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E (Advanced Level) Supporting Seminar 2015

Business studies I
Answer guidance



































Every correct answer is given with two marks each Total 60 marks



(a) Macro Environment

(b) Unlimited companies

32. (a) Policy interest rate

(b) Dishonouring
33. (a) Risk & Hazard

(b) Central Bank of Sri Lanka
34. (a) Multiple stores

(b) Free Trade

(a) SA 8000 (Social Responsibility Standard)

(b) F. W. Taylor


(a) Government gazette

(b) Centralized / De-centralized

37. (a) Completeness / Accuracy / Politeness / Summarized / Specific / Low cost / Speed /

Convenience in usage

(b) Evidence is available on message

Explanations can be made through charts and figures

Message can be presented with a prior preparation

Important information can be highlighted
38. (a) Investment decisions / Financial decisions
(b) Fixed capital and working capital

(a) Financial statements / Break-even point

(b) Metropolitan Area Network


(a) Business idea

(b) Executive summary

41. (a)



Government policies on co-operatives are implemented

Auditing the accounts of co-operative societies
Registering the co-operative societies
Investigation of public compliance on co-operatives
Product franchise
Manufacturing franchise
Business format franchise

(a) Private limited company

(b) A copy of the by law

43. (a) stock cycle time

(b) Relationship marketing

Integrated marketing

Internal marketing

Social responsibility marketing / Performance marketing


44. (a) Customer concept

(b) Demographic factors maintain a very high relationship with consumer needs, wants and

45. (a) Decisions on debtors, decisions on stocks

(b) Decisions of dividends, decisions on credit and debt capital structure
46. (a) Bear market

(b) There is a low geared capita structure

Lack of responsibility to repay

There should be any mortgages

Intention of representing owners capital

Since debentures should be paid with a fixed cost
47. (a)


Cash surplus can be identified before it occurs

Cash deficit can be identified before it occurs
Cash can be planned and controlled through comparing with actual cash usage
Any future cash surplus can be invested effectively
Business can be prepared for any future cash shortage before it occurs
Liquidity ratio
Activity ratio
Gearing ratio
Profitability ratio

48. (a) To attract and to retain most suitable and satisfied labour force who gives their personal

maximum commitment to achieve organizational success

(b) Government rules / Employee attitude

Living cost / Training & Development

Salaries in similar businesses / profitability of the business / Demand and supply
for the labour
49. (a) Maximizing the wealth of the owners / Maximizing the equity capital

(b) Money market / capital market
50. (a) Strategic level

Management level

Knowledge level

Operational level

(b) Production plan

Machine and equipment requirement

Material requirement

Production overhead cost

Total cost and unit cost

Factory layout plan

Disposal of waste and environmental impact
Marks 2 20 = 40
Total marks for Paper 1 = 60 + 40 = 100


Business Studies II
1. (i) (a)

To increase the sales of the business

To increase the business capacity
To increase the market price of the share
To retain / survive in the market
To increase the quality of products
To face with the competition

(1 x 2 = 2 marks)

(b) Production, purchasing, marketing, accounting and financial activities, human

resources management, research and development
(1 x 2 = 2 marks)

(ii) (a) Secondary production depends on primary production

E.g. cultivation of fruits included under primary production and producing fruit juice,

jam, cordial using those fruits included under secondary production

(Writing the relationship 1 x 1 = 1 mark)

(Writing a related example = 1 mark)

(b) Age level, gender, income, job, beliefs, climate and weather, education levels

(0.5 mark per answer, 4 points = 2 marks)
(iii) (a) The conversion process in which resources (inputs) are converted into outputs known

as production. Anything that can be purchased from the market that has the capacity to

fulfil needs and wants are known as a product.
(2 marks)

(b) Service businesses
(1 mark)

Direct services are indirect services
(1 mark)

Interest salary

tax concessions
exchange rates
per capita income national production

(Explaining 4 answers = 4 marks)

(v) (a) Patience




(b) Foreign investments flow to the country

Foreign technology flow to the country

High quality products can be consumed

Home and foreign trade get expanded

Foreign exchange flow to the country

Foreign relationships can be developed among nations

New business structures can be developed
Diversified set of employees can be generated


(4 points = 2 marks)

(4 points = 2 marks)

2. (i) (a)

Board of investments of Sri Lanka

(1 mark)
Invested capital, Number of jobs generated, whether the product is presented to local
or foreign markets, technology that is used, infrastructure facilities that are used, and
environmental impact
(2 points = 1 mark)

(b) Government should provide financial, foreign exchange, marketing facilities and tax
concessions to businesses and businesses should generate new jobs, foreign exchange

income, contributing to the national production and environmental protection.

(2 marks)
(ii) (a) 1. Market is complex
2. High competition
3. Growth in free trade
4. Impact of globalization
(4 points = 2 marks)
(b) 1. Critical awareness

2. Active participation
3. Concern on society
4. Solidarity

(iii) (a) 1. Department of Examination

2. Department of Immigration and Emigration
3. Department of Registration of Persons
4. Central Bank of Sri Lanka
5. Foreign Embassy of The Related Country

(4 points = 2 marks)

(4 points = 2 marks)

(b) Business has to be registered if the business activities are conducted by any other name

than the name of the owner.

(1 mark)

1. Obtaining an registration application from divisional secretariat
2. Obtaining a Grama Sevaka report on business names registration
3. The completed registration application should be presented to divisional secretary
with Grama Sevaka report
4. Obtaining the business registration certificate from divisional secretary

(4 points = 1 mark)
(iv) (a) Suwimal

Sole proprietor / Sole trader
(1 mark)


Partnership / Private Limited Company / Public Limited Company
(1 mark)

Do not agree
(0.5 marks)
Only the listed public limited companies function in the Colombo Stock Exchange,
None listed public limited companies dont function or listed in Colombo Stock
(1.5 marks)


(v) (a)

1. Shops are open only for limited number of hours

2. Goods are not sold for credit
3. Lack of promotional methods used
4. Insufficient funds
5. Management problems
6. None existence of employee motivation methods

(4 points = 2 marks)

(b) 1. Financial stability

2. Reputation of the business

3. Trustworthiness

4. Expected sales amount

(2 marks)

3. (i) (a) 1. Ravindra

(0.5 marks)
2. Creativeness, identifying business opportunities, making innovations, risk bearing,
problem solving, commitment, self-confidence & others
(3 points = 1.5 marks)

(b) 1. Industrial Development Board

- Infrastructure facilities, technical services, consultancy

2. Industrial technological institute

- Technical services, consultancy

3. Export development board
- Marketing and selling facilities

4. Standard institutes
- Consultancy

(ii) (a)

Evaluating the financial stability of the business

Analysing the debtors turnover
Identifying the debenture issuing capabilities
Studying the profitability and liquidity

(2 institutes = 1 mark)
(2 services = 1 mark)

(2 points = 2 marks)

(b) Certification given by credit rating institute

Financial stability of the business can be identified
Financial institutes can be compared
Risk can be minimized

(1 mark)

(2 points = 1 mark)

(iii) (a) Value of the cheques issued can be identified

Issuing date is available
Cheque number is available
Current account balance can be ascertained

(4 points = 2 marks)

(b) 1. When the word Cash is written instead of the name of the payee the cheque is
(1 mark)
known as Cash Cheque

2. Agree
There is no payee in a cash cheque, therefore it cannot be crossed


(1 mark)

(iv) (a) Any institute or fund operates in Sri Lankan financial system that accepts savings from

the public by any nature for a certain time period is known as a contractual savings
E.g. Insurance institutes, Employee provident fund, Employee trust fund

(Explanation 1 mark, two examples 1 mark, Total 2 marks)
(b) Level of inflation

Expansion in business activities

To facilitate portability of money

To facilitate the usage

(2 marks)

(v) (a) ATM machines

Electronic Fund Transfer at Point of Sales
Tele Banking
Internet Banking

(2 marks)

(b) Can refuse

(1 mark)

According to the proximate cause principle risks that are not covered are not getting

(1 mark)
4. (i) (a) Value of the policy / Maturity period / Health of the person

(2 points = 2 marks)

(b) A transportation system includes Way, Mode, Power and Terminal. Roads constructions
represent only the Way. Therefore renovation of roads will not facilitate the growth in a

transportation system
(2 marks)
(ii) (a) 1. Introduction of new packaging methods
2. Minimizing the dual transportation effect
3. Introducing a most suitable transportation mode
4. Educating farmers on transportation

(4 points = 2 marks)

(b) 1. Providing cooling facilities

2. Usage of packages
3. Classifying products according to nature
4. Introducing appropriate stock quantities in receiving and issuing stocks

(4 points = 2 marks)
(iii) 1. Registering the business as an exporter

2. Finding a foreign buyer

3. Obtaining the export licenses if necessary

4. Receiving an indent

5. Sending the pro-forma invoice as a reply to the indent
(4 points = 4 marks)


(iv) (a) 1. Availability of bargaining power to buyers

2. Fresh products can be purchased
3. Easy access to traders
4. Cultural representation is available
5. Social relationships can be maintained

(4 points = 2 marks)

(b) Electronic communication

E-mail, Skype, Telephone
Written Letters

(2 points = 2 marks)

(v) (a) 1. The locations in which imported cargo is stored until the importer pays custom duty
and release them
(1 mark)

2. Its a solution for warehousing problem

Imported products can be sorted and graded
Imported products can be branded or labelled
Products can be sold within the bonded warehouse
Cargo can be released through paying duty in instalments
(b) Bank draft
Letter of credit
Electronic payments

Foreign payment methods (SWIFT payments)

Telegraphic transfers

(2 points = 1 mark)

(4 points = 2 marks)

5. (i) (a) Comprehensive set of knowledge developed in given a subject scope through theories,

principles and concepts is known as a Science and using it practically is known as

an Art
(2 marks)
(b) Goals and objectives included in a plan are evaluated in controlling process. Therefore

planning is needed for controlling
(2 marks)

(ii) (a) 1. Productivity

2. Time allocation
3. Cost
4. Waste
5. Profit
6. Revenue
7. Sales volume

(4 points = 2 marks)
(b) 1. Business can face with dynamic environmental changes
2. Maximum utilization of scare resources
3. Managers are guided to think about the future
4. Planning is necessary to manage others (other managers)
5. To continuous growth and existence of the business
(4 points = 2 marks)


(iii) (a) Financial motivation methods

- Loans are provided

- Bonus payments

- Products of the business are sold at subsidised prices

Non-Financial motivation methods

- Employee training
- Promotions
- Health, housing, food, uniform and transportation facilities
- Job security
- Suitable working environment
- Organizing trips from the business
- Employees are connected to business management and decisions
(4 points, two each) = 2 marks)

(b) Obtaining the support from all other parties to fulfil the vision and mission
Employees should be motivated
He should communicate with all related parties
Business activities should be controlled
Ensuring the self-confidence of followers

(4 points = 2 marks)
(iv) (a) 1.

Division of work
Job specialization
Span of control
Unity of command
Rules and regulations
Centralization and de-centralization

(b) To achieve goals of the business

To implement plans effectively
To utilize resources productively
To co-ordinate work between departments and members

(v) (a) 60 000

- 30
= 2,000 units

(4 points = 2 marks)

(4 points = 2 marks)

(1 mark)
(1 mark)

(b) 1. It can be used as an instrument in planning activities of the business related to cost,
profits and capacity
2. It can be used in production planning and setting up the product price
3. Product price, income and cost can be explained
4. Profits or loss in the different marketing stages can be presented

(4 points = 2 marks)

6. (i) (a) The base of the marketing is to fulfil needs and wants of the individuals in the society.

Therefore marketing is known as human and social process
(2 marks)
(b) 1.


(ii) (a)

Product diversification can be facilitated

Production can be expanded
Employment can be increased
Differences income distribution can be avoided
Overall economic development can be facilitated

(2 points = 1 mark)

High satisfaction for the price that is paid

Customer awareness increases as product information is given to the market
High availability of goods and services in the market
Goods can be purchased with high convenience
Living standard of the customer can be increased through purchasing different
(2 points = 1 marks)
product types


(4 points = 2 marks)

(b) Goods only provide the direct support to any service providing business to offer their

service to the customer.
Trading institute uses equipment, furniture and electric scales to provide their
A restaurant provide their service using food and furniture
A medical institute provide their service using medicine, beds, chairs and other
medical instruments
(one example is sufficient, 2 marks)

(iii) (a) Good marketing mix

* Product mix
* Price mix

* Place mix

* Promotion

Product variety, quality, package, brand, sizes warranty

listed price, Discount, allowances, repayment period,
credit terms
Distribution methods, coverage, regions, inventories,
Advertising, Sales promotion, Personal selling, public
relations and direct marketing

Service marketing mix

* People, Processes, Physical environment
(Good mix 1 mark, service mix 1 mark = total 2 marks)

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(iv) (a) 1.

Core product / Basic benefit

E.g. Motor vehicle for transportation
Basic product
E.g. Chassis of a car
Augmented product
E.g. Air condition cars
Potential product
E.g. Cars without drivers

It should be short and simple

Easy to pronounce, identify and remember
Nature and the usage is explained
Can be converted into another product
Should be differentiable from competitor products
Should represent a specific culture

(4 points = 2 marks)

(4 points = 1 mark)

(b) National brand Product is introduced to the market under one brand
E.g. Coca Cola

Private brand
A brand designed by traders after purchasing the product from
the manufacturer
E.g. Nipuna Rice

Individual brand All the products of the given business are introduced to the
market under different brands
E.g. Soda, Necto, Ginger beer
(2 points = 1 mark)
(c) Government rules, Goodwill, Income of the consumer, expected profit, expected

(2 points = 1 mark)
20 000
(d) 1. 4 +
1 000


= Rs.30.00

2. 30 1 000

(0.5 marks)

Rs. 30 000/-

(0.5 marks)

(v) (a) Name of the position, Age limit, Servicing terms, Educational and professional

qualification, Experiences, Salary levels should be included
(3 marks)
(b) Newspapers, Internet, Television, Radio, Government gazette, posters, notice boards

(2 points = 1 mark)

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7. (i) (a) -

Product specification
Quality of materials
Speed of the suppliers
Supplier trustworthiness
Lead time
Repayment terms

(4 points = 2 marks)

Production cannot be conducted continuously

Product quality will comedown
Stock maintenance cost will increase
Lost in the market share
Reputation will get affected

(4 points = 2 marks)

(ii) (a) 1. Job production / Order based production

(1 mark)



Production quantity
Flexibility of the process
Whether the production is for order for bulks

(2 points = 1 mark)

(b) 1. Durability
(2 points = 1 mark)

2. The producers take formally to monitor every steps of the production process to

verity quality of the product can be defined as quality control

(1 mark)
(iii) (a) It is the process in which all the stages of the production process is controlled

effectively to ensure the quality of the product
(1 mark)


Total cost will come down
Cost of holding and cost of ordering become equal at this point
(Correct graph is needed)

(b) Nature of the product
Connected number of employees
Time consumption on production

Power source
(4 points = 2 marks)

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(iv) (a) Benefits to the employer

1. Quality of the product will increase
2. Employee mistakes and wastage come down
3. Employee performances will increase

(2 points = 1 mark)

Benefits to the employee
1. Employee satisfaction increases
2. High eligibility to earn promotions

3. Employee performances will increase
4. The professional value of the employee increases

(2 points = 1 mark)

(b) 1. Overall expected productively of the business increases

2. Labour absenteeism will come down, production activities will flow smoothly

3. Wastage of resources will come down

4. Motivated staff can be generated

5. Employee turnover will come down

(4 points = 2 marks)
(v) (a) Human resources manager is authorized to promote and hire employees in his own
division or department (vertical authority), and he is also authorized to promote and to
transfer employees in other departments and divisions as well (horizontal authority),
but other managers are not authorized to influence promotions and transfers of other
departments and sections.
(2 marks)
(b) Job description is the process in which tasks, duties and responsibilities related to work
unit or job is identified. In job specification the qualification, experiences and talents

that a person should maintain to perform the given job is identified.

(2 marks)
8. (i) (a) Agree
(0.5 marks)
Colombo Stock Exchange facilitates investor to exchange shares and debentures of listed
companies, therefore transactions are made only among the investors as a result of it
new capital will not flow to the company.

(1.5 marks)
(b) Investing the funds of an investor in different investment sources
(1 mark)

E.g. share market investments, treasury bills, treasury bonds, fixed deposits and etc.

(ii) (a) Debentures

Reasons : 1. Debentures are paid with a specific interest only

2. They can be redeemed when needed

3. No influences on management (No votes)
(For specific answer and explanation 2 marks)



Its a solution for high gearing

Dividends are not compulsory
No obligation to redeem them
No need to provide securities
(For specific answer and explanation 2 marks)

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(b) 1. Obtaining a bank overdraft

2. Generating accrued payments
3. Delaying the payments to creditors
4. Obtaining funds from debtors as soon as possible

(4 points = 2 marks)

(iii) (a) Treasury bonds

Treasury bills
Ordinary shares
Preference shares
Share warrants
Corporate debentures
Government credit instruments


(b) Market capitalization


To businesses
1. Number of customers will increase
2. Corporate image increases
3. Promotions will enhanced
4. Revenue will increase
5. Profits will increase

Financial feasibility

To customers
1. Communication fees will come down
2. Time can be used productively
3. New relationships can be developed
4. Meeting customers with similar interests

(2 marks)
(2 marks)

(2 marks)

(2 marks)

(v) (a) Its a document that explains the cash inflows and outflows of the business for a

specific future time period.

(1 mark)

- Capital, Loans obtained, cash sales, other income, payments from
(2 points = 1 mark)

- Purchasing assets, Insurance, electricity and salary payments, loan
instalments payments and tax payments

(2 points = 1 mark)
(b) A business can move towards its goal through following a business plan as it creates a
proper path, if there is no plan business function without a goal. Then it is similar to a

boat with a broken paddle

(1 mark)

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