Home › Learning Hub › IB DP Business Management › Paper 2: quantitative
P2

Paper 2: quantitative stimulus

Assessment · SL and HL

Paper 2 tests your quantitative skills: ratios, break-even, investment appraisal, cash flow and more, applied to stimulus material you see for the first time in the exam. SL and HL sit different papers of the same form; HL is longer and can use HL-only topics. This page explains the structure and how to earn the method marks, then gives a full practice paper with a markscheme.

🎯What this page covers

  • The structure, timing and weighting of Paper 2 at SL and HL.
  • How calculations, “comment” questions and the 10-mark extended response are marked.
  • A practice paper on accounts, ratios, break-even, cash flow and investment appraisal, with a markscheme.

📚The paper

SL
1 hour 30 minutes, 40 marks, weighting 35%. Section A 20 marks; Section B 20 marks. Units 1 to 5, no HL-only content.
HL
1 hour 45 minutes, 50 marks, weighting 30%. Section A 30 marks; Section B 20 marks. Includes HL-only topics and extensions.
Section A
answer all the structured questions, which have a quantitative focus. Analytic markscheme.
Section B
answer one of two questions: structured parts worth 10 marks, then a 10-mark extended response. At SL, one option may be about a social enterprise.

The stimulus is presented in parts: read a part, answer its question, then move on. It mixes text, tables, charts and infographics. A calculator is allowed (a four-function one is enough), and 5 minutes’ reading time comes first. Financial statements use the IB layouts: the statement of profit or loss and the statement of financial position (3.4).

Earning the calculation marks

  • Show working: write the formula, substitute the numbers, then give the answer. Method marks can be earned even if the final answer is wrong.
  • Units and format: %, $, units, “: 1” for ratios, years and months for payback. Round sensibly (usually 2 decimal places) and say so.
  • Own figure rule: if you get an earlier part wrong but use your wrong figure correctly later, you can still earn the later marks.
  • Construct questions (a break-even chart, a cash flow forecast, a statement) need the correct layout, title and labels.
  • “Comment on” questions after a calculation want interpretation: what the figure means for the business, compared with what.

The 10-mark extended response

Marked with the same markbands as Paper 1 Section B: focus on the question, accurate tools and theories, stimulus information integrated into the argument, balance, and the limitations of the data. In Paper 2 the tools are often your own calculations: use them as evidence, then add qualitative factors the numbers leave out.

Timing: about 2 minutes per mark. At SL, roughly 40 minutes for Section A and 45 for Section B; at HL, 55 and 45.

✏️Worked example: a practice paper

Kopi Lereng roasts and sells specialty coffee from farms on the slopes of Mount Batur, Bali, to cafés and online customers. All figures are in Rp million unless stated.

Part 1: 2025 accounts. Sales revenue 2400; cost of sales 1440; expenses 600; interest 40; tax 80. Current assets: cash 90, debtors 150, stock 210. Current liabilities 300. Non-current liabilities 600; equity 1200.

Part 2: premium bags. A 1 kg premium bag sells for Rp 150 000 with variable costs of Rp 90 000. Fixed costs of the premium line are Rp 48 million a month. Kopi Lereng sells 1000 bags a month. A competitor has cut prices; the manager is considering cutting the price to Rp 140 000.

Part 3: a new roaster. The current roaster can produce 1200 bags a month. A larger roaster costs 1000 and is expected to generate net cash flows of 300, 350, 400 and 400 in years 1 to 4. Discount factors at 10%: 0.9091, 0.8264, 0.7513, 0.6830.

Part 4: cash flow. Opening cash balance in January: 90. Forecast cash inflows: January 200, February 180, March 260. Cash outflows: January 230, February 250, March 220. February includes a large payment to farmers after the harvest.

Section A

  1. (a) Define the term gross profit. [2]
    (b) Calculate the gross profit margin and the profit margin for 2025. [4]
    (c) Calculate the current ratio and the acid test ratio, and comment on Kopi Lereng’s liquidity. [4]
  2. (a) Calculate the contribution per bag and the break-even quantity per month. [4]
    (b) Calculate the margin of safety. [2]
    (c) Calculate the new break-even quantity if the price is cut to Rp 140 000, and explain the effect on the margin of safety. [4]
  3. HL (a) Calculate the capacity utilization rate of the current roaster. [2]
    (b) Calculate the payback period and the average rate of return for the new roaster. [4]
    (c) Calculate the net present value of the new roaster. [4]

Section B

  1. (a) Define the term working capital. [2]
    (b) Prepare a cash flow forecast for January to March, showing the closing balance each month. [4]
    (c) Explain two ways Kopi Lereng could deal with its cash flow problem in February. [4]
    (d) Using information from the stimulus and your answers, recommend whether Kopi Lereng should buy the new roaster. [10]

Markscheme

1(a) Sales revenue minus cost of sales: the profit before overheads (expenses), interest and tax are deducted. [2]

1(b) Gross profit = 2400 − 1440 = 960; GPM = 960 ÷ 2400 × 100 = 40%. PBIT = 960 − 600 = 360; profit margin = 360 ÷ 2400 × 100 = 15%. [2 each: working and answer]

1(c) Current assets = 90 + 150 + 210 = 450. Current ratio = 450 ÷ 300 = 1.5 : 1. Acid test = (450 − 210) ÷ 300 = 0.8 : 1. Comment: the current ratio is within the usual 1.5–2 range, but the acid test is below 1, so without selling stock Kopi Lereng could struggle to pay its short-term debts; much of its liquidity is tied up in coffee stock. [1 + 1 + 2]

2(a) Contribution = 150 000 − 90 000 = Rp 60 000. BEQ = 48 000 000 ÷ 60 000 = 800 bags. [2 + 2]

2(b) 1000 − 800 = 200 bags. [2]

2(c) New contribution = Rp 50 000; BEQ = 48 000 000 ÷ 50 000 = 960 bags. If sales stay at 1000, the margin of safety falls to 40 bags, so Kopi Lereng is much closer to a loss; the cut only makes sense if sales rise well above 1000 or would otherwise fall to the competitor. [2 + 2]

3(a) 1000 ÷ 1200 × 100 = 83.3%. [2]

3(b) Cumulative: −1000, −700, −350, +50. Payback in year 4: 350 ÷ 400 × 12 = 10.5 months, so 3 years 10.5 months. ARR: (1450 − 1000) ÷ 4 = 112.5; 112.5 ÷ 1000 × 100 = 11.25%. [2 + 2]

3(c) PVs: 272.73 + 289.24 + 300.52 + 273.20 = 1135.69. NPV = 1135.69 − 1000 = +135.69 (Rp 135.69 million). [4]

4(a) Current assets minus current liabilities: the money available for day-to-day running of the business. [2]

4(b) [4: layout 1, net flows 1, closing balances 2]

  • January: opening 90, inflows 200, outflows 230, net −30, closing 60.
  • February: opening 60, inflows 180, outflows 250, net −70, closing −10.
  • March: opening −10, inflows 260, outflows 220, net +40, closing 30.

4(c) 2 + 2, each applied: arrange an overdraft for February only (the shortfall is small and temporary, recovered in March); negotiate to pay farmers in instalments (but relationships with farmers matter for quality); chase debtors of 150 faster; delay non-essential spending.

4(d) Markbands. For: positive NPV (HL) and an ARR of 11.25%, above a 10% cost of capital; the roaster is at 83% capacity, so growth will soon need more capacity; lower unit costs could help compete on price (Part 2). Against: payback of almost 4 years is long and the cash flows are forecasts; liquidity is weak (acid test 0.8, a February overdraft), so paying 1000 up front is risky; gearing would rise if it borrows (non-current liabilities already 600); competition may reduce the forecast cash flows. Judgment: buy, but finance it with a medium-term loan or leasing rather than cash, and only after fixing February’s cash shortage; or delay until capacity utilization nears 95%. Limitations: no data on how the cash flow forecasts were made or on the loan rate.

Check it. Discounted cash flows (1135.69) are smaller than the undiscounted total (1450), and the NPV is positive while the ARR (11.25%) exceeds the 10% discount rate: the two results agree.
Leaving numbers without comment. “Acid test = 0.8” earns the calculation marks only. Say what it means for this business and compare it with a benchmark, a past year or a competitor.

📝Practise

More questions on the same stimulus. Work through them, then reveal the answer.

1. [2 marks] Calculate ROCE for 2025.
Capital employed = 600 + 1200 = 1800. ROCE = 360 ÷ 1800 × 100 = 20%.
2. [2 marks] Calculate the gearing ratio. HL
Gearing = non-current liabilities ÷ capital employed × 100 = 600 ÷ 1800 × 100 = 33.3%.
3. [2 marks] Calculate profit for the period (after interest and tax).
360 − 40 − 80 = Rp 240 million.
4. [2 marks] How many bags a month must Kopi Lereng sell at Rp 150 000 to earn Rp 12 million profit a month from premium bags?
(48 + 12) million ÷ 60 000 = 1000 bags, exactly its current sales.
5. [4 marks] Explain two limitations of the break-even analysis in Part 2.
(1) It assumes all 1000 bags sell at one price, but café customers may get bulk discounts. (2) It assumes variable costs stay constant, but green coffee prices vary with each harvest and exchange rates, so the BEQ may shift.
6. [10 marks] Discuss whether Kopi Lereng should cut the price of its premium bags to Rp 140 000.

For: matches the competitor and protects sales volume; if demand is price elastic, volume could rise above 1000 and increase total contribution (at 1200 bags, contribution is 60 million, the same as now).

Against: BEQ rises from 800 to 960 and the margin of safety falls to 40 bags; profit falls from 12 million to 2 million a month if volume is unchanged; specialty coffee buyers may be loyal to quality and less price sensitive; a price war could follow; a lower price may weaken the premium image.

Judgment: keep the price and compete on quality and origin (differentiation), perhaps with targeted offers for café contracts; more data on price elasticity is needed.

🔗Go deeper — other people’s work

These are external resources, not mine. If one stops working, tell me and everything above it on this page still stands.

  • The IB Business management guide (first assessment 2024) — formulae, financial statement layouts and discount tables.
  • Your teacher and the IB programme resource centre — specimen and past papers with markschemes.
  • Tutor2u — practice calculations for ratios, break-even and investment appraisal.