Here are some hints for the last question
Sam is planning to expand her business and is considering taking out a bank loan.
Evaluate the importance of her annual Profit and Loss Account and Balance Sheet to the bank when she applies for a loan. (10 marker)
- When using the word EVALUATE - it means you need to look at advantages and disadvantages.
- Evaluate the importance of two financial statements – the profit and loss account and the balance sheet – to a stakeholder (the lender).
- To reach a high level it is essential that you demonstrates evaluative skills.
- Simple statements and theory about the importance of financial statements will only give you a max of 3 marks.
Level 1 1 – 3 MARKS Candidate has made simple statements about profit and loss and
balance sheets. Candidates may only consider one financial statement.
There may be limited development at the top end of the level e.g. The bank will want to see the profit and loss account because it will show them if they have enough money to pay back the loan. The quality of written communication will be poor with frequent spelling, punctuation and grammar errors and the style of writing will not be appropriate to the subject matter
Level 2 4 – 7 MARKS A reasoned evaluation will be given but the answer will lack balance. Candidates are likely to make reference to one of the financial statements with some development. Candidates are likely to have considered either profitability as shown in the P & L account or the liquidity shown in the balance sheet. There will be a good level of quality of written communication with few mistakes in spelling, punctuation and grammar. The quality of the
language used will be appropriate for the subject matter; however its
use will not be as confidently used as that in level 3.
Level 3 8 – 10 MARKS A reasoned and developed evaluation will be given. Both documents will be discussed with some importance/value attached as
development. At the top end of the level a conclusion will be given which shows
understanding that the bank would not base their decision on the financial documents from one year only but would want to see them across a number of years (3) plus a forecast to assess the trends before making a decision on a loan.
The quality of written communication will be of a high standard with few, if any, errors in spelling, punctuation and grammar. The style of writing and the structure of the response will be appropriate and of a high standard and there will be clear evidence of analysis in the answer.