Question page 17

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A. Entrepreneur: Sonya; investors: brother (part-owner) – bank (lender); customers; employee (book-keeper/receptionist); employer: Sonya; service providers: (bank/landlord/phone company); suppliers (photo materials); interest group (Chamber of Commerce)

B. (i) co-operation and possible change: all stakeholders co-operate due to mutual need; change might be when one of the stakeholders (e.g. employee) wants a bigger share of the wealth created; investors provide capital, Sonya provides enterprise; change might be the failure to repay loan or pay the dividend; interest group (Chamber of Commerce) commissions a brochure; change might be that they are dissatisfied with the product(ii) competition and possible change: landlord v. entrepreneur (rent raised);change might be an agreement on a 5-year rent deal; employee v. employer (wages); change might be a wage-rise demand; service supplier (bank) v. entrepreneur (bank charges); change might be an increase in charges

C. non-legislative: discussion/negotiation => agreement; mediation => agreement;legislative: hire a solicitor => court.

Answer page 17

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Question page 29

Page 29

Higher Level Section 2 Applied Business Question Page 29

A. Rights under the Sale of Goods and Supply of Services Act 1980: a car fit for specified purpose, i.e. to tow a standard caravan.Remedies: car sold was not fit, so refund

B. Get advice as to suitable car before buying – check a range of suitable cars – get his choice of car checked by a mechanic before buying – know rights re purchases and guarantees – read guarantee before signing it

C. For Paddy: Non-legislative resolution is cheaper, more certain, quicker than court action (his claim is probably above the limit for the Small Claims Court). He is without a car and is trying to get his money back so legislative resolution would take too long.For seller: Non-legislative resolution would save legal costs (he’d probably lose in court) and bad publicity; he would also get payment for towing.

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Question page 49

Page 49

A. 10% pay claim: discussion – negotiation – code of practice – conciliation, Industrial Relations Officer (IRO) – arbitration (Labour Court)Dismissal: meeting – conciliation (third party) – mediationArbitration (Rights Commissioner) – arbitration (Labour Court or Employment Appeals Tribunal)Promotion dispute: discussion – negotiation – compromise – mediation (Equality Mediator) – arbitration (Equality Officer) – Labour Court (arbitration on appeal)

B. Joe O’Neill: Rights Commissioner would reinstate him with compensation for pay missed out on – Unfair Dismissals Act – no proper procedure for dismissal – grounds for dismissal not fairAnn Murray: an Equality officer would judge which was more important for the job of Sales Manager: Anne’s extra experience and better sales record or Seán’s fame as a former footballer. Either answer is acceptable. The only relevant point in law is that promotion cannot be based on gender

C. 10% pay claim: regular reviews of pay and productivity – agreed procedures for pay claims – reference to national agreements – productivity incentive schemes for workersDismissal: payment for extra work done, negotiation for additional work, employ a temporary replacement for absent workers, different managerial approach.Promotion: clear guidelines for promotions, discussion with disappointed candidates, recognition of Anne’s experience and sales record.

Answer page 49

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Question page 62

Page 62

A. Characteristics: initiative (selling father’s lettuce) – communicator (persuaded parents) – creative (food from leftovers) – energetic (up early before school) – resilient (find a more secure idea).

B. Skills: identifying opportunities (finding a good business idea) – innovation (to ensure the product has an appeal) – risk assessment (ensuring risks are minimised) – planning (clear objectives and necessary resources) – time management (to ensure important tasks are dealt with first) – decision-making (good decisions made in time)

C. Initiatives to start projects – confidence to take risks and still succeed – flexible (able to work in changing environment) – people person (able to work well with others) – leadership (to motivate others to get involved) – future focused (to identify needs of community – planning (put ideas into action) – decision making (ensure good collective decisions are made, etc).

Answer page 62

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Question page 71

Page 71

A. Characteristics: people person (builds up team spirit) – analytical (knows why finance is needed and benefits) – hard-working (occasionally works late at the office) – time manager (allocates time well, delegates)Activities: planning (1/2 hour session each morning) – organising (everyone knows what they have to do)

B. Geraldine’s role: to run the factory (set objectives daily – motivate workers – make sure everyone knows what to do)Kevin’s role: to set up the business, employ a manger to run it, develop ideas for the business, arrange the finance that Geraldine asks for

C. Lack of time to perform both roles well so either one or both, would suffer. Could he be on the spot “when the situation requires it”?Lack of managerial ability: Kevin can’t delegate as well as Geraldine; could he build up the same team spirit or create a great sense of order?

Answer page 71

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Question page 83

Page 83

A. Joseph Hanratty is a democratic leader: makes suggestions – calls a group together to generate ideasPatricia Cooney is more autocratic: always gives very definite instructions – delegates little (expects to be consulted about changes and makes the decision herself)

B. Yes: Design/illustration require lots of creativity and teamwork, so a democratic or laissez-faire style is needed (lots of projects on the work areas) (very flexible time-keeping)Production is a mechanised process, which an autocratic style may suit (workers and machines implement manager’s decisions) – less opportunity for creativity and initiative

C. Joseph: a Theory Y manager (McGregor) – encouraging, supporting creativity, (chatting to some people about their work), (makes suggestions), (calls a group together to generate ideas). Re Maslow: he seeks to satisfy their need for acceptance (calls a group together) and workers are self-actualising (“my work” … with enthusiasm)Patricia: a Theory X manager (McGregor) – uses bonuses to motivate – doesn’t trust the workers (often on the factory floor, seeing what is happening). Re Maslow: she only looks after their physiological needs (well paid, bonuses).

Answer page 83

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Question page 112

Page 112

A. Some did not receive Notice of Meeting, or Agenda – Agenda not followed – angry blaming, criticising, instead of objective points – worker’s side not heard

B. Some did not get Notice/Agenda (as a result, some late, unprepared for meeting, probably angry) – Agenda not followed (and so, control of meeting lost) – Production Manager was allowed to ‘angrily blame’ the H.R. Manager (and so, several departmental managers in turn criticised one another) – the workers’ representatives felt unfairly treated (‘challenged the Chairman to be fair and to hear both sides’) and so, their trust in the management was damaged

C. Should be in control – (insisting that Agenda be followed and all comments made to the Chairperson, not to others at the Meeting)Impartial (allow workers side to be heard) – good humoured (maintain a positive atmosphere). See p90.

Answer page 112

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Question page 130

Page 130

A. Strengths: high quality standards – skilled, dedicated workforce – Honours degree in Business and Language – fluent French and SpanishWeaknesses: outdated styles – poor credit control – bad stock controlOpportunities: tourist numbers growing – demand from US chain stores – worldwide market for scarves and shawlsThreats: possible loss of US market due to lack of response (also, competition from other knitwear manufacturers)

B. Mission statement: high quality contemporary knitwear for world marketStrategic plan: marketing objectives for each market – improved controlsTactical plans: product range for each market – credit control system – stock control systemOperational plans: monthly sales targets per market – appoint designer – appoint credit controller – appoint stock controller – constant review of stock, credit positionsContingency plans: cover for possible illness or absence of Jennie

C. Credit Control: save interest – save bad debts – improve cash flow – reduce administration costs.

Answer page 130

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Question page 152

Page 152

A. Short-term: six months rent – wages of staff during training – stocks of raw materials – payment for gas bills – other short-term expenses, e.g. electricity/phoneMedium-term: purchase of production machinery, office furniture and equipment, vehiclesLong-term: purchase of premises, purchase of high cost equipment, e.g. kiln.

B. Raw materials: use trade credit – get goods – pay later – supplier will give 30–60 days credit – no cost to firm – supplier will be patient with new customers with potential for sales growthVehicles: leasing – no capital outlay – regular payments – full possession and use – tax efficient – no worry about obsolescence – option to purchase – no ownership initiallyPremises: (long term loans – repayments and interest must be paid – premises may be required as security for loan – personal guarantee may be required – interest payable reduces profits – tax liability – must meet banks’ lending criteria

C. Identify amount of set-up finance needed before any income generated – analyse long-, medium- and short-term finance needs – detailed plan allows control of cash flows – able to organise finance needed in advance – avoid running out of cash – identify times when cash flow is tight – identify times of excess cash which can be fully used – allows matching of sources of finance to uses.

Answer page 152

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Question page 175

Page 175

A. Insurance risks: Employer’s Liability – Product Liability – Public Liability – premises and contents – vehicles – Consequential Loss.Taxes: PAYE Income Tax – PRSI – Valued Added Tax – Corporation Profits Tax

B. Actual Value of Crane €100,000Value insured €60,000Proportion/Average insured = €60,000 €100,000 = 3/5Claim for loss €32,000Compensation paid = €32,000 x 3/5 = €19,200Average clause: firm was underinsured and so is only paid a proportionate amount of the claim**Note: error in question – should have asked for ‘rule’ not ‘principle’

C. Employer’s Liability: health and safety training – protective clothing – safe work environment – safety practices – reduce accidents and claims – reduce premiums.Product Liability: product safety features – safety instructions for use – quality checks – product testing – improves product safety – reduce claims – reduce premiums.Public Liability: health and safety notices and information – safety procedures for public and visitors – protective clothing – reduces accidents and injuries – reduce claims – reduce premiums.Premises and Contents: protective devices and systems – sprinkler system against fire – fire alarms – CCTV against robberies or stealing – safes or storerooms for valuable items – security staff – reduce fire risks and burglary or theft – reduce claims – reduce premiums.

Answer page 175

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Question page 198

Page 198

Question page 198

Page 198

A. Assess past performance – identify problems to be resolved, e.g. profitability, liquidity – assists decision making – monitoring and controlling costs – financial planning, e.g. cash flow statements – measuring management performance – identifying needs for finance – assessing the financial strength of the firm

B. ProfitabilityNet Profit percentage = net profit/sales x 100.2003 = 18,000/140,000 x 100 = 12.9%2004 = 19,000/170,000 x 100 = 11.2%Return On Investment = Net Profit/Capital Employed x 100.2003 = 18,000/320,000 x 100 – 5.6%2004 = 19,000/360,000 x 100 = 5.3%The firm is profitable. The Net Profit percentage has fallen slightly from 12.9% in 2003 to 11.2% in 2004.The Return On Investment has fallen from 5.6% in 2003 to 5.3% in 2004. This is about the same as the rate of interest paid by banks on risk-free depositsLiquidityCurrent ratio = Current Assets/Current Liabilities.2003 = 67,000/36,000 = 1.92004 = 71,000/46,000 = 1.5Acid Test ratio = (Current Assets – Stock)/Current Liabilities.2003 = (67,000 – 35,000)/36,000 = .92004 = (71,000 – 42,000)/46,000 = .6The Current ratio has worsened from 1.9 in 2003 to 1.5 in 2004. This is well below the norm of 2. The Acid ratio has worsened from .9 in 2003 to .6 in 2004. This is well below the norm of 1. The firm may not be able to pay its short-term debts as they fall due.

Answer page 198

Page 198

Debt/Equity positionDebt/Equity ratio = Debt Capital/Equity Capital x 100.2003 = 100,000/220,000 x 100 = 45.5%2004 = 120,000/240,000 x 100 = 50%The debt position of the firm has worsened with the Debt/Equity ratio rising from 45.5% in 2003 to 50%

in 2004. The debt position is relatively high at 50% and should be reduced

C. Profitability – increase selling prices – reduce purchasing costs – reduce stock losses/damage – change to lower cost suppliers – reduce the expenses of the business.Liquidity – reduce credit days given to debtors – increase credit period received from creditors – ensure adequate working capital for level of sales – sell-off slow moving stock and convert to cash – issue more shares – take out a loan – sell and leaseback a fixed asset.

Answer page 198

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Question page 219

Page 219

A. Wages/salaries: essential; profit-sharing scheme: good motivator where management have inculcated a team spirit; pensions: poor value as a motivator as they are not linked to the employee’s performance (Note: share ownership/options are not suitable for most employees of a private limited company)

B. Specify job title/description – person specification – pay and conditions – how to apply – contact number/address.Also cannot specify age, gender, marital status, religion or race

C. Successful growth: requires sustained increase in output and sales, which means anticipating and creating customer demand and meeting this demand adequately. It also requires good management to plan, organise and control the firm as it grows.Training: gives job skills – updates skills – enables flexible response to change – focuses on customer satisfaction – all of which are essential for the growth of Murphy Metalwork.Development: is very important for successful growth: prepares for new responsibilities in an unpredictable future – broader understanding – capacity/confidence to take on new challenges.Especially important for management, planning/organising/controlling future growth of Murphy Metalwork successfully.

Answer page 219

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Question page 236

Page 236

A. Past/present: falling market share => loss of revenue and loss of customers.New competitors with different USPs => possible collapse of Uisce’s market.Product quality declining or withdrawal of products => loss of customers or possible health risk => closure by Health Board or possible consumer court action.Dissatisfied, frustrated staff => a further drop in quality or drop in productivity.Future: possible closure by Health Board – unlikely to survive this: possible strike => very difficult to recover customers, considering present situation

B. Product team could be drawn from various departments, with expertise in hygiene, testing, production, maintenance, Human Resources, marketing and finance to produce proposals, as a matter of urgency; to improve product quality. Management decides objectives and deadlines, allocates resources, chooses team members and/or the team leader. The team could work co-operatively to research the problem and present proposals to solve it.Management may approve the proposals and appoint a new team (or the same one) to implement the proposals. When the project is completed, team members would return to their departments

C. Changes: falling market share; new competitors and a decline in product quality. A facilitator approach would involve consultation with employees about these problems – seeking solutions – encouraging constructive criticism – encouraging the taking-on of extra responsibilities and providing training and support to help with those responsibilities.Dissatisfaction or frustration among staff would hardly arise if this facilitative process were done properly. Should they arise, discussion, consultation and recognition of effort would be needed anyway to resolve this problem.However, it would probably be difficult for Michael to successfully change his management style, after all these years and so, rather than Michael changing style, a new manager (e.g. Joseph) with new methods would be more likely to succeed.

Answer page 236

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