Edexcel Business A Level Paper 2
(Theme 2 & 3) Exam And Correct
Answers.
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
(Theme 2 & 3) Exam And Correct
Answers.
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
