Ethics in Finance (AQA A Level Business): Exam Questions

Source A: Nationwide Building Society

Nationwide is the world's largest building society and the second largest mortgage lender in the United Kingdom. It is a mutual, which means it has no shareholders. It is owned by its members, who are the people who bank, save or hold a mortgage with it, and in principle every member is an owner. Nobody outside the membership has a claim on its profit.

That changes what profit is for. A listed bank divides its profit between dividends to shareholders and money kept in the business. Nationwide has no shareholders to pay, so it keeps almost all of its profit in the business to build its financial strength, and gives value to members in two other ways. The first is pricing, through better savings rates and lower mortgage rates. In the year to 31 March 2025 it put this at £1 795 million of member financial benefit, which is its estimate of how much better off its members were than they would have been with a typical high street bank. The second is direct payments: £1 000 million paid to eligible members through the Fairer Share Payment and a one-off reward called The Big Nationwide Thank You. Both reach members before profit is calculated, so neither is paid out of profit.

The year was a large one. On 1 October 2024 Nationwide completed the acquisition of Virgin Money, a bank with its own customers, brand and business lending arm. Statutory profit before tax rose to £2 302 million from £1 776 million, even after the direct payments to members. The rise was mainly due to a one-off accounting gain of £2.3 billion on buying Virgin Money, which arose because the assets acquired were valued at more than the £2.8 billion price. Underlying profit before tax, which leaves out one-off items and the direct payments, fell to £1 852 million from £2 003 million, which the society put down to its decision to pay members better rates. Total underlying income reached £5.2 billion, and Pay.UK switching data for the nine months to December 2024 showed more current account switchers moving to Nationwide than to any other brand.

Buying a bank is an unusual thing for a mutual to do. Virgin Money's customers did not choose a mutual, and integrating it will take years and a great deal of money. Every pound spent on that integration is a pound not returned to members this year, which is the tension the society is now living with.

Source: information sourced from Nationwide Building Society preliminary results for the year ended 31 March 2025

Appendix B: What being a mutual means

Source: Analyst

Appendix C: Where the value went, Nationwide and a typical listed bank with the same profit before tax

Source: Analyst

Assess whether Nationwide Building Society's members are better off than the shareholders of a listed bank would be.

Source B: Fairhurst Linen Ltd

Fairhurst Linen Ltd is a commercial laundry on an industrial estate outside Leeds. It is a private limited company owned by Dev Anand and his sister Rani Anand, and it employs 24 people. It washes, presses and delivers bed linen, towels and table linen for hotels and restaurants across Yorkshire, and it charges by the kilogram.

Last year it processed 3.1 million kilograms at an average of 60p a kilogram, which brought in £1 860 000. Detergent, water, energy and packaging cost 20p for every kilogram put through the machines. Everything else is fixed: wages of £624 000 and premises, machines, maintenance and insurance of £456 000, which together come to £1 080 000 a year and are paid whether the machines run or not. Profit for the year was £160 000.

The machines are not full. They could handle 4.2 million kilograms a year, and last year they did 3.1 million. A new tunnel washer costing £320 000 would raise that ceiling further, and Dev Anand has been talking to the bank about it.

The Anands have set themselves an objective: a profit margin of 15% within three years.

Two things stand between them and it. The first is a contract. A hotel group has offered Fairhurst Linen Ltd 900 000 kilograms a year, which would nearly fill the machines, but only at 44p a kilogram. The second is that Fairhurst Linen Ltd pays its detergent supplier, a small chemicals firm in Rotherham, after 90 days, while its own hotel customers pay it after 45.

Appendix D: Fairhurst Linen Ltd, summary of last year

Source: Analyst

Assess whether Fairhurst Linen Ltd should pay its detergent supplier sooner than it does.

Source B: Galliford Try Holdings plc

Galliford Try Holdings plc builds things: schools, hospitals, water treatment works, roads and defence sites. It is a public limited company listed in London and it works almost entirely in the United Kingdom, mostly for public sector clients and regulated utilities. It does not build houses for sale.

Construction is a low-margin business and Galliford Try Holdings plc says so. In the year to 30 June 2025 revenue was £1.9 billion, 6% up on the year before, and the divisional adjusted operating margin was 3.0%. The company had set itself a target of 3.0% and reached it a year earlier than it had planned.

On a job of this size almost nothing is built by Galliford Try Holdings plc's own employees. The work is done by subcontractors: groundworkers, electricians, roofers, most of them small firms. In construction the usual way to hold on to cash is to pay those firms slowly, and the industry has a long record of doing exactly that. In the six months to 31 December 2025 Galliford Try Holdings plc paid its supply chain in an average of 29 days, and it publishes how quickly it pays.

It also holds a great deal of cash. The figure it reports is the average of its cash balance at the end of each month, which was £179 million, up from £155 million. It reports the average rather than the year-end figure because a construction company's cash moves a long way from month to month, and the balance on any single day says very little.

Source: information sourced from Galliford Try Holdings plc results for the year ended 30 June 2025 and the six months ended 31 December 2025

Appendix D: Galliford Try Holdings plc selected results

Source: Galliford Try Holdings plc

Assess whether paying its subcontractors within 29 days is likely to benefit Galliford Try Holdings plc.

Source B: Thorne Valley Orchards Ltd

Thorne Valley Orchards Ltd grows apples on 180 acres in Herefordshire and turns them into juice and chutney in a press and kitchen on the same site. It is a private limited company run by Marianne Vance, whose family has farmed the land since 1954, and it employs 26 people, more in the picking season.

It sells in two ways. Its own-brand juice and chutney go to farm shops, delicatessens and garden centres, and brought in £2.1 million last year. Bulk apples it does not need go to a large juice processor, which brought in £1.1 million. Total revenue was £3.2 million.

Its own orchards do not produce enough. Thorne Valley Orchards Ltd buys a further 3 380 tonnes of apples a year from fourteen contract growers, all of them small farms within thirty miles. It pays them £142 a tonne. The published market rate last year was £168 a tonne, and Appendix E shows how that gap has widened. The growers accept it because Thorne Valley Orchards Ltd takes the whole crop, pays within fourteen days and has done so for years. Its own customers, the farm shops and delicatessens, take about 45 days to settle.

The land is worth £4.6 million. Together with the buildings, press and kitchen, capital employed is £5.4 million. Against that, operating profit last year was £310 000 and profit before tax, after £64 000 of interest, was £246 000.

Marianne Vance has been offered a contract by a supermarket for 900 000 bottles of own-label juice a year at £1.10 a bottle. Her own brand sells at £2.40. The press currently runs at about 40% of what it could do.

Appendix D: Thorne Valley Orchards Ltd, summary of last year

Source: Analyst

Appendix E: What Thorne Valley Orchards Ltd pays its growers, against the market rate

Source: Analyst

Assess whether Thorne Valley Orchards Ltd should pay its contract growers the published market rate.

Calculate Thorne Valley Orchards Ltd's gross profit to support your answer.

Source B: Aldergate Landscapes Ltd

Aldergate Landscapes Ltd designs and builds gardens across Cheshire and north Staffordshire. It is a private limited company owned by Joss Aldergate and his wife Ruth, and it employs 19 people alongside regular subcontractors for stonework and electrics.

Most of the work is for private clients having a whole garden rebuilt, at an average of £14 200 a garden. The rest is for two housing developers who want the gardens finished before a show home opens. Last year the company built 188 gardens for revenue of £2 669 600. Materials and subcontractors cost £9 800 a garden. Everything else, meaning the yard, the vans, the permanent staff, the designer and the office, cost £680 000.

The work does not arrive evenly. Appendix E shows what comes in each month, and the three months from December to February brought in £214 000 between them, against fixed costs of about £170 000 for the same period.

To manage this, Aldergate Landscapes Ltd asks private clients for a 50% deposit when the design is signed off. The deposit is spent almost immediately, though not usually on that client's garden: it pays for materials on the job already running.

At the year end the company was owed £312 000 by clients and developers, held £186 000 of gardens that were half built and not yet invoiced, and had £24 000 in the bank. Against that it owed £268 000 to suppliers and subcontractors, £71 000 in VAT and PAYE, and was £46 000 into its overdraft.

Appendix D: Aldergate Landscapes Ltd, summary of last year

Source: Analyst

Assess whether Aldergate Landscapes Ltd should change how it uses the 50% deposits it takes from private clients.

Source B: Big Issue Media Ltd

Big Issue Media Limited publishes The Big Issue, a weekly magazine sold on the street by people who are homeless or at risk of becoming homeless. The company was set up in 1991 and is part of a group of 16 companies known as the Big Issue Group. It is a social enterprise: it trades like any other business, but it exists to create work for its vendors rather than to pay outside shareholders.

The selling model is unusual. Vendors buy copies of the magazine from Big Issue Media Limited at half the cover price, then sell them at the full price and keep the difference. A vendor is not an employee. What they earn depends entirely on how many copies they sell, so the number of magazines moving through the business is also the number that decides whether a vendor can pay their rent.

That number has been falling. Fewer people carry cash, fewer people buy print magazines, and the streets are quieter than they were. In the year to 31 March 2025 turnover fell by 37.1% to £3.92 million. The company cut its workforce from 74 people to 56. Cash at the bank fell to £297 000 and net assets fell by 43.6% to £630 000. Appendix D shows how the business changed.

The directors are considering two ways forward. They could raise the cover price, which would give each vendor more money for every copy sold. Or they could push more sales through the Big Issue app and website, which costs less to run but cuts the vendors out of the sale. Appendix F sets out the two options.

Source: information sourced from Companies House, 2026

Appendix D: How Big Issue Media Ltd changed during the year

Source: Companies House

Appendix E: Information on the economics of the magazine

Source: Analyst

Appendix F: Data for two ways forward

Source: Analyst

Appendix F shows two ways forward for Big Issue Media Ltd.

Evaluate both options and recommend which one would be the better way forward for Big Issue Media Ltd.

Source A: Nationwide Building Society

Nationwide is the world's largest building society and the second largest mortgage lender in the United Kingdom. It is a mutual, which means it has no shareholders. It is owned by its members, who are the people who bank, save or hold a mortgage with it, and in principle every member is an owner. Nobody outside the membership has a claim on its profit.

That changes what profit is for. A listed bank divides its profit between dividends to shareholders and money kept in the business. Nationwide has no shareholders to pay, so it keeps almost all of its profit in the business to build its financial strength, and gives value to members in two other ways. The first is pricing, through better savings rates and lower mortgage rates. In the year to 31 March 2025 it put this at £1 795 million of member financial benefit, which is its estimate of how much better off its members were than they would have been with a typical high street bank. The second is direct payments: £1 000 million paid to eligible members through the Fairer Share Payment and a one-off reward called The Big Nationwide Thank You. Both reach members before profit is calculated, so neither is paid out of profit.

The year was a large one. On 1 October 2024 Nationwide completed the acquisition of Virgin Money, a bank with its own customers, brand and business lending arm. Statutory profit before tax rose to £2 302 million from £1 776 million, even after the direct payments to members. The rise was mainly due to a one-off accounting gain of £2.3 billion on buying Virgin Money, which arose because the assets acquired were valued at more than the £2.8 billion price. Underlying profit before tax, which leaves out one-off items and the direct payments, fell to £1 852 million from £2 003 million, which the society put down to its decision to pay members better rates. Total underlying income reached £5.2 billion, and Pay.UK switching data for the nine months to December 2024 showed more current account switchers moving to Nationwide than to any other brand.

Buying a bank is an unusual thing for a mutual to do. Virgin Money's customers did not choose a mutual, and integrating it will take years and a great deal of money. Every pound spent on that integration is a pound not returned to members this year, which is the tension the society is now living with.

Source: information sourced from Nationwide Building Society preliminary results for the year ended 31 March 2025

Appendix A: Nationwide Building Society selected results

Source: Nationwide Building Society

Appendix B: What being a mutual means

Source: Analyst

Appendix C: Where the value went, Nationwide and a typical listed bank with the same profit before tax

Source: Analyst

Nationwide Building Society gave members £1 795 million of member financial benefit and £1 000 million of direct payments, and is spending heavily on integrating Virgin Money.

Evaluate whether Nationwide Building Society should return more of its profit to members now or keep more of it in the business.

Source B: Kettleby Plant Hire Ltd

Kettleby Plant Hire Ltd hires excavators, dumpers and telehandlers to builders across the East Midlands. It is a private limited company owned by Sean Kettleby and it employs 22 people, including four fitters who service the machines and two drivers who deliver them.

It owns 68 machines. Last year they were out on hire for 15 400 machine-days in total, at an average of £118 a day, which is revenue of £1 817 200. Fuel, delivery and servicing cost £34 for every day a machine is out. Everything else costs £1 050 000 a year and is paid whether the machines are out or standing in the yard.

Its customers are not alike. National housebuilders take more than half the revenue and are given sixty days to pay, which in practice becomes seventy-one. Small builders and sole traders are given seven days, or asked for a card when they collect. Sean Kettleby set it up that way and is candid about why: the housebuilders would go elsewhere if he pushed them, and the sole traders would not.

The machines are wearing out. Three excavators need replacing this year at £74 000 each. Sean Kettleby can buy them, which is what he has always done, or he can hire them in from a larger national firm when a customer needs one and hand the margin over. The bank has offered him a five-year loan for the £222 000, and he has enough in the company to pay cash if he chooses to.

Appendix D: Kettleby Plant Hire Ltd, summary of last year

Source: Analyst

Appendix E: Kettleby Plant Hire Ltd, who pays and when

Source: Analyst

Appendix E shows the payment terms Kettleby Plant Hire Ltd gives each type of customer.

Evaluate whether Kettleby Plant Hire Ltd should give every customer the same payment terms or keep the terms it has.