at the end of each question or part question.
The businesses described in this paper are entirely fictitious.
You are advised to spend no longer than 2 hours on Section A.
You are reminded of the need for good English and clear presentation in your answers.
Calculators may be used.
Section A: Data Response [25 marks]
Answer all questions.
1 Read the passage below and answer all the questions that follow.
Furnitec Inc. is a manufacturing and supplier of home and office furniture. The company manufactures the furniture at its head office in Harare and distributes it through its retail shops in Bulawayo and Mutare.
The business’s main market has been local households and newly-established firms. The company’s two furniture retail shops are strategically located near the borders to facilitate supply of furniture to neighbouring countries if prospects arise. However, the economic recession faced by the country is negatively affecting Furnitec Inc.’s operations. Worst affected by viability problems is the company’s Mutare Branch.
Workers at mutare branch are restless amid speculation of the possibility of retrenchment. Consequently, staff motivation is at its lowest ebb and this has further reduced performance of the branch. RApid fall in consumer income has reduced demand for furniture and competitors have responded by reducing furniture prices significantly.
Management has prepared interim accounts to analyse the impact of Mutare branch’s viability problems on the performance of the company. Appendices below show extracts from those accounts.
Appendix 1: Balance Sheet Extract of Furnitec Inc. as at 30 June 2006
Current Liabilities 10
Appendix 2: Table of Revenues and Costs for the Retail Branches
|Allocated fixed costs||70||20||90
a) From Appendix 1, calculate two different liquidity ratios and comment on this liquidity position. 
b) i) From Appendix 2, calculate the contribution for each branch. 
ii) Using calculations from b) i) and any other calculations, advise Furnitec Inc’s management whether to close down the Mutare branch or not. 
c) Discuss other factors that might be considered before deciding whether or not to close down the Mutare branch. 
Section B: Essays [75 Marks]
2 a) Explain how economic constraints might affect prospects of small firms. 
b) Discuss measures that small firms might undertake to minimise effects of economic constraints. 
3 ” A firm that does not manage its working capital effectively is likely to face problems.”
a) Examine the problemes like to be faced by a firm that does not manage its working capital effectively. 
b) Evaluate the methods a firm might use to manage its working capital effectively. 
4 “The probability of success for many new products is very low.”
a) Why,then, do many businesses decided to develop new products? 
b) Discuss the importance of factors that might influence the success of a new product. 
5 a) Explain the benefits of privatising state enterprises. 
b) Evaluate the effectiveness of centrally planned economic systems. 
6 Evaluate methods a business might employ to promote co-operation between management and workforce. 
7 Evaluate the contribution the Production Department can make towards the achievement of business objectives. 
8 Discuss barriers to effective communication and suggest solutions to those barriers. 
9 a) Why might a firm present data in a misleading way? 
b) To what extent is decision tree analysis an important decision making tool? 
10 a) Describe the following types of budgets:
i) flexible budgets: 
ii) zero budgets 
b) Evaluate the usefulness of budgets to a large manufacturing firm. 
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