Practice 3.5 Profitability and liquidity ratio analysis 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 ($) |
|---|---|---|
| Revenue | 100,000 | 90,000 |
| Cost of goods sold | 40,000 | 42,000 |
| Expenses | 30,000 | 35,000 |
| Net profit | ? | ? |
| Current assets | 60,000 | 50,000 |
| Current liabilities | 30,000 | 40,000 |
1.[2]
Calculate the net profit for Month 1 and Month 2. Show all your working.
2.[2]
Calculate the current ratio for Month 2. Show all your working.
3.[2]
Explain one reason why a fall in net profit might concern the finance team.
4.[2]
Identify one method of primary market research used by businesses like BeanBar Ltd.
5.[2]
Outline one problem that may arise from poor internal communication between departments.
Question 3
SLPaper 2
BiteFresh Ltd.
BiteFresh Ltd. is a company that produces ready-made healthy meals for supermarkets and gyms. Due to growing demand, the business is planning to open a second production facility. Management is deciding between two locations: one in an urban area with higher rent but closer to suppliers and customers, and another in a rural area with lower operating costs but limited infrastructure.
The finance team has produced updated financial data to help evaluate the company’s performance and support the location decision.
Table 1: Financial data for BiteFresh Ltd.
| Item | Amount ($) |
|---|---|
| Revenue | 400,000 |
| Cost of goods sold | 220,000 |
| Expenses | 130,000 |
| Fixed costs (per month) | 12,000 |
| Selling price per unit | 10 |
| Variable cost per unit | 4 |
| Current assets | 70,000 |
| Current liabilities | 35,000 |
1.[2]
Calculate the net profit for the business.
Show all your working.
2.[2]
Calculate the net profit margin.
Show all your working.
3.[2]
Calculate the current ratio.
Show all your working.
4.[2]
Calculate the break-even output per month.
Show all your working.
5.[2]
Outline one factor that BiteFresh Ltd. should consider when choosing between the urban and rural location options.
Question 4
SLPaper 2
Solveta Ltd.
Solveta Ltd. is a private limited company that manufactures eco-friendly packaging materials for global e-commerce businesses. The company recently launched a major marketing campaign to enter three new export markets. This campaign involved substantial investment in promotion, pricing adjustments, and changes to distribution (place) to align with regional consumer expectations.
To fund this expansion, Solveta used a mix of retained profit, a medium-term loan, and newly issued share capital. While sales revenue has increased, rising logistics and distribution costs have impacted short-term liquidity. The finance department has released Solveta’s statement of financial position and asked the marketing and finance teams to assess its implications for profitability and cash flow.
Figure 1. Solveta Ltd. Statement of financial position as at 30 June 2024
| Item | $ |
|---|---|
| Assets | |
| Non-current assets | |
| Property, plant and equipment | 600,000 |
| Less: Accumulated depreciation | (150,000) |
| Net non-current assets | 450,000 |
| Current assets | |
| Cash | 60,000 |
| Debtors | 85,000 |
| Stock | 105,000 |
| Total current assets | 250,000 |
| Total assets | 700,000 |
| Liabilities | |
| Current liabilities | |
| Bank overdraft | 12,000 |
| Trade creditors | 48,000 |
| Short-term loan | 40,000 |
| Total current liabilities | 100,000 |
| Non-current liabilities | |
| Borrowings—medium term | 180,000 |
| Total liabilities | 280,000 |
| Net assets | 420,000 |
| Equity | |
| Share capital | 300,000 |
| Retained earnings | 120,000 |
| Total equity | 420,000 |
1.[2]
Explain one reason Solveta Ltd. may have chosen to use more than one source of finance for its international marketing campaign.
2.[2]
Suggest one element of the marketing mix Solveta adjusted to support its international expansion
3.[2]
Calculate the current ratio and acid test ratio for Solveta Ltd. Show all your working.
4.[2]
Outline what these liquidity ratios suggest about Solveta’s short-term financial position.
5.[2]
Comment on how Solveta’s cost and revenue structure may affect its profitability.
Question 5
SLPaper 2
PrintWise Ltd.
PrintWise Ltd. is a medium-sized business that offers custom printing services for schools and local businesses. The company uses a tall organizational structure with multiple layers of management. The managing director has an autocratic leadership style and prefers to give instructions rather than involve employees in decision-making.
Important updates are usually communicated through memos and notice boards. Recently, some employees complained that they were not informed about schedule changes, which affected their work performance.
Table 1 shows selected financial data from PrintWise Ltd.’s final accounts.
Table 1: Selected financial data for PrintWise Ltd. for 2024
| Item | Amount ($) |
|---|---|
| Revenue | 250,000 |
| Gross profit | 100,000 |
| Net profit | 40,000 |
| Current assets | 80,000 |
| Current liabilities | 40,000 |
1.[2]
Identify two features of a tall organizational structure.
2.[2]
State two characteristics of autocratic leadership
3.[2]
Calculate the net profit margin for PrintWise Ltd. Show all your working.
4.[2]
Calculate the current ratio for PrintWise Ltd. Show all your working.
Question 6
SLPaper 2
Global Beans Ltd. (GBL)
Global Beans Ltd. (GBL) is a multinational company (MNC) that sources, roasts, and sells premium coffee in over 30 countries. The company started as a family-run business and experienced rapid internal growth before expanding overseas through joint ventures and franchising.
GBL recently released its final accounts. Table 1 shows selected financial data.
Table 1: Selected financial data for GBL
| Item | Amount ($ million) |
|---|---|
| Revenue | 300 |
| Gross profit | 120 |
| Net profit | 30 |
| Current assets | 90 |
| Current liabilities | 60 |
GBL’s plans for further growth have sparked concerns from local stakeholders in some developing countries where it operates. Local farmers fear that expansion could shift sourcing to cheaper markets, reducing their income. Meanwhile, GBL’s investors are pressuring the company to boost profitability.
1.[2]
Identify two stakeholder groups affected by GBL’s growth.
2.[2]
Calculate GBL’s gross profit margin and net profit margin. Show all your working.
3.[2]
Outline one reason why GBL’s investors might be concerned about its net profit margin.
4.[2]
State one advantage and one disadvantage of using franchising as a method of growth for GBL.
5.[2]
Explain one ethical conflict that may arise when a multinational company like GBL tries to cut costs in developing countries.
Question 7
HLPaper 2
SkyGlide Ltd.
SkyGlide Ltd. is a UK-based manufacturer of premium travel backpacks and accessories. In early 2024, the company launched a major expansion into Southeast Asian markets after adjusting elements of its marketing mix to better suit local consumer preferences. The expansion was supported by a new marketing plan focusing on luxury positioning and partnerships with local influencers.
Despite the brand’s strong reputation in Europe, the finance team noticed early signs that sales growth in the new markets was slower than projected. Management has provided the final accounts and key financial data from Q2 2024 for review.
Table 1: Selected Financial Data – SkyGlide Ltd. (Q2 2024)
| Item | Amount (£) |
|---|---|
| Forecasted sales revenue | 4,500,000 |
| Actual sales revenue | 3,800,000 |
| Cost of goods sold (actual) | 2,000,000 |
| Operating expenses (actual) | 1,400,000 |
| Net profit (actual) | — |
| Capital employed | 6,000,000 |
| Current assets | 1,300,000 |
| Current liabilities | 950,000 |
1.[2]
Calculate the sales revenue variance for SkyGlide Ltd. Show all your working.
2.[2]
Calculate the actual net profit and the net profit margin for Q2 2024. Show all your working.
3.[2]
Calculate the return on capital employed (ROCE) for SkyGlide Ltd. Show all your working.
4.[2]
Comment on what the financial results reveal about SkyGlide’s international marketing performance.
5.[2]
Suggest two ways SkyGlide Ltd. could adapt its marketing mix to better meet the needs of international consumers.
Question 8
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 ($) |
|---|---|
| Revenue | 420,000 |
| Cost of goods sold | 250,000 |
| Expenses | 100,000 |
| Net profit | ? |
| Current assets | 75,000 |
| Current liabilities | 50,000 |
1.[2]
Identify two features of a democratic leadership style.
2.[2]
Calculate the net profit for the quarter. Show all your working.
3.[2]
Calculate the net profit margin. Show all your working.
4.[2]
Calculate the current ratio. Show all your working.
5.[2]
Explain one way that job enrichment could improve staff motivation at CraftCore Ltd.
Question 9
SLPaper 2
TechEdge Solutions
TechEdge Solutions is an IT services company that provides technical support and web design services. The company places a strong emphasis on human resource management, offering regular training sessions and performance appraisals to improve staff skills and job satisfaction.
The business is led by a transformational manager who motivates employees through a clear vision and regular team meetings. Communication within the company is maintained via weekly emails and in-person meetings.
Table 1 shows selected financial data from TechEdge Solutions' final accounts Q4 2024.
Table 1: Selected final account data for TechEdge Solutions Q4 2024
| Item | Amount ($) |
|---|---|
| Revenue | 200,000 |
| Cost of Goods Sold | 120,000 |
| Expenses | 50,000 |
| Net Profit | 30,000 |
| Current Assets | 50,000 |
| Current Liabilities | 25,000 |
1.[2]
Outline one feature of effective human resource management employed by TechEdge Solutions
2.[2]
Identify two characteristics of transformational leadership as demonstrated by TechEdge’s manager.
3.[2]
State one benefit of using regular team meetings as a communication method in a company like TechEdge Solutions.
4.[2]
Calculate the net profit margin for TechEdge Solutions. Show all your working.
5.[2]
Calculate the current ratio for TechEdge Solutions. Show all your working.
Question 10
HLPaper 3
Elevate Health Tech (EHT)
Resource 1 – Background of the organization
Elevate Health Tech (EHT) is a social enterprise based in Peru. Founded in 2021 by two biomedical engineers, it develops low-cost, portable diagnostic devices (such as digital stethoscopes and glucose meters) for use in rural and underserved communities across Latin America. EHT reinvests all profits into R&D and local employment programs.
EHT has grown quickly, scaling from 5 to 38 employees in two years. It operates as a private limited company, with both founders holding equal ownership and decision-making authority.
Resource 2 – Statement from the HR Director
"Our team is motivated by our mission, but we’re facing growing pains. We’ve recently hired 12 new staff, many with limited technical background. We have no formal training programme or organizational structure. Employees report confusion about job roles, and productivity varies significantly across teams. The co-founders are very hands-on, but this is becoming unsustainable."
Resource 3 – Loan proposal from the Development Impact Bank (DIB)
DIB is prepared to offer EHT a $750,000 low-interest loan to expand production and distribution across four Andean countries. The loan would cover machinery upgrades and recruitment but requires EHT to submit quarterly financial statements and maintain a current ratio of at least 1.5 throughout the term.
A grace period of 18 months will apply before repayments begin.
Resource 4 – Excerpt from EHT’s financial summary (unaudited, 2024)
Note: Fixed assets are fully depreciated and no longer productive.
| Item | Amount (USD) |
|---|---|
| Current assets | $230,000 |
| Current liabilities | $180,000 |
| Non-current liabilities | $50,000 |
| Retained profit | $40,000 |
| Total equity | $100,000 |
Resource 5 – Email from the Head of R&D
"To remain competitive, we need to launch two new diagnostic products within the next 18 months. The current design lab is at capacity. We either need to lease a second lab or invest in automation. The team is overworked and we’ve lost two engineers to burnout. I’m also concerned about our lack of appraisal or performance review systems."
Resource 6 – Mission statement (from company website)
We believe affordable diagnostics are a human right. We exist to empower healthcare workers and communities with reliable tools, local jobs, and dignity-driven innovation.
1.[2]
With reference to the stimulus, describe one internal issue that might arise from EHT’s current ownership structure.
2.[6]
Explain one human resource challenge and one financial challenge that EHT may face if it accepts the DIB loan and scales up
3.[17]
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.