Stakeholders and their conflicting interests - Worksheets, Questions and Revision

15 original exam-style questions - 4 pages of questions with a full mark scheme - free printable PDF.

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This topic is chapter 4 of GCSE Business: Business in the real world and enterprise Practice Book 1.

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1.4 Stakeholders and their conflicting interests

AQA 8132 · Calculator allowed · about 60 minutes

Total Marks

Name: _______________________________ Date: ____ / ____ / ______

Answer ALL questions in the spaces provided. Show your working for any calculation: method marks are available even if your final answer is wrong. Marrow Lane Grocers, used throughout this pack, is a fictional business.

Which one of the following best describes the government's interest in a business like Marrow Lane Grocers?

A) Collecting corporation tax revenue and ensuring the business complies with the law
B) Receiving a share of Marrow Lane Grocers' dividends
C) Buying groceries at a discounted price
D) Lending Marrow Lane Grocers money to expand

(Total for Question 1 is 1 mark)

State two interests that customers have in a business like Marrow Lane Grocers.

(Total for Question 2 is 2 marks)

Which one of the following is an INTERNAL stakeholder of a business?

A) A customer
B) A local resident
C) An employee
D) The government

(Total for Question 3 is 1 mark)

Marrow Lane Grocers has 12 members of staff who share the employee bonus pool (question 11b) equally. Calculate the bonus each employee receives. Show your working.

(Total for Question 4 is 2 marks)

State two ways, other than pay or a bonus, that Marrow Lane Grocers could satisfy the interests of its employees.

(Total for Question 5 is 2 marks)

Which one of the following is the best example of a pressure group taking an interest in Marrow Lane Grocers?

A) A regular customer buying groceries every week
B) An employee working on the tills
C) A shareholder attending the annual general meeting
D) A local environmental campaign group calling on Marrow Lane Grocers to reduce plastic packaging

(Total for Question 6 is 1 mark)

Marrow Lane Grocers makes £80,000 of profit before tax. Corporation tax is charged at 19% of profit.
Calculate the corporation tax Marrow Lane Grocers must pay. Show your working.

(Total for Question 7 is 2 marks)

Using your answer to question 7, calculate Marrow Lane Grocers' profit after tax. Show your working.

(Total for Question 8 is 2 marks)

Explain one way in which the interests of Marrow Lane Grocers' shareholders and the local community could conflict.

(Total for Question 9 is 3 marks)

Explain one way in which the interests of Marrow Lane Grocers' shareholders and its employees could conflict.

(Total for Question 10 is 3 marks)

Marrow Lane Grocers' board decides to allocate its £64,800 after-tax profit (question 8) as follows: 40% to shareholders as dividends, and 5% to an employee bonus pool.

(a)Calculate the total dividend pool paid to shareholders.(2)

(b)Calculate the total employee bonus pool.(2)

(Total for Question 11 is 4 marks)

Marrow Lane Grocers also allocates 2% of its after-tax profit (question 8) to a community donation fund, and keeps the rest of the after-tax profit as retained profit for reinvestment.

(a)Calculate the community donation fund.(2)

(b)Using your answers to questions 8, 11 and 12a, calculate the retained profit kept for reinvestment.(2)

(Total for Question 12 is 4 marks)

Explain one reason why shareholders might argue that the £25,920 dividend pool (question 11a) should be even larger, at the expense of the employee bonus pool (question 11b).

(Total for Question 13 is 3 marks)

Marrow Lane Grocers' shareholders are pushing for their dividend share to rise from 40% to 50% of after-tax profit (question 11a) next year. This extra dividend would come entirely out of retained profit (question 12b), reducing the funds available for store reinvestment, while the employee bonus pool (question 11b/11) and community donation fund (question 12a) would stay unchanged.
Recommend whether Marrow Lane Grocers' board should approve the shareholders' request. Justify your answer using the figures and points made earlier in this pack.

(Total for Question 14 is 9 marks)

Marrow Lane Grocers is considering switching all its fresh produce packaging to a more expensive biodegradable material after a local environmental pressure group (question 6) campaigned against its plastic packaging. Analyse the impact of this decision on the conflicting interests of Marrow Lane Grocers' shareholders and its customers.

(Total for Question 15 is 6 marks)

Mark scheme · 1.4 Stakeholders and their conflicting interests

Question 1

B1 A cao
Answer: A

Question 2

B1 fair or competitive prices (oe)
B1 good quality products, reliable stock availability, or good customer service (oe)
Answer: Any two, e.g. fair or competitive prices; good quality products and reliable stock availability.

Question 3

B1 C cao
Answer: C

Question 4

M1 3,240 / 12 seen (ft from question 8b)
A1 £270 cao
Answer: £270.

Question 5

B1 one acceptable way, e.g. offering job security/permanent contracts
B1 a second acceptable way, e.g. training and promotion opportunities, or safe/pleasant working conditions
Answer: Any two, e.g. job security; training and promotion opportunities.

Question 6

B1 D cao
Answer: D

Question 7

M1 80,000 x 0.19 seen
A1 £15,200 cao
Answer: £15,200.

Question 8

M1 80,000 - 15,200 seen (ft from question 6)
A1 £64,800 cao
Answer: £64,800.

Question 9

B1 identifies the conflict, e.g. shareholders want costs kept low to maximise profit and dividends
B1 develops the point, e.g. this could mean the community donation fund (question 10a) or measures to reduce noise/traffic near the store are kept to a minimum
B1 links clearly to an outcome, e.g. local residents may then feel the business is not giving enough back, which could damage its reputation and local support
Answer: Shareholders wanting costs kept low to maximise dividends could mean the community donation fund or measures to reduce local traffic/noise are kept to a minimum, which could damage the business's reputation and local support.

Question 10

B1 identifies the conflict, e.g. shareholders want a larger share of profit paid out as dividends
B1 develops the point, e.g. this can mean less money is available to increase staff pay or hire extra staff
B1 links clearly to an outcome, e.g. employees may become demotivated or leave for better-paid jobs elsewhere, which the business must weigh against keeping shareholders satisfied
Answer: Shareholders wanting a larger dividend can mean less money is available to increase staff pay, which could demotivate employees or cause them to leave, a trade-off the business must manage.

Question 11

(a) M1 64,800 x 0.40 seen (ft from question 7)
(a) A1 £25,920 cao
(a) Answer: £25,920.
(b) M1 64,800 x 0.05 seen (ft from question 7)
(b) A1 £3,240 cao
(b) Answer: £3,240.

Question 12

(a) M1 64,800 x 0.02 seen (ft from question 7)
(a) A1 £1,296 cao
(a) Answer: £1,296.
(b) M1 64,800 - 25,920 - 3,240 - 1,296 seen (ft from question 7, 8a, 8b, 10a)
(b) A1 £34,344 cao
(b) Answer: £34,344.

Question 13

B1 identifies a reason, e.g. shareholders took the financial risk of investing in Marrow Lane Grocers and expect a return in exchange
B1 develops the point, e.g. they may compare their return with what they could earn investing the same money elsewhere
B1 links clearly to an outcome, e.g. if the dividend feels too low compared with the risk taken, shareholders may sell their shares or refuse to invest further, weakening the business's access to finance
Answer: Shareholders took the risk of investing and expect a competitive return; if the dividend is too low compared with the risk taken or with other investments available, they may sell their shares or refuse further investment, weakening the business's access to finance.

Question 14

Level 1 (1-3): Makes simple, undeveloped comments about the dividend request, with little or no use of the pack's figures and no clear recommendation.
Level 2 (4-6): Gives a developed argument for or against approving the request, using some of the pack's figures, but does not fully weigh both sides or reach a clearly justified recommendation.
Level 3 (7-9): Weighs the evidence for and against approving the request, using the dividend, retained-profit and stakeholder figures from this pack, and reaches a justified recommendation supported by that analysis.
Indicative content:
- For approving: shareholders took the financial risk of investing in Marrow Lane Grocers (question 9) and a higher, more competitive dividend could help retain their support and make it easier to raise further finance from them in future.
- For approving: the employee bonus pool and community donation fund are protected/unchanged, so this specific conflict does not directly worsen relations with those two stakeholder groups.
- Against approving: retained profit would fall from £34,344 (question 10b) by the full amount of the dividend increase, leaving less money for reinvestment in the store, which could limit future growth or maintenance.
- Against approving: reduced reinvestment could eventually affect employees and customers indirectly (e.g. an ageing store, fewer opportunities for pay rises funded by growth), even though the bonus pool itself is untouched this year.
- Judgement: a reasonable recommendation is that the board should only approve part of the increase, or delay it, since retained profit funds the business's own future (and indirectly all other stakeholders' long-term interests), so protecting a reasonable level of reinvestment alongside a modest, not maximal, dividend rise is likely to balance shareholder and business interests better than the full request.

Question 15

Level 1 (1-3): Makes simple, undeveloped points about the packaging change, with limited application to Marrow Lane Grocers and little or no reference to the pack's stakeholder groups or figures.
Level 2 (4-6): Provides a developed and applied analysis of the benefits and drawbacks of the packaging change for both shareholders and customers, referring to Marrow Lane Grocers' figures or stakeholder interests.
Indicative content:
- Biodegradable packaging costs more than plastic packaging, which would reduce Marrow Lane Grocers' profit and therefore the after-tax profit available for the dividend pool (question 8a), directly affecting shareholders' interests.
- Shareholders may accept a smaller short-term dividend if the change protects the business's reputation and long-term sales, since ignoring pressure group campaigns can risk a damaging boycott or negative publicity.
- Customers concerned about the environment are likely to welcome the change, which could attract new environmentally conscious customers or increase loyalty among existing ones (question 17).
- Other customers focused mainly on price (question 17) may be less positive if higher packaging costs are eventually passed on through higher prices, which would work against their main interest.
- A balanced conclusion might note that the change is likely to satisfy the pressure group and environmentally conscious customers while creating a short-term cost pressure on shareholders' dividends, so Marrow Lane Grocers needs to judge whether the reputational benefit outweighs the reduced profit, similar to the dividend-versus-reinvestment trade-off already considered in question 15.

Stakeholders and their conflicting interests - Worksheets, Questions and Revision

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Related topics

1.4 Stakeholders and their conflicting interests

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Question 7

Question 8

Question 9

Question 10

Question 11

Question 12

Question 13

Question 14

Question 15

Mark your answers

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Question 7

Question 8

Question 9

Question 10

Question 11

Question 12

Question 13

Question 14

Question 15