IB Business Management Topic Unit 3: Financial…

EcoForge Ltd. is a UK-based company that manufactures energy-efficient building materials. To improve competitiveness, EcoForge has adopted a lean production strategy, including just-in-time (JIT) inventory systems and total quality management (TQM) initiatives. As part of its production planning review, the company is investing in new software to better align production schedules with customer orders.

EcoForge Ltd. plans to expand into the European market by opening a new manufacturing plant. The finance team has compiled key efficiency and financial data for 2024 to evaluate whether the company should fund this expansion internally or seek external sources of finance.

Table 1: Selected Financial Data – EcoForge Ltd. (2024)

(a) one way total quality management (TQM) can support lean production at EcoForge Ltd.

(b) the stock turnover ratio for EcoForge Ltd. Show all your working.

(e) one financial challenge that FreshSteps Foundation may face by relying on project-based cash inflows.

(e) With reference to Tables 1 and 2 only, one comment on TerraVolt Ltd.’s profitability and one comment on its liquidity position.

(e) one problem that may arise from poor internal communication between departments.

(c) on what the stock turnover ratio result suggests about EcoForge Ltd.’s inventory management (stock control) efficiency.

(d) one internal and one external source of finance EcoForge Ltd. could use to fund the new plant.

(e) how improved production planning could support EcoForge Ltd.’s financial and strategic goals.

LuminaCare

(a) With reference to Resource 3, one HR issue that may be impacting LuminaCare’s ability to scale sustainably.

(b) one financial challenge and one marketing challenge LuminaCare may face if it accepts the concessional loan.

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

(a) the gross profit for FreshSteps Foundation. Show all your working.

(b) why FreshSteps Foundation is tax exempt.

(d) the payback period for the new project. Show all your working.

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)

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.

(a) the profit before tax in 2024 for TerraVolt Ltd. (show your working). Give your final answer in €000s.

(b) TerraVolt Ltd.’s net book value of non-current assets as at 31 December 2024 (show your working). Give your final answer in €000s.

(c) Using the straight-line depreciation method, TerraVolt Ltd.’s annual depreciation expense based on the machinery investment (show your working). Give your final answer in €000s.

(d) the current ratio for TerraVolt Ltd. as at 31 December 2024 (show your working).

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 sales	40,000	42,000
Expenses	30,000	35,000
Net profit	?	?
Current assets	60,000	50,000
Current liabilities	30,000	40,000

(a) the net profit for Month 1 and Month 2. Show all your working.

(b) the current ratio for Month 2. Show all your working.

(d) one method of primary market research.

(c) Using the resources and relevant business management tools and theories, recommend a plan of action for LuminaCare over the next five years. Your plan must make a clear recommendation on financing (choose Series A now, choose the concessional loan now, or propose a staged sequence using both at different times) and your choice.

Revenue	7,500,000
Cost of sales	4,400,000
Operating expenses	2,600,000
Net profit	500,000
Average stock	550,000

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	—

IB Business Management Unit 3: Financial Management - Accounting, Ratio Evaluation, Core Financial Documents Questionbank

IB Business Management Unit 3: Financial Management - Accounting, Ratio Evaluation, Core Financial Documents Questionbank

IB Business Management Unit 3: Financial Management - Accounting, Ratio Evaluation, Core Financial Documents Questionbank

IB Business Management Unit 3: Financial Management - Accounting, Ratio Evaluation, Core Financial Documents Questionbank

IB Business Management Topic Unit 3: Financial Management - Accounting, Ratio Evaluation, Core Financial Documents Questionbank