Practice 3.6 Efficiency ratio analysis (HL only) 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
FreshSteps Foundation
FreshSteps Foundation is a non-profit social enterprise based in Kenya that installs small-scale water filtration systems in rural communities. It operates as a private limited company (Ltd) but reinvests all surplus profits to expand its social impact rather than paying dividends.
Its business objectives include achieving financial sustainability and maintaining a minimum return on capital employed (ROCE) of 5% to fund future installations without relying heavily on grants.
Table 1: Statement of Profit or Loss for FreshSteps Foundation for the year ending 31 December 2024 (figures in $000)
| Item | Amount ($000) |
|---|---|
| Sales revenue | 2,600 |
| Cost of sales | 1,300 |
| Operating expenses | 1,050 |
| Depreciation expense | 100 |
| Interest expense | 40 |
| Tax | — (tax-exempt) |
Table 2: Additional Financial Information
| Item | Amount ($000) |
|---|---|
| Capital employed | 3,500 |
| Current assets | 480 |
| Current liabilities | 400 |
| Initial investment for new project | 800 |
| Net annual cash inflow from project | 220 |
1.[2]
Calculate the gross profit for FreshSteps Foundation. Show all your working.
2.[2]
State why FreshSteps Foundation is tax exempt.
3.[2]
Calculate the current ratio for FreshSteps Foundation. Show all your working.
4.[2]
Calculate the payback period for the new project. Show all your working.
5.[2]
Explain one financial challenge that FreshSteps Foundation may face by relying on project-based cash inflows.
Question 3
HLPaper 2
SkyGen Ltd.
SkyGen Ltd. is a software company that previously operated using a traditional hierarchical structure with centralized decision-making. After losing several talented developers, the company began restructuring project teams and moving toward a flatter matrix system.
SkyGen has also updated its performance appraisal process and begun introducing self-managed development plans. The HR director is piloting new methods for evaluating staff performance while linking role enrichment to innovation output.
Table 1. Statement of Financial Position: SkyGen Ltd. (as at 31 December 2023) (All figures in $m)
| Description | $m |
|---|---|
| Property, plant and equipment | 1,800 |
| Accumulated depreciation | (600) |
| Non-current assets | 1,200 |
| Cash | 300 |
| Debtors | 450 |
| Stock | 250 |
| Current assets | 1,000 |
| Total assets | 2,200 |
| Trade creditors | 200 |
| Short-term loans | 200 |
| Current liabilities | 400 |
| Long-term borrowings | 300 |
| Total liabilities | 700 |
| Net assets | 1,500 |
| Retained earnings | 1,500 |
| Total equity | 1,500 |
Additional information:
- The PP&E figure includes $900m of specialized hardware expected to last 6 years.
- In 2023, that equipment was used to produce 15,000 units out of an expected 90,000-unit lifetime.
- Annual sales = $3,600m, of which 50% are credit sales.
- SkyGen previously used top-down summative appraisals but now trials peer-led feedback and project-based self-evaluations.
1.[2]
Calculate units-of-production depreciation for the year
2.[2]
Calculate SkyGen Ltd.’s debtor days.
3.[2]
Distinguish between summative and self-appraisal, using SkyGen Ltd. as context.
4.[2]
Explain how job enrichment and delayering might support SkyGen Ltd.’s move to a matrix structure.
5.[2]
Identify one limitation of bureaucracy in SkyGen’s previous structure
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
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 6
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 7
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.
Question 8
HLPaper 2
AquaPure Ltd.
AquaPure Ltd. is a Spanish company that manufactures portable water purification systems. Following success in domestic markets, the company launched a new product line aimed at rural communities in South America and Southeast Asia. However, issues with production planning led to stockouts during peak demand seasons, damaging customer trust. To address this, management activated parts of its contingency plan, including emergency supplier contracts.
The company’s latest research and development (R&D) project — a solar-powered filter — was recently launched but required significant upfront investment, putting strain on financial resources. The finance team has provided key financial and operational data for review.
Table 1: Selected Financial and Operational Data – AquaPure Ltd. (2024)
| Item | Amount (€) |
|---|---|
| Forecasted sales revenue | 6,000,000 |
| Actual sales revenue | 5,250,000 |
| Cost of goods sold (actual) | 2,900,000 |
| Operating expenses (actual) | 2,100,000 |
| Net profit (actual) | — |
| Capital employed | 7,200,000 |
| Average stock | 800,000 |
| Units forecasted to sell | 50,000 units |
| Units actually sold | 44,000 units |
| Contribution per unit | €60 |
| Fixed costs (annual) | €2,800,000 |
| Net cash inflow from new product (Years 1–4) | €400,000 p.a. |
| Initial investment (solar-powered filter project) | €1,200,000 |
1.[2]
Calculate the sales revenue variance and the number of units variance. Show all your working.
2.[2]
Calculate the net profit margin for AquaPure Ltd. Show all your working.
3.[2]
Calculate the stock turnover ratio for the solar-powered filter project. Show all your working.
4.[2]
Calculate the payback period for the solar-powered filter project. Show all your working.
5.[2]
Comment on the impact of stockouts during peak demand seasons on AquaPure Ltd.’s marketing strategy.
Question 9
HLPaper 2
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.
Figure 1. Statement of Financial Position: AstraPod Ltd. (as at 31 December 2024)
(All figures in $m)
| $m | |
|---|---|
| Property, plant and equipment | 1,200 |
| Accumulated depreciation | (200) |
| Net non-current assets | 1,000 |
| Cash | 250 |
| Debtors | 300 |
| Stock | 150 |
| Total current assets | 700 |
| Total assets | 1,700 |
| Trade creditors | 150 |
| Bank overdraft | 50 |
| Short-term loan | 200 |
| Total current liabilities | 400 |
| Long-term borrowings | 300 |
| Total liabilities | 700 |
| Net assets | 1,000 |
| Retained earnings | 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]
Calculate AstraPod Ltd.'s depreciation expense using the straight-line method
2.[2]
Using the information provided, distinguish between a market-oriented and product-oriented approach.
3.[2]
Identify one feature of through the line promotion and explain how AstraPod’s campaign reflects this.
4.[2]
Outline whether AstraPod is currently operating in a niche market or mass market
5.[2]
Explain one limitation of AstraPod Ltd.’s current depreciation method
Question 10
HLPaper 2
CoreByte Ltd.
CoreByte Ltd. is a medium-sized software company offering custom business platforms. The finance team recently reviewed the budget for 20XX and compared it to actual results. A summary is provided below.
To improve long-term employee motivation and reduce turnover, CoreByte Ltd. introduced a wider task variety for project teams and allocated a portion of company profits to an internal share ownership scheme. Senior leadership is divided between data-driven decision-making and intuitive approaches based on manager experience.
Table 1: Budget for CoreByte Ltd. for the period ended 2024
(All figures in $m)
| Revenue | Budgeted | Actual | Variance |
|---|---|---|---|
| Software subscriptions | 180 | 175 | 5 (A) |
| One-time custom projects | 60 | 70 | 10 (F) |
| Consulting and support | 30 | 25 | 5 (A) |
| Total revenue | 270 | 270 | 0 |
| Costs | Budgeted | Actual | Variance |
|---|---|---|---|
| Salaries and benefits | 100 | 110 | 10 (A) |
| Hardware and hosting | 25 | 20 | 5 (F) |
| Office rent | 15 | 15 | 0 |
| Marketing spend | 20 | 25 | 5 (A) |
| Utilities and admin | 10 | 12 | 2 (A) |
| Total costs | 170 | 182 | 12 (A) |
| Excess of revenue over costs | 100 | 88 | 12 (A) |
Additional data:
- Accounts receivable = $15 million
- Annual sales = $120 million
- CoreByte Ltd. has no long-term debts but is experiencing frequent short-term cash shortages.
1.[2]
Referring to Table 1, state: (i) Which revenue stream showed the most favourable variance (ii) Which cost item caused the largest adverse variance
2.[2]
Calculate CoreByte Ltd.'s debtor days
3.[2]
Explain one benefit and one limitation of using variance analysis for CoreByte Ltd.’s managers.
4.[2]
Explain how job enlargement and employee share ownership schemes may support employee motivation at CoreByte Ltd.
5.[2]
Distinguish between scientific and intuitive approaches to management decision-making, using CoreByte Ltd. as context.