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
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 goods sold | 1,950,000 |
| Operating expenses | 1,380,000 |
| Net profit | 270,000 |
| Capital employed | 2,400,000 |
| Average stock | 325,000 |
1.[2]
Explain how democratic leadership may help address motivation issues at AlpineWare Ltd.
2.[2]
Calculate the return on capital employed (ROCE) Show all your working.
3.[2]
Comment on what this figure suggests about AlpineWare’s financial performance.
4.[2]
Suggest one internal and one external source of finance that AlpineWare Ltd. could use to fund automation investments.
5.[2]
Analyse how motivation and financial efficiency could work together to support AlpineWare’s long-term success.
Question 5
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.
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]
Calculate:
(i) Creditor days
(ii) 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 6
HLPaper 2
RapidFit Gym
RapidFit Gym is a small chain of fitness centers offering affordable memberships and group classes. The company has seen consistent growth over the past five years but is now facing increased competition from boutique fitness studios and online fitness platforms.
RapidFit is considering investing in a new gym location or upgrading its existing facilities to attract more members. The management is also concerned about operational inefficiencies, particularly with inventory management for gym equipment and receivables from corporate clients who pay for bulk memberships.
The following financial data is provided for the year ending December 31, 2023:
| Financial Metric | Value (USD) |
|---|---|
| Revenue | 2,000,000 |
| Cost of Goods Sold (COGS) | 1,200,000 |
| Operating Expenses | 600,000 |
| Net Profit | 200,000 |
| Average Inventory | 100,000 |
| Average Accounts Receivable | 120,000 |
| Initial Investment for New Gym | 1,000,000 |
| Initial Investment for Upgrade | 500,000 |
| Projected Annual Cash Flow (Gym) | 200,000 |
| Projected Annual Cash Flow (Upgrade) | 120,000 |
| Discount Rate | 10% |
| Useful Life (years) | 5 |
1.[4]
Calculate the payback period and net present value (NPV) for both investment options (new gym location and upgrade).
2.[4]
Using the provided data, analyze RapidFit’s inventory turnover ratio and evaluate its operational efficiency.
3.[4]
Explain the impact of inefficiencies in receivables management on RapidFit’s liquidity and suggest strategies to address this issue.
Question 7
SLPaper 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 | 1,200 | |
| Accumulated depreciation | (200) | |
| Non-current assets | 1,000 | |
| Current assets | ||
| Cash | 250 | |
| Debtors | 300 | |
| Stock | 150 | |
| Current assets | 700 | |
| Total assets | 1,700 | |
| Current liabilities | ||
| Trade creditors | 150 | |
| Bank overdraft | 50 | |
| Short-term loan | 200 | |
| Current liabilities | 400 | |
| Non-current liabilities | ||
| 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:
(i) Creditor days
(ii) 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 8
SLPaper 2
Question 53 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.
Below is SkyGen Ltd.'s Statement of Financial Position as at 31 December 2023.
Statement of Financial Position: SkyGen Ltd. (as at 31 December 2023) (All figures in $m)
| Non-current assets | ||
|---|---|---|
| Property, plant and equipment | 1,800 | |
| Accumulated depreciation | (600) |
| Non-current assets | 1,200 |
|---|---|
| Current assets Cash Debtors Stock | 300 450 250 |
| Current assets Total assets | 1,000 2,200 |
| Current liabilities Trade creditors Short-term loans Current liabilities | 200 200 400 |
| Non-current liabilities Long-term borrowings Total liabilities | 300 700 |
| Net assets Retained earnings Total equity | 1,500 1,500 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.
Answer all the questions.
1.[2]
Calculate:
(i) Straight-line depreciation on the equipment
(ii) 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 and why a matrix structure may be more effective in its context.
Question 9
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 10
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]
Calculate:
(i) Creditor days
(ii) 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