Edexcel Business A Level Paper 2
(Theme 2 & 3)2024 Exam Quiz Study
Guide
Retained profits - Answer>>profits that the owners have
reinvested into the business after paying costs and taxes
Owners' funds - Answer>>money put in by the owners
themselves
Sale of assets - Answer>>a one-off way to raise money,
generally used during financial struggles
Benefits of owners funds - Answer>>Avoids interest on loans
Owners keep complete control
Disadvantages of owners funds - Answer>>If it fails after
remortgaging, they could lose their house
Limit to amount raised
Short term finance examples - Answer>>overdrafts for daily
expenses
Medium term finance examples - Answer>>loans, hire
purchase, trade credit, debt factoring used to pay for repairs, paid
back after 1-5 years
Long term finance examples - Answer>>issuing shares,
debentures, mortgages, grants used to pay for major expenditure,
paid back over many years
Selling assets - Answer>>Can sell machines, buildings, land
Limited buyers
Advertising costs
,Sold cheaply
Loans - Answer>>High interest rates
Usually requires security in the form of assets which will be taken
away if they don't make the repayments
Needs regular updates
Grants - Answer>>No repayment
May be recalled if conditions aren't met
May not cover full amount
Hire purchase / leasing - Answer>>Must pay deposit and
monthly
Own assets at the end
Leasing does not lead to ownership
Must pay interest
Will be re-claimed if not paid for
Issuing shares - Answer>>Only for a limited company (ltd, plc)
No risk but must pay yearly dividends
Shareholders at risk as shares fluctuate
Shareholders have influence
Venture capital - Answer>>Large businesses lend to smaller
(not plc) businesses
Lender becomes shareholder
Aim to grow business so share price increases
Lenders play active role
Revenues - Answer>>the amount of product that a customer
actually buys
Total revenue equation - Answer>>volume sold x average
selling price
,Profit as an objective - Answer>>Profit is the most important
source of cash flow and finance
Can be other reasons for running a business than profit
Why profit is important - Answer>>A return on investment
A reward for taking risks
A key source of finance
A measure of business success
A motivating factor
Profit equation - Answer>>total sales - total costs
Costs - Answer>>amounts that a business incurs in order to
make goods/services
Costs are important because - Answer>>They drain away profit
Change profit margins
Main causes of cash flow problems
Changes with output
Variable costs - Answer>>Change as output varies
Lower risk for startups
Variable cost examples - Answer>>Raw materials
Brought in stocks
Wages based on hours
Marketing costs based on sales
Fixed costs - Answer>>Don't change with output
Higher risk for startups
Fixed cost examples - Answer>>Rent & rates
Salaries
, Advertising
Insurance, banking, legal fees
Software
Advisers
Total costs equation - Answer>>fixed costs + variable costs
Problems estimating costs - Answer>>Some are easier than
others
Rent, salaries, advertising
Others are harder
Raw materials
Returns or refunds
Budget - Answer>>a financial plan for the future concerning the
revenues and costs of a business
Managerial accountability - Answer>>Budgets on the objectives
Managers are required to think ahead
Budget uses for management - Answer>>Set targets
Motivate staffs
Improve efficiency
Forecast outcomes
Monitor performances
Assign responsibilities
Allocate resources
Budget as a motivator - Answer>>Provide specific targets and
standards
Attaining or surpassing these targets
Fear of not achieving can act as an incentive
Historical budgets - Answer>>Use last years figures as basis
(Theme 2 & 3)2024 Exam Quiz Study
Guide
Retained profits - Answer>>profits that the owners have
reinvested into the business after paying costs and taxes
Owners' funds - Answer>>money put in by the owners
themselves
Sale of assets - Answer>>a one-off way to raise money,
generally used during financial struggles
Benefits of owners funds - Answer>>Avoids interest on loans
Owners keep complete control
Disadvantages of owners funds - Answer>>If it fails after
remortgaging, they could lose their house
Limit to amount raised
Short term finance examples - Answer>>overdrafts for daily
expenses
Medium term finance examples - Answer>>loans, hire
purchase, trade credit, debt factoring used to pay for repairs, paid
back after 1-5 years
Long term finance examples - Answer>>issuing shares,
debentures, mortgages, grants used to pay for major expenditure,
paid back over many years
Selling assets - Answer>>Can sell machines, buildings, land
Limited buyers
Advertising costs
,Sold cheaply
Loans - Answer>>High interest rates
Usually requires security in the form of assets which will be taken
away if they don't make the repayments
Needs regular updates
Grants - Answer>>No repayment
May be recalled if conditions aren't met
May not cover full amount
Hire purchase / leasing - Answer>>Must pay deposit and
monthly
Own assets at the end
Leasing does not lead to ownership
Must pay interest
Will be re-claimed if not paid for
Issuing shares - Answer>>Only for a limited company (ltd, plc)
No risk but must pay yearly dividends
Shareholders at risk as shares fluctuate
Shareholders have influence
Venture capital - Answer>>Large businesses lend to smaller
(not plc) businesses
Lender becomes shareholder
Aim to grow business so share price increases
Lenders play active role
Revenues - Answer>>the amount of product that a customer
actually buys
Total revenue equation - Answer>>volume sold x average
selling price
,Profit as an objective - Answer>>Profit is the most important
source of cash flow and finance
Can be other reasons for running a business than profit
Why profit is important - Answer>>A return on investment
A reward for taking risks
A key source of finance
A measure of business success
A motivating factor
Profit equation - Answer>>total sales - total costs
Costs - Answer>>amounts that a business incurs in order to
make goods/services
Costs are important because - Answer>>They drain away profit
Change profit margins
Main causes of cash flow problems
Changes with output
Variable costs - Answer>>Change as output varies
Lower risk for startups
Variable cost examples - Answer>>Raw materials
Brought in stocks
Wages based on hours
Marketing costs based on sales
Fixed costs - Answer>>Don't change with output
Higher risk for startups
Fixed cost examples - Answer>>Rent & rates
Salaries
, Advertising
Insurance, banking, legal fees
Software
Advisers
Total costs equation - Answer>>fixed costs + variable costs
Problems estimating costs - Answer>>Some are easier than
others
Rent, salaries, advertising
Others are harder
Raw materials
Returns or refunds
Budget - Answer>>a financial plan for the future concerning the
revenues and costs of a business
Managerial accountability - Answer>>Budgets on the objectives
Managers are required to think ahead
Budget uses for management - Answer>>Set targets
Motivate staffs
Improve efficiency
Forecast outcomes
Monitor performances
Assign responsibilities
Allocate resources
Budget as a motivator - Answer>>Provide specific targets and
standards
Attaining or surpassing these targets
Fear of not achieving can act as an incentive
Historical budgets - Answer>>Use last years figures as basis
