Raising Finance (Edexcel A Level Business): Exam Questions

Read the following extracts (E to G) (opens in a new tab) before answering

Using the data in Extract E, explain one way Hardy Punglia could use his cash flow forecast

Read the following extracts (A to C) (opens in a new tab) before answering

Explain one financial reason why Leo Scott Smith decided to establish Tended Ltd as a private limited company

Read the following extracts (E to G) (opens in a new tab) before answering

By March 2022, following the opening of a second shop, Hardy Punglia forecasts that cash inflows will be 350% higher than in March 2020, with cash outflows 40% of this figure. He expects to have an opening balance of £13,000

Calculate the forecast closing balance for Hardy Punglia's business in March 2022

Read the following extracts (A to C) (opens in a new tab) before answering

Explain one suitable source of finance that Tended Ltd could use to solve its cash flow problems

Read the following extracts (E to G) (opens in a new tab) before answering

Explain one suitable external source of finance The Wonky Table could use to fund its upstairs renovation

Extract A

Stylideas Ltd

In 2011, Tom Pellereau became Lord Sugar’s first Apprentice winner. Alan Sugar, a business angel, invested £250 000 in Tom Pellereau’s business idea. The company is owned by Tom Pellereau and Sir Alan Sugar, with 50% of the shares each.

Stylideas Ltd produces and sells a range of luxury cosmetic products for the health and beauty market. These include a variety of products for skincare, nailcare and teeth whitening.

Stylideas Ltd has enjoyed rapid success since its formation. Its sales turnover in 2024 was more than £5 million. The company now employs 14 staff.

(Source: adapted from https://www.thesun.co.uk/tvandshowbiz/23378433/lordsugar-apprentice-business-partner-tom-pellereau-multi-millionaire/)

Extract B

Selected financial information from Stylideas Ltd Statement of Financial Position 2024

(Source: adapted from https://find-and-update.company-information. service.gov.uk/company/07746771/filing-history)

Extract C

Tom Pellereau

Tom Pellereau is the Chief Executive Officer (CEO) and Innovations Director of Stylideas Ltd. It has employees who work in specific functions, such as marketing, operations and finance, which allows Stylideas to adopt a role culture.

His beauty brand Stylideas has flourished with several market-leading products. Its most successful being the makeup brush cleaner and dryer, which retails for £29.99. “We’ve now sold over 2 million of those,” says Tom. “As a result, I can now have a sales director, an operations director, and a marketing team, so I can focus on what I do best, which is innovation.”

In 2023, the business won Gold for the Business Innovation Award at the London Business Awards for small and medium businesses. Its LED face mask was a 2024 Beauty Awards winner.

New products include a £54.99 beauty fridge that is selling at a rate of 250 units a week, anti-wrinkle and anti-ageing devices, innovative mirrors and sustainable makeup products like reusable cotton pads that can go in the washing machine.

As well as selling its products directly from its website, Stylideas Ltd supplies retailers such as Boots, Superdrug and Amazon. Most of the company’s sales are in the UK, but it also distributes its products in France, Germany and Italy. (Source: adapted from https://stylpro.co.uk/)

Extract D

Growth in the UK economy

The UK economy unexpectedly picked up in late 2024, where GDP grew by 0.9% compared to 0.4% in 2023. The growth reflected a strong performance by the UK’s large service sector, the Office for National Statistics said.

“A pleasant surprise, but we’re not out of the woods yet. Beneath the surface of these latest figures, consumer demand and business investment were weaker than expected,” said Scott Gardner, an investment strategist.

The UK was the best performing major European economy, with Germany, France and Italy facing recession. But the UK trailed behind the United States, which saw 2.3% growth.

At the end of 2024, the Bank of England halved its forecast for growth in 2025 to 0.75%, although other forecasters, such as the National Institute of Economic and Social Research, were more optimistic about future growth.

(Source: adapted from https://www.msn.com/en-gb/money/economy/ uk-economy-unexpectedly-picked-up-in-late-2024-outlook-for2025-still-sluggish/ar-AA1yXZlt?ocid=BingNewsSerp)

Explain one benefit to Tom Pellereau of using a business angel as a source of finance

Extract B

Vantage Driving Academy Ltd

Vantage Driving Academy Ltd operates a driving school in Norwich with 11 instructors. It was set up in 2020 by Jo Whitlock using £22,000 of her own savings.

The business now needs £160,000 to replace its ageing fleet of 11 cars. Jo has identified several possibilities.

Vantage holds £38,000 in retained profit built up since 2022. Jo could also sell two older cars the business no longer needs, which a dealer has valued at £9,000 in total.

A bank has offered a five-year loan of £120,000 at a fixed rate of interest. Alternatively, a leasing company would supply all 11 cars for a monthly payment, with Vantage never owning them.

Jo said: "I have always put my own money in. I am less comfortable owing it to somebody else."

Using Extract B, explain one difference between the internal and external sources of finance available to Vantage Driving Academy Ltd

Extract A

Oreton Landscaping

Oreton Landscaping is a garden design and maintenance business in Shropshire, owned and run by Sam Oreton as a sole trader since 2019. Sam employs four staff.

The business has won a contract to landscape a new housing development, which would require £85,000 of new machinery. Sam's bank has refused a loan of that size, saying the business has "insufficient security for a loan of that size".

Sam's accountant has suggested converting Oreton Landscaping into a private limited company. This would make the business a separate legal entity, allow Sam to sell shares to his brother and a former colleague, and give Sam limited liability.

Sam is reluctant. "It has been mine since day one," he said. "I do not want to be outvoted in my own business."

Using Extract A, explain one way in which becoming a private limited company could improve Oreton Landscaping's access to finance

Extract D

Cranmere Watersports Ltd

Cranmere Watersports Ltd hires kayaks and paddleboards from a lakeside site in Cumbria. Trade is highly seasonal, with almost all income earned between May and September.

The forecast below covers the first four months of 2026. The opening cash balance on 1 January 2026 is £14,500.

Owner Nadia Brandt has been offered an overdraft facility of £10,000 by her bank.

Using the data in Extract D, calculate Cranmere Watersports Ltd's forecast closing cash balance at the end of March 2026. You are advised to show your working

Extract B

Norbury Robotics Ltd

Norbury Robotics Ltd was founded in 2024 by two engineering graduates, Priya Menon and Callum Fraser. It builds robotic arms that sort recycling at waste transfer stations.

The business has one prototype, one trial customer and no revenue. Priya and Callum need £250,000 to build their first six machines.

They have prepared a 40-page business plan setting out market research on 480 waste transfer stations it has identified as potential customers, three years of forecast cash flows, the qualifications of both founders, and a detailed breakdown of how the £250,000 would be spent.

Two banks have declined. A third has asked for a meeting, saying the forecasts were "the most thorough we have seen from a start-up this size".

Priya said: "Nobody is lending us money because of the robot. They are lending because we can show them the numbers behind it."

Using Extract B, explain one way in which Norbury Robotics Ltd's business plan could help it to obtain finance