Edexcel Business A Level Paper 2
(Theme 2 & 3)With Complete And
Correct Answers
Retained vprofits v- vCORRECT✅✅profits vthat vthe vowners vhave vreinvested vinto vthe
vbusiness vafter vpaying vcosts vand vtaxes
Owners' vfunds v- vCORRECT✅✅money vput vin vby vthe vowners vthemselves
Sale vof vassets v- vCORRECT✅✅a vone-off vway vto vraise vmoney, vgenerally vused
vduring vfinancial vstruggles
Benefits vof vowners vfunds v- vCORRECT✅✅Avoids vinterest von vloans
Owners vkeep vcomplete vcontrol
Disadvantages vof vowners vfunds v- vCORRECT✅✅If vit vfails vafter vremortgaging, vthey
vcould vlose vtheir vhouse
Limit vto vamount vraised
Short vterm vfinance vexamples v- vCORRECT✅✅overdrafts vfor vdaily vexpenses
Medium vterm vfinance vexamples v- vCORRECT✅✅loans, vhire vpurchase, vtrade
vcredit, vdebt vfactoring vused vto vpay vfor vrepairs, vpaid vback vafter v1-5 vyears
Long vterm vfinance vexamples v- vCORRECT✅✅issuing vshares, vdebentures,
vmortgages, vgrants vused vto vpay vfor vmajor vexpenditure, vpaid vback vover vmany vyears
Selling vassets v- vCORRECT✅✅Can vsell vmachines, vbuildings, vland
Limited vbuyers
Advertising vcosts
Sold vcheaply
Loans v- vCORRECT✅✅High vinterest vrates
Usually vrequires vsecurity vin vthe vform vof vassets vwhich vwill vbe vtaken vaway vif vthey
vdon't vmake vthe vrepayments
Needs vregular vupdates
Grants v- vCORRECT✅✅No vrepayment
May vbe vrecalled vif vconditions varen't vmet
May vnot vcover vfull vamount
,Hire vpurchase v/ vleasing v- vCORRECT✅✅Must vpay vdeposit vand vmonthly
Own vassets vat vthe vend
Leasing vdoes vnot vlead vto vownership
Must vpay vinterest
Will vbe vre-claimed vif vnot vpaid vfor
Issuing vshares v- vCORRECT✅✅Only vfor va vlimited vcompany v(ltd, vplc)
No vrisk vbut vmust vpay vyearly vdividends
Shareholders vat vrisk vas vshares vfluctuate
Shareholders vhave vinfluence
Venture vcapital v- vCORRECT✅✅Large vbusinesses vlend vto vsmaller v(not vplc)
vbusinesses
Lender vbecomes vshareholder
Aim vto vgrow vbusiness vso vshare vprice vincreases
Lenders vplay vactive vrole
Revenues v- vCORRECT✅✅the vamount vof vproduct vthat va vcustomer vactually vbuys
Total vrevenue vequation v- vCORRECT✅✅volume vsold vx vaverage vselling vprice
Profit vas van vobjective v- vCORRECT✅✅Profit vis vthe vmost vimportant vsource vof
vcash vflow vand vfinance
Can vbe vother vreasons vfor vrunning va vbusiness vthan vprofit
Why vprofit vis vimportant v- vCORRECT✅✅A vreturn von vinvestment
A vreward vfor vtaking vrisks
A vkey vsource vof vfinance
A vmeasure vof vbusiness vsuccess
A vmotivating vfactor
Profit vequation v- vCORRECT✅✅total vsales v- vtotal vcosts
Costs v- vCORRECT✅✅amounts vthat va vbusiness vincurs vin vorder vto vmake
vgoods/services
Costs vare vimportant vbecause v- vCORRECT✅✅They vdrain vaway vprofit
Change vprofit vmargins
Main vcauses vof vcash vflow vproblems
Changes vwith voutput
Variable vcosts v- vCORRECT✅✅Change vas voutput vvaries
Lower vrisk vfor vstartups
Variable vcost vexamples v- vCORRECT✅✅Raw vmaterials
Brought vin vstocks
, Wages vbased von vhours
Marketing vcosts vbased von vsales
Fixed vcosts v- vCORRECT✅✅Don't vchange vwith voutput
Higher vrisk vfor vstartups
Fixed vcost vexamples v- vCORRECT✅✅Rent v& vrates
Salaries
Advertising
Insurance, vbanking, vlegal vfees
Software
Advisers
Total vcosts vequation v- vCORRECT✅✅fixed vcosts v+ vvariable vcosts
Problems vestimating vcosts v- vCORRECT✅✅Some vare veasier vthan vothers
Rent, vsalaries, vadvertising
Others vare vharder
Raw vmaterials
Returns vor vrefunds
Budget v- vCORRECT✅✅a vfinancial vplan vfor vthe vfuture vconcerning vthe vrevenues
vand vcosts vof va vbusiness
Managerial vaccountability v- vCORRECT✅✅Budgets von vthe vobjectives
Managers vare vrequired vto vthink vahead
Budget vuses vfor vmanagement v- vCORRECT✅✅Set vtargets v
Motivate vstaffs
Improve vefficiency
Forecast voutcomes
Monitor vperformances
Assign vresponsibilities
Allocate vresources
Budget vas va vmotivator v- vCORRECT✅✅Provide vspecific vtargets vand vstandards
Attaining vor vsurpassing vthese vtargets
Fear vof vnot vachieving vcan vact vas van vincentive
Historical vbudgets v- vCORRECT✅✅Use vlast vyears vfigures vas vbasis
Realistic
Circumstances vmay vhave vchanged
Does vnot vencourage vefficiency
Zero vbased vbudgets v- vCORRECT✅✅Cost v/ vrevenues vset vto v0
Based von vnew vproposals vfor vsales vand vcosts
(Theme 2 & 3)With Complete And
Correct Answers
Retained vprofits v- vCORRECT✅✅profits vthat vthe vowners vhave vreinvested vinto vthe
vbusiness vafter vpaying vcosts vand vtaxes
Owners' vfunds v- vCORRECT✅✅money vput vin vby vthe vowners vthemselves
Sale vof vassets v- vCORRECT✅✅a vone-off vway vto vraise vmoney, vgenerally vused
vduring vfinancial vstruggles
Benefits vof vowners vfunds v- vCORRECT✅✅Avoids vinterest von vloans
Owners vkeep vcomplete vcontrol
Disadvantages vof vowners vfunds v- vCORRECT✅✅If vit vfails vafter vremortgaging, vthey
vcould vlose vtheir vhouse
Limit vto vamount vraised
Short vterm vfinance vexamples v- vCORRECT✅✅overdrafts vfor vdaily vexpenses
Medium vterm vfinance vexamples v- vCORRECT✅✅loans, vhire vpurchase, vtrade
vcredit, vdebt vfactoring vused vto vpay vfor vrepairs, vpaid vback vafter v1-5 vyears
Long vterm vfinance vexamples v- vCORRECT✅✅issuing vshares, vdebentures,
vmortgages, vgrants vused vto vpay vfor vmajor vexpenditure, vpaid vback vover vmany vyears
Selling vassets v- vCORRECT✅✅Can vsell vmachines, vbuildings, vland
Limited vbuyers
Advertising vcosts
Sold vcheaply
Loans v- vCORRECT✅✅High vinterest vrates
Usually vrequires vsecurity vin vthe vform vof vassets vwhich vwill vbe vtaken vaway vif vthey
vdon't vmake vthe vrepayments
Needs vregular vupdates
Grants v- vCORRECT✅✅No vrepayment
May vbe vrecalled vif vconditions varen't vmet
May vnot vcover vfull vamount
,Hire vpurchase v/ vleasing v- vCORRECT✅✅Must vpay vdeposit vand vmonthly
Own vassets vat vthe vend
Leasing vdoes vnot vlead vto vownership
Must vpay vinterest
Will vbe vre-claimed vif vnot vpaid vfor
Issuing vshares v- vCORRECT✅✅Only vfor va vlimited vcompany v(ltd, vplc)
No vrisk vbut vmust vpay vyearly vdividends
Shareholders vat vrisk vas vshares vfluctuate
Shareholders vhave vinfluence
Venture vcapital v- vCORRECT✅✅Large vbusinesses vlend vto vsmaller v(not vplc)
vbusinesses
Lender vbecomes vshareholder
Aim vto vgrow vbusiness vso vshare vprice vincreases
Lenders vplay vactive vrole
Revenues v- vCORRECT✅✅the vamount vof vproduct vthat va vcustomer vactually vbuys
Total vrevenue vequation v- vCORRECT✅✅volume vsold vx vaverage vselling vprice
Profit vas van vobjective v- vCORRECT✅✅Profit vis vthe vmost vimportant vsource vof
vcash vflow vand vfinance
Can vbe vother vreasons vfor vrunning va vbusiness vthan vprofit
Why vprofit vis vimportant v- vCORRECT✅✅A vreturn von vinvestment
A vreward vfor vtaking vrisks
A vkey vsource vof vfinance
A vmeasure vof vbusiness vsuccess
A vmotivating vfactor
Profit vequation v- vCORRECT✅✅total vsales v- vtotal vcosts
Costs v- vCORRECT✅✅amounts vthat va vbusiness vincurs vin vorder vto vmake
vgoods/services
Costs vare vimportant vbecause v- vCORRECT✅✅They vdrain vaway vprofit
Change vprofit vmargins
Main vcauses vof vcash vflow vproblems
Changes vwith voutput
Variable vcosts v- vCORRECT✅✅Change vas voutput vvaries
Lower vrisk vfor vstartups
Variable vcost vexamples v- vCORRECT✅✅Raw vmaterials
Brought vin vstocks
, Wages vbased von vhours
Marketing vcosts vbased von vsales
Fixed vcosts v- vCORRECT✅✅Don't vchange vwith voutput
Higher vrisk vfor vstartups
Fixed vcost vexamples v- vCORRECT✅✅Rent v& vrates
Salaries
Advertising
Insurance, vbanking, vlegal vfees
Software
Advisers
Total vcosts vequation v- vCORRECT✅✅fixed vcosts v+ vvariable vcosts
Problems vestimating vcosts v- vCORRECT✅✅Some vare veasier vthan vothers
Rent, vsalaries, vadvertising
Others vare vharder
Raw vmaterials
Returns vor vrefunds
Budget v- vCORRECT✅✅a vfinancial vplan vfor vthe vfuture vconcerning vthe vrevenues
vand vcosts vof va vbusiness
Managerial vaccountability v- vCORRECT✅✅Budgets von vthe vobjectives
Managers vare vrequired vto vthink vahead
Budget vuses vfor vmanagement v- vCORRECT✅✅Set vtargets v
Motivate vstaffs
Improve vefficiency
Forecast voutcomes
Monitor vperformances
Assign vresponsibilities
Allocate vresources
Budget vas va vmotivator v- vCORRECT✅✅Provide vspecific vtargets vand vstandards
Attaining vor vsurpassing vthese vtargets
Fear vof vnot vachieving vcan vact vas van vincentive
Historical vbudgets v- vCORRECT✅✅Use vlast vyears vfigures vas vbasis
Realistic
Circumstances vmay vhave vchanged
Does vnot vencourage vefficiency
Zero vbased vbudgets v- vCORRECT✅✅Cost v/ vrevenues vset vto v0
Based von vnew vproposals vfor vsales vand vcosts
