11 mark
Which one of the following is a short-term source of finance?
Select one answer.
Retained profit
Share capital
Trade credit
Venture capital
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Putting a Business Idea into Practice (Edexcel GCSE Business)
Exam Questions
1 hour30 questions21 mark
Which one of the following is an example of a cash outflow for a small business?
Select one answer.
Bank loan
Personal savings
Raw materials
Receipts
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31 mark
Which one of the following is a definition of market share?
Select one answer.
Market research that can be collected and analysed
The proportion of sales in a market made by one business
The total amount of money from business sales
A group of people who discuss their views on a product
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42 marks
Which two of the following are examples of variable costs?
Select two answers.
Advertising
Insurance
Packaging
Raw materials
Rent
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52 marks
Case Study
On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
Outline one reason why cash would be important to On Your Bike.
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61 mark
Which one of the following is a long-term source of finance?
Select one answer.
Overdraft
Revenue
Trade credit
Venture capital
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72 marks
Which two of the following can be interpreted from a break even diagram?
Select two answers.
Insolvency
Margin of safety
Market share
Net cash flow
Profit
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81 mark
Case Study
Sports Tours Ltd was established in 1989 and is one of the leading online specialist sports tour operators in the United Kingdom. It arranges tours for teams to destinations in the United Kingdom and Europe in sports such as football, rugby, hockey and netball. The business not only organises travel, accommodation and meals, but it also arranges games and entry to tournaments for the sports team whilst on tour.
Sports Tours Ltd has very high standards. It carries out full risk assessments for all tours including possible pre-tour inspection visits. Tours are licensed and authorised through official agencies. All tours have regular contact with a member of staff from Sports Tours Ltd.
In recent years the business has faced increasing competition. This is not only from other sports tour operators but also from teams organising their own tours. Changing levels of consumer income and exchange rates have also had an impact on demand for tours by sports teams.
Sports Tours Ltd are confident that the high level of service they offer will help them to remain competitive. However, it is always looking for more ways to add value to its business activities.
State one fixed cost that Sports Tours Ltd will need to pay.
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91 mark
Case Study
That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
State one example of a cash outflow for That Feeling.
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101 mark
Case Study
That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
Figure 2 shows the age of entrepreneurs starting businesses in the UK since 2000.
Figure 2
(Source: adapted from https://startups.co.uk/the-average-entrepreneur/)
Using the information in Figure 2, identify what percentage of entrepreneurs were in the same age range as Justin when he started That Feeling.
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111 mark
Case Study
That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
Outline one benefit to employees at That Feeling from being mentored by Justin.
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122 marks
Which two of the following are typical objectives for a start-up business?
Select two answers.
Survival
Customer satisfaction
Expand overseas
Sells shares on the stock market
Become market leader
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1
2 marks
2 marksTable 1 contains information about a small business for one month. The business sold 340 units in this month.
Fixed costs | £3 600 |
Variable costs (per unit) | £9 |
Table 1
Using the information in Table 1, calculate the total costs for one month. You are advised to show your workings.
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23 marks
3 marksExplain one possible non-financial aim an entrepreneur may have when starting a small business.
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32 marks
2 marksFigure 1 shows information about the financial performance of a business from January to March.
Figure 1
Using the information in Figure 1, calculate the total profit for the period January to March. You are advised to show your workings.
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42 marks
2 marksCase Study
Last Course Patisserie Ltd is a small private limited company based in Devon which produces hand-made desserts and puddings. The business was established in 1986. Its owners previously worked in the food industry but felt they could offer better value for money to customers. All of the desserts are made fresh to order which has provided Last Course Patisserie with a reputation for being flexible when meeting customer needs.
Getting the best ingredients for the desserts is a vital part of the business. Last Course Patisserie found excellent suppliers of free range eggs and dairy products close to its business location. This means all ingredients could be delivered quickly when needed.
Last Course Patisserie has recently employed a new head chef from Switzerland who has introduced a new range of products to the menu. This has proved to be very popular with customers and the business now struggles to keep up with demand. Last Course Patisserie is receiving increased orders for desserts but, due to the size of its business premises, struggles to meet this increase in demand. The owners have decided that it is the right time for Last Course Patisserie to expand and possibly relocate to new premises
Last Course Patisserie has the following financial information for the month of April.
| April |
Raw materials for each dessert | £0.50 |
Packaging for each dessert | £0.20 |
Fixed costs | £2 730 |
Selling price for each dessert | £2.00 |
Table 2
Using the information in Table 2, calculate the level of output required to break-even in April. You are advised to show your workings.
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52 marks
2 marksCase Study
Last Course Patisserie Ltd is a small private limited company based in Devon which produces hand-made desserts and puddings. The business was established in 1986. Its owners previously worked in the food industry but felt they could offer better value for money to customers. All of the desserts are made fresh to order which has provided Last Course Patisserie with a reputation for being flexible when meeting customer needs.
Getting the best ingredients for the desserts is a vital part of the business. Last Course Patisserie found excellent suppliers of free range eggs and dairy products close to its business location. This means all ingredients could be delivered quickly when needed.
Last Course Patisserie has recently employed a new head chef from Switzerland who has introduced a new range of products to the menu. This has proved to be very popular with customers and the business now struggles to keep up with demand. Last Course Patisserie is receiving increased orders for desserts but, due to the size of its business premises, struggles to meet this increase in demand. The owners have decided that it is the right time for Last Course Patisserie to expand and possibly relocate to new premises
In May suppliers increased the cost of raw materials by 4%.
| April |
Raw materials for each dessert | £0.50 |
Packaging for each dessert | £0.20 |
Fixed costs | £2 730 |
Selling price for each dessert | £2.00 |
Table 2
Using the information in Table 2, calculate the variable cost per dessert following the increase in the cost of raw materials.
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63 marks
3 marksExplain one advantage to a small business of using trade credit as a source of finance.
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72 marks
2 marksTable 1 contains information about cash payments of a small business in one month.
The business sold 200 units in this month. All customers paid in cash.
Selling price | £15 |
Rent | £500 |
Wages | £1 000 |
Advertising | £150 |
Table 1
Using the information in Table 1, calculate the net cash flow for this month You are advised to show your workings.
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82 marks
2 marksFigure 1 shows the total costs for a business between May and July.
Figure 1
Using the information in Figure 1, calculate the percentage change in total costs between May and July. You are advised to show your workings.
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92 marks
2 marksCase Study
On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
On Your Bike has made the following forecasts for the costs and sales of its bikes for 2021.
| Forecast |
Total number of bike sales | 2,000 |
Total revenue | £1 100 000 |
Variable cost per bike | £350 |
Fixed costs | £150 000 |
Table 2
Using the information in Table 2, calculate the selling price per bike.
You are advised to show your workings.
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103 marks
3 marksCase Study
On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
Using the information in Table 2, calculate the profit On Your Bike is forecast to make from selling bikes in 2021. You are advised to show your workings.
| Forecast |
Total number of bike sales | 2,000 |
Total revenue | £1 100 000 |
Variable cost per bike | £350 |
Fixed costs | £150 000 |
Table 2
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112 marks
2 marksTable 1 shows the cash-flow forecast for a small business.
Complete the table with the two missing figures.
| May (£) | June (£) |
Cash inflows | 12 600 | 13 400 |
Cash outflows | 8 200 | 9 100 |
Net cash flow | 4 400 | (ii) ......................... |
Opening balance | 600 | 5 000 |
Closing balance | (i) ................................. | 9 300 |
Table 1
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122 marks
2 marksFigure 1 shows the sales revenue of a business from January to April.
Figure 1
Using the information in Figure 1, calculate, to 2 decimal places, the percentage decrease in sales revenue from January to March. You are advised to show your workings.
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133 marks
3 marksExplain one disadvantage to a small business of manufacturing a high quality product.
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143 marks
3 marksExplain the importance of cash to the survival of a small business.
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156 marks
6 marksCase Study
On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
The owners of On Your Bike want to lower the break even level of output and have decided to do this by reducing costs.
Analyse the impact on On Your Bike of reducing costs in order to lower its break even level of output.
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19 marks
9 marksCase Study
Aphrodite is a clothes shop that was formed in 1994 by two brothers, Andrew and Duncan McKenzie. They opened the shop because they had a lifelong enthusiasm for new fashion.
Andrew and Duncan visit Paris, Milan and London each year to buy their stock. They aim to buy well-known brands, such as Stone Island and Hugo Boss, and to also stock clothes from new designers. This range of stock helps provide them with an advantage over their competition.
Customer service has always been an important part of Aphrodite’s success. A polite and friendly attitude greets all customers on arrival at the shop. In 2007 the business launched its website, which sells its range of clothing using e-commerce. The owners looked to maintain existing high standards of service for customers using their website.
A new opportunity was created when the shop premises next to Aphrodite became available to buy. Andrew and Duncan are considering buying the shop in order to convert the two shops into one large premises. They have calculated that this will cost them £250 000 but are undecided on the best way to finance this.
To pay for the conversion of the premises, Aphrodite is considering two options:
Option 1: obtaining a bank loan
Option 2: crowd funding.
Justify which one of these two options Aphrodite should choose.
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212 marks
12 marksCase Study
That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
Evaluate the importance of achieving non-financial objectives for the success of That Feeling. You should use the information provided as well as your knowledge of business.
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39 marks
9 marksCase Study
Last Course Patisserie Ltd is a small private limited company based in Devon which produces hand-made desserts and puddings. The business was established in 1986. Its owners previously worked in the food industry but felt they could offer better value for money to customers. All of the desserts are made fresh to order which has provided Last Course Patisserie with a reputation for being flexible when meeting customer needs.
Getting the best ingredients for the desserts is a vital part of the business. Last Course Patisserie found excellent suppliers of free range eggs and dairy products close to its business location. This means all ingredients could be delivered quickly when needed.
Last Course Patisserie has recently employed a new head chef from Switzerland who has introduced a new range of products to the menu. This has proved to be very popular with customers and the business now struggles to keep up with demand. Last Course Patisserie is receiving increased orders for desserts but, due to the size of its business premises, struggles to meet this increase in demand. The owners have decided that it is the right time for Last Course Patisserie to expand and possibly relocate to new premises
In order to improve its cash flow position, Last Course Patisserie is considering two options:
Option 1: reducing the number of workers it employs
Option 2: increasing the average selling price of its desserts
Justify which one of these two options Last Course Patisserie should choose.
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