library.SCOTCH: Internal Assessment - Business Management: HL Essay Structure (2023)

HL IA - STRUCTURE

The IBO mandates that the following structure be used so stick to this exactly:

Research Proposal

This must be in-front of the title page, they will take 1 mark off for structure if anything is in the wrong order.

Title page

The title page should give a clear indication of the content of the research project, including the name of the student, the title of the project, the intended audience and the word count.

Acknowledgements

The acknowledgements should recognize any individual and/or organization that made the production of the report possible.

Contents page

The contents page should include the major headings in the report, beginning with the executive summary. Page numbers should be clearly indicated.

Executive summary (abstract)

The executive summary should be a concise, clear and explicit summary of the document, including the recommendations and conclusions. The research question and executive summary should guide the reader to the substance of the report. The maximum length of the executive summary is 200 words, and this is not included in the word count.

Introduction

The introduction should demonstrate some background knowledge about the organization(s) and give a clear outline of the issue or decision under investigation.

Research question

Methodology employed

The methodology section should be a summary of the primary (and, where relevant, secondary) research undertaken and the business tools, techniques and theories applied. It should also include an assessment of the validity and reliability of the data collected (for example, partiality and scope) and the methods employed. Any changes made as the work progressed should be explained.

Main results and findings

The main results and findings section should clarify what the raw data has revealed. This should include a summary of the data collected and of the findings made, and should, where appropriate, be supported by tables, graphs and statistics.

Analysis and discussion

In the analysis and discussion section, the results and findings should be analysed with the help of relevant business tools, techniques and theories. They should also be interpreted: what main issues emerge from the research, and why and how are they helpful (or not) to answering the research question? An evaluative approach to the discussion of findings should be pursued: for example, what are the strengths and weaknesses of the various positions on the issue or decision under investigation and what are their implications?

Conclusion(s) and recommendation(s)

The conclusions should follow on from the analysis and discussion; new facts or arguments should not be presented. Recommendations should be precise, answer the research question and be practical proposals for action that stem from the conclusions. If the results of the research are inconclusive, further research should be recommended. To be of practical value to management, the report should be forward-looking and support the organisation’s decision-making process.

References and bibliography

For presentation of references and bibliography, please see the section on acknowledging the ideas and work of another person in the “The Diploma Programme” section of this subject guide.

Appendices

The appendices should contain only information or data that is required to support of the text and should be clearly referred to where relevant. The appendices will typically include examples of photographs, documents, questionnaires, numerical raw data in tables and statistical calculations.

Do not include definitions should not be in appendix as a technique for saving on word count

Writing the HL IA

  • Introduction
  • Procedure

Writing the Introduction

  • Aim to keep your introduction short.
  • There are no explicit marks awarded here.
  • Briefly outline the issue.
  • This is not a history of the company.
  • End with - "This has therefore led to the following research question…"
  • Put your title at the end of your introduction.
Example of a good introduction

Company X, established in 1964, is a private limited company which develops land in Perfect Park and, having originally purchased farmland in this growing area of Metropolis City, Company X has developed this land into many residential sections, selling them to commercial customers and the general public. Company X has begun plans for a new development - a shoppingcentre-construction for which will commence in 2011 and is expected to cost thirteenmilliondollars . Company X currently faces the decision as to how to finance construction of this new development. Retained earnings will be used to fund half of the construction and the two most suitable sources of finance for the other half have been identified as a bank loan or increasing share capital,. This report therefore focuses on the following research question: Should Company X Ltd finance the construction of the shoppingcentrewith retained earnings coupled with a bank loon or with increased share capital?

Introduction Checklist:

- The briefest of introductions to the business

- Outline the issue

- How do you know it’s an issue?

- Reference interview here

- End with "This has therefore led to the following research question…"

- Put your title at the end of your introduction.

- Keep it short

Writing the Procedure/Methodology

  • The Procedure should be asummaryof theprimary and secondary researchundertaken and thebusiness techniques applied.
  • The Procedure is your full (but heavily summonsed!) step-by-step methodology. It must includeALLresearch used - and this research should be evaluated: i.e.. how useful was that research? How reliable? Valid?
  • It should also include anassessmentof thevalidityandreliabilityof thedatacollected (for example partiality and scope) and themethodsemployed.
  • If you had the chance to do this again, what would you change and why?
  • If you do make any changes, do not explain them - you have a very limited word count restriction. Write this section as if you had got it right first time!
Example of a good Procedure/Methodology

Initially. primary research consisted of a detailed interview with GuyCallender- Manager of Company X Ltd, chosen because he has excellent in-depth knowledge of the business. Director of the company, RodneyCallender, was then interviewed to generate an additional perspective concerning the decision and to ensure that information from the first interviewee correlated with that of the second. improving reliability. GraemeLiddell, was then interviewed regarding the likelihood and specifics of Company X securing a bank loan providing valuable 'inside' information about long-term bank loans as a source of finance. Interviews comprised of a range of open-ended questions regarding specifics of the decision at hand, the relative advantages and disadvantages associated with the two available sources of finance. the existing internal and external factors which may influence the decision which allowed preparation of a Force Field and SWOT analysis. Financial estimations from interviewees coupled with Company X financial reports (2010-2013) allowed quantitative techniques to beutilisedto examine the financial aspects of the decision, including the average rate of return. ratio analysis and forecasting. Other secondary sources consulted include mainstream business textbooks and credible websites related to the research question. Combinations of both primary and secondary resources were used because this enabled detailed quantitative and qualitative analysis and aided the provision of conclusions and recommendation. It must be noted that financial data collected for the years 2010 onwards and expected costs and revenues associated with the new development are predictions and estimates. These figures derived from this data will need to be adjusted when more accurate or precise information becomes available. Information generated from interviewees within the business was correlated with that gathered from GraemeLiddell, financial accounts, online information and textbooks to ensure that any biased perspectives were effectively counterbalanced.

Writing the Main Results and Findings

    TOP TIP-(This section must nownot be combined with Analysis and Discussion they must be separated – DO NOT COMBINE to try and save on words they will smash you for this 2016+!)

    • The information here should be coming from the ‘summary and findingssection of'Activity B' in this document, which you will have previously completed and had checked by me!
    • You are not introducing tool in this section
    • You are not analysing the information in this section eg. calculate ratios, prepare a break even etc but do not analyse these results at this point.

    Writing the Analysis and Discussion

    • Use sub-headings for each analytical tool and make thestructure very clear
    • Under each sub-heading include:Analytical tool, concept or theory + a link back to RQ + Results(graphs. tables, ratios, calculated results, SWOT, decision trees, force field analysis)
    • Summary of main findings+ Relate findings to youranswer of RQ
    • Include ALL findings and results but do so using tables and graphs which don't count towards your find word count, and use appendices to link findings/results back to original information (e.g. SWOT Analysis, financial information and interviews).
    • Relating the findings of each analysis back to your RQ should form the bulk of each sub-heading, and it MUST be well referenced
    • Use appropriate business terminology accurately throughout the paper
    • Look to demonstrate evidence of critical thinking the "because ..." or "in that ..." that shows you know Business Management theory well
    • If your research question did not include a clear choice between two options, discussopportunity costs
    • Look to evaluate based on references; e.g. benefits and limitations of ratio analysis; advantages and disadvantages of sources of finance; interviews.
    Examples of good body paragraph - remember this would be full of references!

    Costs and Revenues Structure of Development:

    The construction of the shopping centre is expected to cost Company X $13 million, the land already having been purchased by the company. Unlike residential sections sold, Company X intends to keep the shopping centre as a long term investment, revenue received being in the form of rent.' Foodstuffs. one of New Zealand's largest organisations", have signed an agreement with Company X whereby they fund the construction of the supermarket, and expected $6 million. and, when completed, Company X will reimburse Foodstuffs who will begin to pay rent.

    Risk Assessment:

    Property development is considered a highly risky industry'. even more so after the GFC', as they are highly susceptible to economic fluctuations which directly influence the property market and hence the company's principal source of revenue., During the GFC. overall confidence levels fell significantly and sales plummeted leaving many developers ultimately insolvent, illustrating the heavy dependence of property developers on market conditions. Other than Foodstuffs, no other tenants have been secured and with no guaranteed source of revenue this development currently has high risk assessment. The agreement with Foodstuffs significantly reduces risk. making potential lenders or shareholders less reluctant to finance this development project., Availability of Financing: An interview with a banker revealed the possibility of a bank loan to be viable however. despite the strong financial position of Company X, the predicted interest rate is 7.5% due to the high risk assessment of the industry., Currently, Company X has only two shareholders - two family trusts - and Mr Brown anticipates no difficulties concerned with securing more share capital if shareholders are convinced it is a relatively safe investment.

    Current Financial Position of Company X:

    Costs and Revenues Structure of Development:

    The construction of the shopping centre is expected to cost Company X $13 million, the land already having been purchased by the company. Unlike residential sections sold, Company X intends to keep the shopping centre as a long term investment, revenue received being in the form of rent.' Foodstuffs. one of New Zealand's largest organisations", have signed an agreement with Company X whereby they fund the construction of the supermarket, and expected $6 million. and, when completed, Company X will reimburse Foodstuffs who will begin to pay rent.

    Risk Assessment:

    Property development is considered a highly risky industry'. even more so after the GFC', as they are highly susceptible to economic fluctuations which directly influence the property market and hence the company's principal source of revenue., During the GFC. overall confidence levels fell significantly and sales plummeted leaving many developers ultimately insolvent, illustrating the heavy dependence of property developers on market conditions. Other than Foodstuffs, no other tenants have been secured and with no guaranteed source of revenue this development currently has high risk assessment. The agreement with Foodstuffs significantly reduces risk. making potential lenders or shareholders less reluctant to finance this development project., Availability of Financing: An interview with a banker revealed the possibility of a bank loan to be viable however. despite the strong financial position of Company X, the predicted interest rate is 7.5% due to the high risk assessment of the industry., Currently, Company X has only two shareholders - two family trusts - and Mr Brown anticipates no difficulties concerned with securing more share capital if shareholders are convinced it is a relatively safe investment.

    Current Financial Position of Company X:

    library.SCOTCH: Internal Assessment - Business Management: HL Essay Structure (1)

    Financial Performance:

    The steady trends in GPM and NPM from 2006-2009 indicate the high profitability of Company X' business activity. The respective ratios for the year ended 2010 show significantly negative growth profit generating activities. with the GPM decreasing by 35.4% and the NPM decreasing by 41.0%. The net profit shows a heavy decline in the last five years. These indicators would be highly concerning had Company X not undergone a significant change in business activities which justifies the deterioration In the ratios. The factor held accountable for this deviance in healthy ratio values Is that, in 2010, Company X begun intensive planning processes for the new shopping centre, monetary rewards for which will be reaped in the future and hence resulting in a severe decline in net profit. EPS values show a gradual decline from $9.77 to $1.06 over the five years examined. reflecting the severe decline in net profit values.

    Ideal Capital Structure:

    The gearing ratio is a constant zero value. representing the lack of external financing. land development is a very "high risk high return business". A major risk is the market conditions changing very suddenly and not being able to sell the land or having to sell it a lot less than before. Banks' attitudes towards lending to properly developers change in relation to the market and often. in wanting to cut their exposure to property markets, banks ask for loans to be repaid and, as witnessed in the current economic downturn, developers often go under. "The advantage of not having gearing Is that we avoid a lot of these issues and can ride out a downturn in the market or a delay in bringing land to the market clue to resource consent issues.

    This concept gives insight into the ideal capital structure of Company X, indicating that, in this market, Company X is more secure with low or zero gearing. However as the economy picks up, one should consider some level of gearing which could provide a greater return on equity.

    library.SCOTCH: Internal Assessment - Business Management: HL Essay Structure (2)

    Forecasted Net Profit Figures show a healthy return to financial performance after the year ended 2011 in which Company X finances the construction of the shops and reimburses Foodstuffs after the completion of the supermarket. Rent received from the tenants totals annually $1.115 million, which exceeds the expected 7.5% interest on the loan. that Company X would incur if they so choose to finance the development.

    library.SCOTCH: Internal Assessment - Business Management: HL Essay Structure (3)

    Significance of forecast ratio analysis:

    There exist two central deviances in the forecast ratio analysis for each option: the gearing ratio and the earnings per share. The gearing ratio was generated purely on expected figures concerning the development for all other future properly sales remain ambiguous at the present time. In option one, the predicted gearing ratios show a steady decline in the proportion of assets externally financed however. at 50.00% in 2011. gearing is extremely high in comparison to the previously steady 0% gearing. As previously detailed. High gearing in this industry can lead to irrevocable damage to business performance if the economic climate was to undergo an unexpected downturn. The EPS values forecasted for option two reflect the increase in the number of shares owned by the shareholders. This would not dilute control or confuse voting power however as the sole two shareholders remain to be the two family trust accounts. the directors making all business decisions. However, this decline in EPS is not expected to regenerate given that the shares wall likely not be retracted.

    Interest Cost vs. Dividend Cost

    Interest cost on the 7.5 million bank loan at the expected interest rate of 7.5% is an estimated $562500 annually. an expense compensated for with the revenue generated in the form of rent from tenants. Interest payments would be classified as expenses and hence world result in tax deductions for Company X..

    Dividends however, because of the nature of the shareholder structure, need only be paid out when directors see fit. Therefore. unlike a bank loan. the business is not obliged to disperse internal funds.

    Lewin’s Force Field Analysis:

    Lewin' s Force Field Analysis is a useful tool when making a decision with examines the factors pressing for (driving forces) and against (restraining forces) a change. This technique can be used to examine the reasons for and against financing the new development with a 50% bank loan or by increasing share capital.

    library.SCOTCH: Internal Assessment - Business Management: HL Essay Structure (4)

    The combination of the two force field analysis for the two options indicates that. from a qualitative perspective. the more beneficial option for Company X is to finance construction through increased shareholder capital. considering that, unlike for option one, the driving forces outweigh the restraining forces for option two.

    Writing the Conclusion and Recommendations

      • Answer the RQ! Answer it straight away
      • Summarise what led you to this answer- a bullet-pointed list of brief conclusions
      • Do NOT include any new Information here
      • Your recommendations should look to the future and consider what needs to be done
      • Limitations should be briefly outlined, justified and addressed by recommendations for future research
      • Your recommendations must link to your conclusions
      • Your recommendations must be feasible
      Example of a good conclusion and recommendation

      CONCLUSIONS AND RECOMMENDATIONS

      In light of analysis. it does appear that the more advisable financing alternative for the 50% of the development project not covered by retained earrings is for Company X Ltd to increase share capital. The following paints of analysis support this assertion:

      1. Development industry is highly susceptible to fluctuations in the economic climate therefore:

      • A bank loanwouldhave relatively high interest rate given the strong financial position of the firm

      • The ideal capital structure for Company X Ltd Involves very low or zero gearing. which enables the firm to -tide out a downturn In the marker as control resides solely in the directors. A bank loan would result initially In a 50.00% gearing ratio, as opposed to the continuation of zero gearing which would result from increasing share capital.

      2. The interest cost outweighs the dividend cost.

      • Annual Interest expenses of on estimated $562500 exceeds that of dividends as. because of the nature of the shareholder structure. dividends need only be paid out when directors see fit.

      3.Lewin'sForce Field Analysis

      • Indicates that, from a qualitative perspective. the more beneficial option for Company X to finance construction through increased shareholder capital. considering that. Whirr for option one. the driving forces outweigh the restraining forces for option how.

      As such, my recommendation would be for Company X to finance the remaining 50% of the development with increased share capital from existing shareholders, The performance of the business and the content of the stakeholders (especially shareholders who will be directly affected) should be monitored to ensure effective change management. However, my analysis is limited: further research must be conducted in order to make a fully informed and justified decision. A recommended further course of action would be an investigation into the possibility of different mixes of the two sources of finance: loan capital and shoe, capital because fit may result in a more acceptable gearing ratio and increased EPS,

      With all financial forecasting being performed by the same interviewees. some estimates may be biased and highly subjective. Ambiguous financial information should be cross-checked by interviews with at least two managing directors in order to observe anydeviancesor correlation between estimates. Company X should also approach a bank to assess the precise conditions and interest rates available if they were to take out a loan so that they can make a more informedjudgementas to the most suitable source of finance.

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