Practice 3.9 Budgets (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
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 3
HLPaper 2
TerraNova Ltd.
TerraNova Ltd. is an agricultural technology company based in New Zealand that develops vertical farming systems for urban food production. The company has a strong innovative corporate culture that values experimentation, sustainability, and cross-functional collaboration. However, as TerraNova scaled operations to meet increasing demand, it introduced stricter performance targets across departments.
These changes, including the removal of flexible working arrangements in the production team, led to a deterioration in industrial relations. Employee representatives submitted a formal grievance to management, citing the lack of consultation and increased stress levels among staff. Senior leaders are now reviewing TerraNova’s budget and financial performance for Q2 2024 to assess whether further cost-cutting is needed.
The company is also exploring external sources of finance to fund a new training and automation programme aimed at improving long-term efficiency and reducing employee workload.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (NZD) | Actual (NZD) |
|---|---|---|
| Sales revenue | 2,400,000 | 2,200,000 |
| Cost of goods sold | 1,050,000 | 1,160,000 |
| Operating expenses | 920,000 | 980,000 |
| Net profit | 430,000 | 60,000 |
1.[2]
Calculate the sales variance and total cost variance for TerraNova Ltd. in Q2 2024.
Show all your working.
2.[2]
Comment on how the variances and final accounts reflect the financial impact of TerraNova’s internal changes.
3.[2]
Explain how TerraNova’s corporate culture may have clashed with recent changes to working conditions.
4.[2]
Suggest one internal and one external source of finance TerraNova Ltd. could consider to fund its employee training and automation programme.
5.[2]
Analyse how improved industrial relations could contribute to TerraNova’s long-term financial performance.
Question 4
HLPaper 2
Question 14: ClearWave Ltd.
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
1.[2]
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024.
Show all your working.
2.[2]
Calculate the actual net profit for Q2 2024.
Show all your working.
3.[2]
Analyse how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
4.[2]
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
Question 5
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 6
SLPaper 2
NutraBeam Ltd. is a health food company that produces organic protein powders and snack bars using renewable energy. The business relies on a batch production method to manufacture its goods and integrates a customised management information system (MIS) that monitors ingredient inventory levels, order fulfilment, and energy consumption in real time.
In Q2 2024, NutraBeam experienced a serious disruption when a contaminated shipment of chia seeds halted production for two weeks. This led to missed retailer delivery targets and negative media coverage. The company activated its crisis management plan, which included supplier audits, public transparency statements, and temporary outsourcing of production.
NutraBeam’s operations manager is now reviewing the company’s production planning, including safety stock levels and quality control procedures. Meanwhile, the finance department has compiled actual vs. budgeted performance data to assess the financial implications of the crisis.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted ($) | Actual ($) |
|---|---|---|
| Sales revenue | 1,800,000 | 1,540,000 |
| Cost of goods sold | 960,000 | 1,200,000 |
| Operating expenses | 520,000 | 540,000 |
| Net profit | 320,000 | –200,000 |
1.[2]
Calculate the total adverse variance in costs and the revenue variance for NutraBeam Ltd. in Q2 2024.
Show all your working.
2.[2]
Comment on what these figures suggest about the financial impact of the production crisis.
3.[2]
Explain one weakness in NutraBeam’s production planning that may have contributed to the severity of the disruption.
4.[2]
Suggest one way NutraBeam could adapt its MIS to improve production resilience in the future.
5.[2]
Analyse how budgeting can support better decision-making during and after a crisis.
Question 7
HLPaper 2
3.9 Budgets (HL only) 3.7 Cash flow 3.2 Sources of finance 4.1 Introduction to marketing 4.5 The seven Ps of the marketing mix
Question 55 CinnaBean Ltd.
CinnaBean Ltd. is a regional café chain known for its cinnamon-based desserts. The business was founded by a sole trader who used personal funds and retained profits to grow. It is now expanding into new regions after seeing steady market growth and rising customer loyalty.
The finance team prepared budgeted and actual figures for Q1 across three locations. The CEO is considering turning each café into a profit centre to enhance accountability. Meanwhile, CinnaBean is reviewing its marketing strategy and whether it should remain product-focused or shift toward a more market-driven approach.
Table 1: Performance Summary - Q1 (figures in $000)
| Category | ||||
|---|---|---|---|---|
| --------------------------------------- Revenue Cost of ingredients 130 Staff wages Utilities Marketing spend Total cost Net profit |
Additional information:
-
All cafés are centrally supplied, but some locations have begun experimenting with local product variations.
-
The owner is considering selling older equipment to fund tech upgrades.
-
Current assets: 300,000.
-
Market share in its home region rose from 12% to 15% over the past year; competitors are entering the same space.
Answer all the questions.
1.[2]
Calculate CinnaBean Ltd.'s liquidity position using the current ratio
2.[2]
State two internal source of finance that could be used for new tech upgrades
3.[2]
Explain the difference between a cost centre and a profit centre using CinnaBean Ltd.'s cafés as context.
4.[2]
Identify one adverse and one favourable variance in Table 1
5.[2]
Explain one advantage for CinnaBean Ltd. of increasing its market share and becoming the market leader.
Question 8
SLPaper 2
TerraNova Ltd.
TerraNova Ltd. is an agricultural technology company based in New Zealand that develops vertical farming systems for urban food production. The company has a strong innovative corporate culture that values experimentation, sustainability, and cross-functional collaboration. However, as TerraNova scaled operations to meet increasing demand, it introduced stricter performance targets across departments.
These changes, including the removal of flexible working arrangements in the production team, led to a deterioration in industrial relations. Employee representatives submitted a formal grievance to management, citing the lack of consultation and increased stress levels among staff. Senior leaders are now reviewing TerraNova’s budget and financial performance for Q2 2024 to assess whether further cost-cutting is needed.
The company is also exploring external sources of finance to fund a new training and automation programme aimed at improving long-term efficiency and reducing employee workload.
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (NZD) | Actual (NZD) |
|---|---|---|
| Sales revenue | 2,400,000 | 2,200,000 |
| Cost of goods sold | 1,050,000 | 1,160,000 |
| Operating expenses | 920,000 | 980,000 |
| Net profit | 430,000 | 60,000 |
1.[2]
Calculate the sales variance and total cost variance for TerraNova Ltd. in Q2 2024.
Show all your working.
2.[2]
Comment on how the variances and final accounts reflect the financial impact of TerraNova’s internal changes.
3.[2]
Explain how TerraNova’s corporate culture may have clashed with recent changes to working conditions.
4.[2]
Analyse how improved industrial relations could contribute to TerraNova’s long-term financial performance.
Question 9
SLPaper 2
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
—
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
1.[2]
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024.
Show all your working.
2.[2]
Calculate the actual net profit for Q2 2024.
Show all your working.
3.[2]
Analyse how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
4.[2]
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
5.[2]
Suggest one additional source of finance ClearWave Ltd. could consider to support future growth, and explain one advantage of your choice.
Question 10
SLPaper 2
ClearWave Ltd. is a UK-based start-up that designs and installs water purification systems for rural communities and NGOs. Its long-term business objectives include expanding into three African markets by 2026, maintaining ethical sourcing practices, and achieving an annual growth rate of 20%.
To support its growth and evolution, the company secured a government development grant, a bank loan, and retained profits. However, some stakeholders—particularly NGO clients and community partners—have raised concerns about whether expansion could compromise product quality and service support.
ClearWave’s finance team has shared Q2 2024 final accounts, alongside the business’s budgeted figures, to assess how growth pressures are impacting profitability.
—
Table 1: Budgeted vs Actual Figures – Q2 2024
| Item | Budgeted (£) | Actual (£) |
|---|---|---|
| Sales revenue | 1,250,000 | 1,100,000 |
| Cost of goods sold | 600,000 | 670,000 |
| Operating expenses | 420,000 | 430,000 |
| Net profit | 230,000 | — |
—
1.[2]
Calculate the total cost variance and the sales revenue variance for ClearWave Ltd. in Q2 2024.
Show all your working.
2.[2]
Calculate the actual net profit for Q2 2024.
Show all your working.
3.[2]
Analyse how ClearWave’s current financial performance may affect its ability to meet its growth objectives.
4.[2]
Suggest one internal and one external stakeholder group that may be concerned about the company’s expansion and explain why.
5.[2]
Suggest one additional source of finance ClearWave Ltd. could consider to support future growth, and explain one advantage of your choice.