Forms of Business & Stakeholders (AQA A Level Business): Exam Questions

Source B: Farmoor Cycles

Farmoor Cycles is an independent bicycle retailer in the UK. It was established in Oxford in 2002 as a worker cooperative by a group of cycling enthusiasts. It now has two other shops in Birmingham and Manchester. The UK bicycle retail sector has a few large national chains that sell bikes, such as Halfords, Decathlon and Argos, as well as many small independent businesses. The entry threat to the industry is high.

The mission of Farmoor Cycles is to:

• provide affordable bicycles for cyclists of all kinds

• promote the benefits of cycling for cyclists of all kinds

• build a fairer society through cooperative ownership.

The business states that 'we have the passion, specialist expertise and links with the local community that customers want'.

It values:

• democracy

• honesty

• openness

• social responsibility

• caring for others.

The business is considering investing in a new inventory management system (Appendix C) which has a forecast life span of 4 years. It usually aims for an average rate of return on its investments of at least 10%. The current rate of interest for taking out a bank loan is 8%.

Appendix D: Farmoor Cycles' data

• Revenue: £1 904 000 in 2023, falling to £1 880 000 in 2024

• Marketing spending as a percentage of revenue: 5% in 2023, 4% in 2024

• Number of employees: 30 in 2023, 32 in 2024

• Employee costs as a percentage of revenue: 25% in 2023, 27% in 2024

• Operating profit margins: 3% in 2023, 2% in 2024

• Cashflow: £125 000 in 2023, (£5 000) in 2024

• Average spending per employee on training: £2 000 in 2023, £750 in 2024

• Average time for customers to pay: 6 months in 2023 and 2024

• Average payment time to suppliers: 4 weeks in 2023, 3 weeks in 2024

Assess whether Farmoor Cycles' stakeholders would be likely to oppose the business becoming a private limited company.

Source B: Riverford Organic Farmers Ltd

Riverford Organic Farmers Limited grows and delivers organic vegetables. Guy Singh-Watson began delivering boxes of vegetables to local households from the family farm in Devon, and the business was registered as a private limited company in 1999. Its registered office is still Wash Barn at Buckfastleigh in Devon, and its registered business activity is the growing of vegetables, roots and tubers.

Customers subscribe to a weekly box rather than choosing individual items. Boxes are packed at Riverford's own sites and delivered straight to the door by its own drivers, so the company controls its route to market and does not sell through supermarkets. Subscribers pay in advance and can pause or change an order online. Riverford owns five of its sites outright and holds another nine on lease.

In 2018 Guy Singh-Watson began transferring ownership of the company to the people who work in it. The process finished on 8 June 2023, when he sold his remaining shares and the Riverford Employee Ownership Trust became the company's only person with significant control. The business is now held in trust on behalf of its roughly 1 000 employees. There are no outside shareholders, so no dividends are paid to investors outside the business.

In the year ended 3 May 2025 turnover rose by 5.9% to £116.9 million. Cash held at the bank rose by a quarter to £12.31 million, and total liabilities fell by 13.0%.

Organic food remains a small part of UK grocery, and supermarkets have been widening their own organic ranges at lower prices.

Because there are no outside shareholders, the directors and the trust decide together what to do with each year's profit. There is £2.4 million available this year. It could be paid to the co-owners as a profit share, or it could be spent on solar panels and new refrigeration at Wash Barn, which would cut the company's running costs every year from then on. Appendix F shows information on the two options.

Source: information sourced from Companies House, 2026

Appendix D: Riverford Organic Farmers Ltd selected financial data

Source: Companies House

Appendix E: UK organic vegetable box market

Share of the UK organic vegetable box market, 2025

• Average annual growth in UK organic food sales, 2021 to 2025 = 3.2%

Source: Analyst

Assess whether being owned by an employee ownership trust makes it easier or harder for Riverford Organic Farmers Ltd to compete with supermarket organic ranges.

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

Assess whether being a social enterprise makes it harder for Big Issue Media Ltd to respond to a 37.1% fall in turnover.

Source A: MJ Gleeson plc

MJ Gleeson plc builds houses. It is a public limited company listed on the London Stock Exchange and it works in two quite different ways. Gleeson Homes builds and sells houses, mainly in the North of England and the Midlands. Gleeson Land buys options on farmland, obtains planning permission and sells the land on to other housebuilders.

What makes Gleeson unusual is who it sells to. It builds the lowest-priced new homes in Britain and says its average selling price is 34% lower than the average new build price in the regions where it works. In the year to 30 June 2025, 78% of the homes it sold were affordable to a couple both earning the National Living Wage. Many of its buyers are first-time buyers who would otherwise be renting.

The year was a difficult one. Group revenue rose 5.9% to £365.8 million and the company sold 1 793 homes, only 21 more than the year before. The average selling price rose 4.3% to £193 600, but almost all of that came from building a different mix of houses rather than from charging more for the same house: underlying price growth was just 0.6%.

Costs went the other way. The gross margin at Gleeson Homes fell from 24.1% to 20.7%, and its operating profit fell 26.4% to £22.3 million. Gleeson Land had a much better year, completing seven land sales and lifting its operating profit from £2.2 million to £7.0 million, but it is far too small to make up the difference. Group profit before tax fell 17.3% to £20.5 million.

The company built from fewer places. Active build sites fell from 79 to 68, while the land pipeline grew slightly to 19 638 plots. Gleeson holds a medium-term target of building 3 000 homes a year, which is well above the 1 793 it managed this year.

Money left the business. Gleeson began the year with net cash of £12.9 million and ended it with net borrowings of £0.8 million, having held its dividend at 11.0p a share even though earnings per share fell from 33.13p to 27.11p.

Source: MJ Gleeson plc audited results for the year ended 30 June 2025, 16 September 2025

Appendix A: MJ Gleeson plc selected results

Source: MJ Gleeson plc

Appendix C: Affordability information

Source: Analyst

Assess whether MJ Gleeson plc can meet the needs of its shareholders and the needs of its first-time buyers at the same time.

Source B: Wetherby Green Garden Centre

Wetherby Green is a garden centre on the edge of a market town, owned and run by Priya Sharma as a sole trader. The business has no separate legal identity from her, so she keeps all of the profit and is personally responsible for all of its debts.

The business sells plants it grows itself in polytunnels behind the site, plants bought in from nurseries, plus compost, tools, pots and garden furniture. There is a small coffee hut. Twelve people work there, most of them part time and most of them only from March to June.

The business took £864 000 last year. Appendix E shows when. April and May alone take £310 000 of it, and the whole of July to October together comes to £178 000, barely more than May on its own.

The difficulty is the inventory. A pot of compost keeps. A shrub does not. Plants have to be bought or sown months before anybody wants them, they need watering and space while they wait, and if they are not sold in their season they either have to be discounted heavily or kept through the winter. Kept plants take up space, need heating in a cold snap, and a proportion of them die.

At the end of last July the business was holding £96 000 of unsold plants at cost. Appendix F sets out the two things it could do with them.

Appendix D: Wetherby Green Garden Centre, summary of last year

Source: Analyst

Appendix E: Wetherby Green Garden Centre monthly sales

Source: Analyst

Assess whether Wetherby Green Garden Centre should become a private limited company.

Source B: Battersea Dogs' and Cats' Home

Battersea Dogs' and Cats' Home is a registered charity, number 206394. It works with animals, provides services to the general public, and operates in London, in Windsor and Maidenhead, and in Kent. It has no shareholders and no owners. Any money left over at the end of the year stays in the charity.

Almost all of its money is given rather than earned. In the year to 31 December 2024 its total income was £70.34 million, of which £59.35 million came from donations and legacies. A legacy is money left to a charity in somebody's will, and legacies alone came to £32.57 million, almost half of everything Battersea received. The rest came from other trading activities, £7.58 million, from charitable activities, £869 000, from investments, £1.81 million, and from other sources, £741 000.

Raising that money costs money. Battersea spent £14.48 million on raising funds during the year. It spent £45.33 million on its charitable activities and £3.62 million on other costs, giving total expenditure of £63.43 million.

Income has grown in three of the past four years, from £52.71 million in 2020 to £70.34 million in 2024. Expenditure has risen every year over the same period. Appendix E shows both.

The charity faces a planning problem that a company selling to customers does not. Nobody can be told in advance how much will be left to Battersea in wills, or when. Legacies are the largest single source of its income and the least predictable.

Source: Charity Commission register of charities, entry 206394

Appendix D: Battersea Dogs' and Cats' Home income and expenditure, year to 31 December 2024

Appendix E: Battersea Dogs' and Cats' Home income and expenditure, 2020 to 2024

Appendix F: Battersea Dogs' and Cats' Home spending on raising funds

Source: Charity Commission

Battersea Dogs' and Cats' Home cannot know in advance how much will be left to it in wills.

Evaluate whether Battersea Dogs' and Cats' Home should try to grow its other trading activities or concentrate on raising more donations and legacies.

Source B: Foxhall Creamery Ltd

Foxhall Creamery Ltd makes hard cheese on the Shropshire border. It is a private limited company owned in equal shares by Kate Foxhall, who is 61, and Owen Ridd, who is 58, and it employs 48 people. Revenue last year was £6 800 000, sold to farm shops, delicatessens and independent grocers, none of whom takes more than 4% of output.

The cheese has to sit. The youngest thing Foxhall Creamery Ltd sells has been in the store for nine months, and its best-known cheese comes out at fourteen. Every wheel in the store is money already spent and not yet earned, and there are two rooms of them.

The accounts look reassuring. At the year end the company held £1 240 000 of inventory, was owed £680 000 by customers and had £410 000 in the bank, against £520 000 owed to suppliers, £118 000 in VAT and PAYE, and £194 000 of the bank loan falling due within the year. The loan stands at £1 460 000 in total, and the financial objective for this year is to reduce it by £200 000.

Foxhall Creamery Ltd values the cheese in its store at what the milk, the labour and the power have cost. A wheel that has been maturing for thirteen months appears in the accounts at the same figure as it did on the day it was made, although the price it will fetch has roughly doubled in the meantime.

The company needs a third maturing store, which will cost £900 000. It can pay for it out of the bank balance and this year's retained profit, or it can borrow again.

There is a larger question behind that one. Kate Foxhall wants to retire within five years. A cheese wholesaler has offered £4 900 000 for the company. The alternative the two of them have been reading about is an employee ownership trust, which would buy the business on behalf of the 48 staff and pay Kate Foxhall and Owen Ridd out of future profits over about seven years.

Appendix D: Foxhall Creamery Ltd, current assets and current liabilities

Source: Analyst

Kate Foxhall wants to retire within five years. A cheese wholesaler has offered £4 900 000 for the company.

Evaluate whether Foxhall Creamery Ltd should be sold to the wholesaler or transferred to an employee ownership trust.

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 completed the acquisition of Virgin Money on 1 October 2024. Every pound spent on integrating it is a pound not returned to members this year.

Evaluate whether Nationwide should put its profit into integrating Virgin Money or into increasing member financial benefit.