Practice 1.3 Business objectives 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 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 ($000) |
|---|---|
| Capital employed | 3,500 |
| Current assets | 480 |
| Current liabilities | 400 |
| Initial investment for new project | 800 |
| Net annual cash inflow from project | 220 |
1.[2]
Calculate the gross profit for FreshSteps Foundation. Show all your working.
2.[2]
State why FreshSteps Foundation is tax exempt.
3.[2]
Calculate the current ratio for FreshSteps Foundation. Show all your working.
4.[2]
Calculate the payback period for the new project. Show all your working.
5.[2]
Explain one financial challenge that FreshSteps Foundation may face by relying on project-based cash inflows.
Question 2
SLPaper 2
VerdeLeaf
VerdeLeaf is a worker co-operative that produces compostable packaging for small food businesses. All employees are members who share in profits and help make decisions. As the business grew, VerdeLeaf introduced a more formal functional organisational structure, which has created friction between departments.
The business’s original objective was to remain local and values-driven, but it has recently started supplying national chains. While some members support this shift, others worry it goes against VerdeLeaf’s founding purpose. Recent feedback suggests rising demotivation in the production team, especially due to poor communication across departments and inconsistent involvement in decision-making.
The finance team has provided partial data for Q1 2024 and tasked a trainee to complete the statement of profit or loss.
Table 1: Financial data for VerdeLeaf – Q1 2024
| Item | Amount ($) |
|---|---|
| Units sold | 4,000 |
| Selling price per unit | 6.50 |
| Variable cost per unit | 2.10 |
| Salaries (production + sales) | 38,000 |
| Marketing and promotion | 14,000 |
| Office rent and overheads | 16,000 |
| Tax rate | 25% |
| Dividends paid to members | 12,000 |
Figure 1: Statement of profit or loss (partially completed)
VerdeLeaf Statement of profit or loss
for the quarter ended 31 March 2024
| Item | $ |
|---|---|
| Sales revenue | __________ |
| Cost of sales | __________ |
| Gross profit | __________ |
| Expenses: | |
| - Salaries | (38,000) |
| - Marketing and promotion | (14,000) |
| - Office rent and overheads | (16,000) |
| Profit before tax | __________ |
| Tax (25%) | __________ |
| Profit for period | __________ |
| Dividends | (12,000) |
| Retained profit | __________ |
1.[2]
Outline one challenge VerdeLeaf may face as it grows from a local co-operative to a national supplier.
2.[2]
Identify one external stakeholder and who may be interested in VerdeLeaf’s current situation.
3.[2]
Using the data in Table 1, calculate the blanks in the profit and loss account shown in Figure 1. Show all your working.
4.[2]
Explain what the profit and loss account suggests about VerdeLeaf’s cost and revenue structure.
5.[2]
Suggest one way VerdeLeaf could improve internal communication to support motivation among staff.
Question 3
SLPaper 2
FreshBurst Ltd.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector. Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
1.[2]
Using Figure 1, identify the break-even level of output for FreshBurst Ltd.’s new product.
2.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
3.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
4.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
5.[2]
Using Figure 1, calculate the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
Question 4
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 5
HLPaper 2
CleanCurrent Ltd.
CleanCurrent Ltd. is a renewable energy start-up that installs solar panels for residential and small business clients. Initially formed as a sole trader, the business recently transitioned into a private limited company (Ltd) to scale operations and attract investment. Its primary business objectives are to increase market share in suburban regions, reduce customer acquisition costs, and achieve positive monthly cash flow by the end of the fiscal year.
The business recently launched a referral programme and expanded into two new districts. While customer inquiries have increased, installation capacity has been strained, leading to delays in payments and project backlogs. This has created tension with certain stakeholders, including installers and suppliers, who are now facing late payments.
The finance manager has prepared a simple cash flow forecast for August 2024 to assess the immediate impact of CleanCurrent’s growth and financial decisions.
Table 1: Cash Flow Forecast – August 2024
| Item | Amount (£) |
|---|---|
| Opening balance | 10,000 |
| Cash inflows | 82,000 |
| Cash outflows | 96,000 |
| Closing balance | — |
1.[2]
Explain one reason why CleanCurrent Ltd. may have changed from a sole trader to a private limited company.
2.[2]
Calculate the net cash flow and closing balance for August 2024. Show all your working.
3.[2]
Suggest one conflict that might arise between two stakeholder groups as a result of CleanCurrent’s recent expansion.
4.[2]
Analyse how cash flow challenges could affect CleanCurrent’s ability to meet its business objectives.
5.[2]
Suggest one short-term strategy CleanCurrent Ltd. could implement to manage cash flow more effectively.
Question 6
SLPaper 2
FreshBurst Ltd.
FreshBurst Ltd. is a rapidly expanding company that produces natural fruit juices. The company began as a small family business but has experienced significant internal growth over the past three years. Its long-term business objective is to increase market share in the premium health drink sector.
Recently, it invested in new equipment to transition from job production to batch production, aiming to improve efficiency and meet rising demand.
The finance team has created a break-even chart to support a proposal for further investment in production facilities. Senior managers are also considering how the expansion may impact stakeholder groups.
Figure 1: Break-even chart for FreshBurst Ltd.’s new product line
1.[2]
Using Figure 1, identify the break-even level of output for FreshBurst Ltd.’s new product.
2.[2]
Explain one advantage of using batch production for FreshBurst Ltd. as it grows.
3.[2]
Outline one conflict that may arise between two stakeholder groups as a result of FreshBurst Ltd.’s expansion.
4.[2]
Explain one way the company’s objective to increase market share could influence operational decisions.
5.[2]
Using Figure 1, calculate the profit earned if FreshBurst Ltd. produces and sells 6,000 units. Show all your working.
Question 7
HLPaper 2
TechCare Solutions (TS)
TechCare Solutions (TS) is a tech company that provides software solutions to improve accessibility for people with disabilities. The company’s vision is "Empowering lives through technology." Its mission is to create innovative and affordable products that help individuals with disabilities access technology.
TS has business objectives that include expanding globally, maximizing shareholder value, and setting ethical objectives related to digital inclusion.
1.[4]
Explain how TechCare Solutions’ vision statement influences its business objectives.
2.[4]
Identify one tactical objective that TechCare Solutions could pursue to support its mission.
3.[6]
Analyze the impact of setting ethical objectives on TechCare Solutions' growth strategy.
4.[10]
Discuss the potential conflicts that may arise between TechCare Solutions' strategic objectives to maximize shareholder value and its commitment to ethical objectives.
Question 8
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 9
HLPaper 2
EcoHomes Construction (EC)
EcoHomes Construction (EC) is a company that specializes in building eco-friendly houses using sustainable materials and energy-efficient technologies. The company’s vision is "Building a greener future, one home at a time."
Its mission is to reduce the environmental impact of housing by innovating sustainable construction practices. EC's business objectives include increasing profits, expanding its operations into new markets, and ensuring its projects meet high ethical standards by maintaining certifications for sustainable construction.
1.[4]
Identify one strategic objective that could help EcoHomes Construction achieve its mission.
2.[4]
Identify one ethical objective that could support EcoHomes Construction’s vision, and explain its importance.
3.[6]
Explain how balancing profit objectives with ethical objectives could impact EcoHomes Construction's decision-making process.
4.[10]
Discuss the potential benefits and drawbacks of EcoHomes Construction adopting corporate social responsibility (CSR) initiatives as part of its long-term growth strategy.
Question 10
HLPaper 2
Prep Chef (PC)
Prep Chef (PC) produces froze ready-made meals that are organic and sold to food retailers around the country.
PC buys large quantities of organic ingredients from local farmers for its just-in-case (JIC) stock control management, using a cost-plus (mark-up) pricing strategy.
PC is known for its:
- good-quality organic frozen meals, which are perceived as good value for money
- flexibility with retailers in terms of quantity of meals supplied, credit given and efficient delivery at pre-arranged dates
- corporate social responsibility (CSR) based on a long-term commitment made to farmers to purchase large quantities of organic ingredients every four months and pay a fair price promptly
- PC has an excellent working relationship with farmers, who always prioritize PC’s requests in terms of quantity and delivery.
Recently, an economic downturn and increased competition, especially from non-organic frozen meal suppliers, has decreased demand for frozen organic meals.
The finance manager of PC, Connie, provided the following financial information.
Table 1: Selected financial information for PC
| Total revenue | $6000000 | $3500000 |
| Gross profit margin | ||
| Net profit margin | ||
| Creditor days | 10 | 5 |
| Debtor days | 50 | 70 |
| Stock turnover days | 20 | 40 |
| Current ratio | 2.1 | 2.4 |
| Acid test (quick) ratio | 0.8 | 0.6 |
Connie is worried about the cash flow of PC and suggested the company changes the stock control method from just-in-case (JIC) to just-in-time (JIT). She is also looking at other strategies to improve PC’s financial position.
1.[2]
Define the term corporate social responsibility (CSR).
2.[4]
Explain one advantage and one disadvantage for PC of using a cost-plus (mark-up) pricing strategy.
3.[4]
Explain one advantage and one disadvantage for PC of changing its stock control method from just-in-case (JIC) to just-in-time (JIT).
4.[10]
With reference to Table 1, evaluate two strategies that PC could use to improve its financial position other than transitioning to a just-in-time (JIT) stock control method.