| Date | November 2016 | Marks available | 6 | Reference code | 16N.1.SL.TZ0.1 |
| Level | Standard level | Paper | Paper 1 | Time zone | Time zone 0 |
| Command term | Explain | Question number | 1 | Adapted from | N/A |
Question
With reference to Medimatters, describe two steps in setting up a new business.
Refer to case study: Medimatters
Explain suitable sources of finance in order for Medimatters to finance the additional setup cost of $50 000 (line 92).
Refer to case study: Medimatters
Markscheme
Possible steps include:
- identifying market opportunities: in this instance the medical industry or general public
- sourcing capital: in this instance the owners plus possible outside sources
- determining a location: may not be an issue unless they decide to make the lenses themselves
- building a customer base: a challenge in this instance.
Others steps could include:
- business idea/model/plan
- ownership decisions/legal structure
- name, registration, copyrights/patents
- product rangeroles / training.
Mark as 2+2.
Accept any other relevant step.
Award [1] for each correct step identified and [1] for a description of how that step relates to Medimatters. Award a maximum of [2] per step.
They require $60 000 to start trading.
They are each able to contribute some finance, but this will be insufficient.
- Set up as a private limited company. Would they want other shareholders? Family and friends might want to invest but would anyone else? Venture capital/Angels.
- Loans are a possibility but would banks/lenders be interested? There is no collateral and no trading history so seems unlikely.
- Working capital sources not available since not trading.
- Also debentures, mortgages not appropriate (accept as source but not contextual). Overdrafts not contextual.
- Grants/subsidies, particularly from medical/research organizations could be
helpful. For example, governments might have business start-up
loans/grants.
To what extent would they want to retain control? If this is not an issue there may be possibilities from venture capitalist sources.
Accept any other relevant application.
Marks should be allocated according to the paper 1 markbands for May 2016 forward, section A.
For a theoretical answer award a maximum [3]. For only explaining one source of finance award a maximum of [3].
If it answers the question “What source?” without explaining sources, award a maximum of [4].
If the explanation is mainly descriptive, but in context, award a maximum [5].
