK:
Resource 5 - Market Report Excerpt
"Health Food Retailers Face Staffing Struggles in Competitive Market"
Health food retail is a high-turnover sector, with 35% of employees leaving within their first year. Companies like FreshFusion are encouraged to adopt new employee-centric strategies, such as internal promotions, career development programs, and employee wellness initiatives, to remain competitive.
The report highlights that companies with lower turnover rates have successfully implemented flexible scheduling and robust training programs to build a committed workforce.
1.[2]
Using an appropriate business management theory, describe a human need that FreshFusion fulfills for its employees.
2.[6]
Explain two challenges FreshFusion faces in managing its human resources effectively. Support your answer using information from the case study and resources provided.
3.[17]
Using all the resources provided and your knowledge of business management, recommend a strategic plan to improve employee retention at FreshFusion over the next three years. Your response should consider employee development, scheduling flexibility, wellness initiatives, and compensation.