A LevelBusinessAQAExam Questions5. Financial Management5.1 Financial Objectives

Financial Objectives (AQA A Level Business): Exam Questions

Exam code: 7132

Syllabus Edition

First teaching 2023

Last exams 2027

1 hour15 questions
Easy
Medium
Hard
1
1 mark

Which one of the following best describes the relationship between the finance function and the other functions of a business?

  • Finance operates independently of marketing, operations and human resources

  • Finance sets targets that the other functions must follow, without being influenced by them in return

  • Marketing, operations and human resources all depend on finance, but finance is unaffected by them

  • Financial decisions affect the other functions, and those functions also shape financial planning

Choose your answer

2
1 mark

A business invests £250,000 in new machinery. It expects the machinery to generate additional profit of £30,000 each year.

What is the annual return on investment?

  • 0.12%

  • 12%

  • 10.7%

  • 8.3%

Choose your answer

3
1 mark

Which one of the following is a cost objective?

  • Keep the unit cost of each product below £2

  • Increase revenue by 8% compared with last year

  • Maintain an operating profit margin of at least 20%

  • Hold enough cash to cover three months of wages

Choose your answer

4
2 marks

What is meant by the term 'cash flow objective'?

How did you do?

5
3 marks

Brindle Bakery supplies bread to supermarkets. Its supermarket customers pay 60 days after delivery, but Brindle Bakery must pay its flour supplier within 7 days.

Explain one reason why Brindle Bakery could be profitable and still run short of cash.

How did you do?

6
3 marks

Larchmont Tools manufactures hand tools. Last year it reported a healthy gross profit but a much smaller operating profit.

Explain one reason why Larchmont Tools' operating profit is much smaller than its gross profit.

How did you do?

7
2 marks

What is meant by the term 'the finance function' in a business?

How did you do?

1
4 marks

Kelsale Ceramics is choosing between two capital investments. A new kiln would cost £180,000 and a delivery fleet would also cost £180,000. The business can only fund one of them.

Explain one benefit to Kelsale Ceramics of setting a return on investment objective.

How did you do?

2
4 marks

Halvern Foods produces ready meals. It has set an objective to cut its operating costs by 10% during the next financial year.

Explain one drawback to Halvern Foods of setting this cost objective.

How did you do?

3
5 marks

Netherfield Gardens is a garden centre. Most of its sales take place between March and July, but it pays for its plants and other inventory in January.

Explain one difficulty Netherfield Gardens may face in meeting its cash flow objectives.

How did you do?

4
6 marks

Ashgrove Interiors reported a profit of £1.4m last year. In February the business was unable to pay its suppliers, and its bank refused to extend its overdraft.

Analyse how Ashgrove Interiors could be profitable and yet unable to pay its suppliers.

How did you do?

5
6 marks

Table 1 shows financial data for Marchwood Ltd.

Calculate:

  • Marchwood Ltd's gross profit for the year

  • Marchwood Ltd's profit for the year.

How did you do?

1
9 marks

Analyse the possible effects on Calderbrook Textiles' other functional areas of the finance director's decision to cut every budget by 12%.

How did you do?

2
16 marks

Evaluate the usefulness to Pennine Cycles Ltd of setting a return on investment objective as its only financial objective.

How did you do?

3
25 marks

To what extent should a business always prioritise its profit objectives over its cash flow objectives?

How did you do?