AQA A-Level Business Comprehensive Revision Bundle |
Practice Papers, Model Answers & Exam Techniques
QUESTIONs and answers 2026/2027
QUESTION 1
A project has an initial capital outlay of £50,000 and generates net cash
inflows of £15,000 in Year 1, £25,000 in Year 2, and £20,000 in Year 3.
What is the payback period for this investment?
• A. 1 year 6 months
• B. 2 years
• C. 2 years 3 months
• D. 2 years 6 months
Correct Answer: D. 2 years 6 months
Detailed Rationale: After Year 1, £15,000 has been recovered, leaving
£35,000 of the initial outlay. After Year 2, an additional £25,000 is
recovered (total £40,000), leaving £10,000 remaining to be paid back. In
Year 3, the cash inflow is £20,000. To recover the remaining £10,000
10,000
takes × 12 months = 6 months. Therefore, the total payback
20,000
period is 2 years and 6 months.
QUESTION 2
According to the Boston Matrix, which type of product typically has a
high market share in a low-growth market and generates strong,
reliable cash flows?
, • A. Star
• B. Cash cow
• C. QUESTION mark (Problem child)
• D. Dog
Correct Answer: B. Cash cow
Detailed Rationale: Cash cows are established products in mature, low-
growth markets. Because they hold a high market share and require
little promotional investment, they generate high positive cash flows
used to fund other parts of the business.
QUESTION 3
According to Herzberg's Two-Factor Theory, which of the following is
classified as a "hygiene factor"?
• A. Achievement
• B. Recognition
• C. Working conditions
• D. Responsibility
Correct Answer: C. Working conditions
Detailed Rationale: Hygiene factors (such as working conditions, pay,
company policy, and job security) do not motivate employees on their
own, but their absence causes dissatisfaction. Factors like achievement,
recognition, and responsibility are motivators.
QUESTION 4
,A factory has a maximum output of 5,000 units per week, but currently
produces 4,000 units per week. What is its capacity utilization?
• A. 80%
• B. 125%
• C. 75%
• D. 20%
Correct Answer: A. 80%
Detailed Rationale: Capacity utilization is calculated as
Actual Output 4,000
× 100. Substituting the values: × 100 = 80%.
Maximum Possible Output 5,000
QUESTION 5
According to Ansoff's Matrix, launching a completely new product into a
completely new market is known as:
• A. Market penetration
• B. Product development
• C. Market development
• D. Diversification
Correct Answer: D. Diversification
Detailed Rationale: Diversification involves a high-risk growth strategy
where a business enters a new market with a new product. Market
penetration involves existing products in existing markets, product
development involves new products in existing markets, and market
development involves existing products in new markets.
QUESTION 6
, A business has non-current liabilities of £200,000 and total equity plus
non-current liabilities (capital employed) of £500,000. What is its
gearing ratio?
• A. 25%
• B. 40%
• C. 60%
• D. 250%
Correct Answer: B. 40%
Detailed Rationale: The gearing ratio measures the proportion of a
business's capital employed that is financed by long-term debt (non-
Non-Current Liabilities
current liabilities). The formula is × 100. Here,
Capital Employed
200,000
× 100 = 40%.
500,000
QUESTION 7
If the price of a luxury good increases by 10% and demand falls by 25%,
what is the Price Elasticity of Demand (PED) and how is demand
described?
• A. -2.5, price elastic
• B. -0.4, price inelastic
• C. -2.5, price inelastic
• D. -0.4, price elastic
Correct Answer: A. -2.5, price elastic
Practice Papers, Model Answers & Exam Techniques
QUESTIONs and answers 2026/2027
QUESTION 1
A project has an initial capital outlay of £50,000 and generates net cash
inflows of £15,000 in Year 1, £25,000 in Year 2, and £20,000 in Year 3.
What is the payback period for this investment?
• A. 1 year 6 months
• B. 2 years
• C. 2 years 3 months
• D. 2 years 6 months
Correct Answer: D. 2 years 6 months
Detailed Rationale: After Year 1, £15,000 has been recovered, leaving
£35,000 of the initial outlay. After Year 2, an additional £25,000 is
recovered (total £40,000), leaving £10,000 remaining to be paid back. In
Year 3, the cash inflow is £20,000. To recover the remaining £10,000
10,000
takes × 12 months = 6 months. Therefore, the total payback
20,000
period is 2 years and 6 months.
QUESTION 2
According to the Boston Matrix, which type of product typically has a
high market share in a low-growth market and generates strong,
reliable cash flows?
, • A. Star
• B. Cash cow
• C. QUESTION mark (Problem child)
• D. Dog
Correct Answer: B. Cash cow
Detailed Rationale: Cash cows are established products in mature, low-
growth markets. Because they hold a high market share and require
little promotional investment, they generate high positive cash flows
used to fund other parts of the business.
QUESTION 3
According to Herzberg's Two-Factor Theory, which of the following is
classified as a "hygiene factor"?
• A. Achievement
• B. Recognition
• C. Working conditions
• D. Responsibility
Correct Answer: C. Working conditions
Detailed Rationale: Hygiene factors (such as working conditions, pay,
company policy, and job security) do not motivate employees on their
own, but their absence causes dissatisfaction. Factors like achievement,
recognition, and responsibility are motivators.
QUESTION 4
,A factory has a maximum output of 5,000 units per week, but currently
produces 4,000 units per week. What is its capacity utilization?
• A. 80%
• B. 125%
• C. 75%
• D. 20%
Correct Answer: A. 80%
Detailed Rationale: Capacity utilization is calculated as
Actual Output 4,000
× 100. Substituting the values: × 100 = 80%.
Maximum Possible Output 5,000
QUESTION 5
According to Ansoff's Matrix, launching a completely new product into a
completely new market is known as:
• A. Market penetration
• B. Product development
• C. Market development
• D. Diversification
Correct Answer: D. Diversification
Detailed Rationale: Diversification involves a high-risk growth strategy
where a business enters a new market with a new product. Market
penetration involves existing products in existing markets, product
development involves new products in existing markets, and market
development involves existing products in new markets.
QUESTION 6
, A business has non-current liabilities of £200,000 and total equity plus
non-current liabilities (capital employed) of £500,000. What is its
gearing ratio?
• A. 25%
• B. 40%
• C. 60%
• D. 250%
Correct Answer: B. 40%
Detailed Rationale: The gearing ratio measures the proportion of a
business's capital employed that is financed by long-term debt (non-
Non-Current Liabilities
current liabilities). The formula is × 100. Here,
Capital Employed
200,000
× 100 = 40%.
500,000
QUESTION 7
If the price of a luxury good increases by 10% and demand falls by 25%,
what is the Price Elasticity of Demand (PED) and how is demand
described?
• A. -2.5, price elastic
• B. -0.4, price inelastic
• C. -2.5, price inelastic
• D. -0.4, price elastic
Correct Answer: A. -2.5, price elastic
