IB Business Management 1.3 Business Objectives Questionbank

FreshSteps Foundation

FreshSteps Foundation is a non-profit social enterprise based in Kenya that installs small-scale water filtration systems in rural communities. It operates as a private limited company (Ltd) but reinvests all surplus profits to expand its social impact rather than paying dividends.

Its business objectives include achieving financial sustainability and maintaining a minimum return on capital employed (ROCE) of 5% to fund future installations without relying heavily on grants.

Table 1: Statement of Profit or Loss for FreshSteps Foundation for the year ending 31 December 2024 (figures in $000)

Table 2: Additional Financial Information

VerdeLeaf

VerdeLeaf is a worker co-operative that produces compostable packaging for small food businesses. All employees are members who share in profits and help make decisions. As the business grew, VerdeLeaf introduced a more formal functional organisational structure, which has created friction between departments.

The business’s original objective was to remain local and values-driven, but it has recently started supplying national chains. While some members support this shift, others worry it goes against VerdeLeaf’s founding purpose. Recent feedback suggests rising demotivation in the production team, especially due to poor communication across departments and inconsistent involvement in decision-making.

The finance team has provided partial data for Q1 2024 and tasked a trainee to complete the statement of profit or loss.

Table 1: Financial data for VerdeLeaf – Q1 2024

Green Haven Ltd. (GH)

Green Haven Ltd. (GH) is a small private limited company that produces indoor hydroponic garden kits. GH was started by two former biology teachers with the aim of promoting sustainable food production in urban homes.

Initially, GH was funded through personal savings and a bank loan. In its first year of operation, GH earned € 240,000 in revenue and incurred € 160,000 in total costs. GH purchases components from suppliers on 30-day trade credit terms. GH now aims to expand and is considering applying for a government grant to help fund the purchase of new machinery.

Table 1 shows selected financial information for GH.

Table 1: Selected financial data for GH

UrbanNest Ltd.

UrbanNest Ltd. is a UK-based furniture company that designs and sells compact, modular pieces for urban apartments. Originally founded as a partnership, it restructured into a private limited company (Ltd.) to raise capital for growth. Its business objectives include increasing market share by 10% annually and maintaining a ROCE of 15%. Following strong domestic sales, UrbanNest is planning to launch a new e-commerce platform to support international expansion into Southeast Asia.

While revenue growth remains steady, rising marketing spend and inventory costs have placed pressure on liquidity. The finance team has shared final account data for 2024, revealing tight cash reserves and slower inventory turnover due to new customisable product lines. The company is now exploring funding options to support its expansion plan.

Table 1: Selected Financial Data – UrbanNest Ltd. (2024)

CleanCurrent Ltd.

CleanCurrent Ltd. is a renewable energy start-up that installs solar panels for residential and small business clients. Initially formed as a sole trader, the business recently transitioned into a private limited company (Ltd) to scale operations and attract investment. Its primary business objectives are to increase market share in suburban regions, reduce customer acquisition costs, and achieve positive monthly cash flow by the end of the fiscal year.

The business recently launched a referral programme and expanded into two new districts. While customer inquiries have increased, installation capacity has been strained, leading to delays in payments and project backlogs. This has created tension with certain stakeholders, including installers and suppliers, who are now facing late payments.

The finance manager has prepared a simple cash flow forecast for August 2024 to assess the immediate impact of CleanCurrent’s growth and financial decisions.

Table 1: Cash Flow Forecast – August 2024