Paper 2 Preparation
Paper 2
Exam Date: May 1, 2026? (TBD)
Morning Session
Paper 2 Format
Paper 2
Paper 2
Sections: A, B
Section A: 30 marks
Section B: 20 marks
Section A
Section B
Extended response question (approx 2 pages of writing)
The box is how much space they expect you to write in the exam so try to be clear and concise
Time Management: Paper 2
Time Management Paper 2 (1 hr 45)
Time Management: Paper 2 - Approx 2 min per mark
How much time for each section?
Section A: 30 marks
Per 10 mark Question
Section B: 20 marks
→ 60 min
→ 20 mins
→ 40 min
That’s Paper 2 :D
Review 3.1 - 3.9
A. Identify two examples of revenue expenditure for Big Deal. [2]
B. Explain an advantage and a disadvantage for Big Deal attempting to keep its revenue expenditure to a minimum. [4]
C. Explain the relationship between capital expenditure and Big Deal’s ability to expand. [4]
D. Explain one reason why capital expenditure is important to Big Deal’s long-term financial sustainability. [4]
Questions
A. Define the term overdrafts. 2
B. Explain two appropriate forms of external finance that Manuel could use. 4
C. Explain one advantage and one disadvantage of Manuel using internal sources of finance to open the new location. 4
D. With reference to Hail Cheeser!, explain the difference between profit and retained profit. 4
E. As a small business, explain two challenges for Hail Cheeser! in getting funding to open a new location. 6
F. Recommend one of the sources of finance that Manuel is considering for his relocation to the waterfront market. 10
A. Define the term business angel. 2
B. Explain one reason why short-term sources of finance would not be suitable for Dishes’ plans to upgrade its offices. 2
C. Explain two other forms of finance that may be available to a small independent restaurant owned by a sole trader that would not be available to Dishes. 4
D. Explain the difference between how Dishes has raised share capital so far versus raising it through an initial public offering. 4
E. Recommend whether Dishes should attempt to raise additional capital through share capital or through loan capital. 10
Questions
A. Construct a fully labeled decision tree for Amherst Global's decisions. [6]
B. Comment on two findings shown in the decision tree. [4]
C. Evaluate the usefulness of a decision tree to support Amherst Global's
decision. [10]
Decision Tree
Practice Question #2
Coffee Stop (CS) is a small cafe serving a variety of coffee drinks and healthy snacks. CS wants to increase its profits and is considering several options, as outlined below.
Option 1: Establish fair trade relationships with coffee farmers to better target ethical consumers.
Option 2:Buy a second coffee machine, that is either:
For both options 2a and 2b, the cafe would need to hire another employee, which would cost $75 000 over five years.
The probabilities, additional costs and additional revenues forecast for each option are given in Table 2. The costs and revenues are projected over a five-year period.
For both options 2a and 2b, the cafe would need to hire another employee, which would cost $75 000 over five years.
Answers!
The expected values of the three programs are:
The best option, considering only the quantitative estimated value, is option 2b because it has the largest estimated value of $9000.
However, it is important to consider that there may be other, qualitative reasons for choosing a different option. For example, if CS is trying to improve its global–social and global–ecological impact, then it might choose option 1, even though that option has a lower estimated value.
In general, if the estimated values of the different options are close to one another, a business may be more likely to consider other qualitative factors in the decision.
Calculate the Break Even Point Before drawing your chart
This will help you draw to scale
Example: Bryan’s Books
Price of each Book: $4
Variable Costs per Book:
Fixed Costs
Step 1: Calculate the Break-even Point
The break-even point (BEP) is where Total Revenue = Total Costs (Fixed Costs + Variable Costs).
1. Identify key values:
Step 1: Calculate the Break-even Point
The break-even point (BEP) is where Total Revenue = Total Costs (Fixed Costs + Variable Costs).
Calculate BEP in units (BEQ):
Step 1: Calculate the Break-even Point
Calculate BEP in revenue:
So, Bryan's Books must sell 1,000 books to break even, generating $4,000 in revenue.
Different Break Even Example showing Margin of Safety
Break Even Chart for driving lessons
• Profit and loss account�• Balance sheet
Income Statement and Balance Sheet
8. The Carolina Fire Museum (CFM) (Questions C, E, F)
OR
11. RaceWear Questions (A, D, F)
• Gross profit margin (GPM)� • Profit margin� • Return on capital employed (ROCE)
Questions: I - L
Question: B after which please do the remaining questions A-G