A LevelBusinessEdexcelExam Questions2. Managing Business Activities2.3 Managing Finance

Managing Finance (Edexcel A Level Business): Exam Questions

Exam code: 9BS0

4 hours24 questions

4 marks

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

Using the data in Extract B, calculate the difference in Morrisons’ acid test ratio between 2014 and 2015. You are advised to show your working

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4 marks

Read extracts E to H before answering

Extract E
PulseTech plc
PulseTech plc is a UK-based public limited company that designs and sells wearable technology products, including fitness trackers and smart health monitors. Its products are sold online and through electronics retailers in the UK, Europe and North America.
PulseTech’s strategy focuses on innovation and data analytics. Its products allow users to track physical activity, sleep patterns and heart rate. The business invests heavily in research and development (R&D) to differentiate its products and maintain a competitive advantage.

Extract F
PulseTech plc – selected financial information (2023)
PulseTech’s directors are under pressure from shareholders to improve profitability, following a slowdown in revenue growth during 2023.

Extract G
Production capacity and outsourcing
PulseTech currently assembles its products at a factory in Eastern Europe. The factory is operating at 92% capacity utilisation.
Demand forecasts suggest that sales could increase by up to 30% over the next two years if PulseTech launches a new health-monitoring device. To meet this demand, PulseTech is considering two options:
Expanding its existing factory
Outsourcing production to a specialist electronics manufacturer in Asia
Outsourcing would reduce PulseTech’s control over production but could lower unit costs.

Extract H
The global wearable technology market
The global wearable technology market has grown rapidly over the past decade. The market was valued at $61.3bn in 2020 and is forecast to reach $150.6bn by 2030, representing strong long-term growth.
Growth is driven by increased health awareness, advances in sensor technology and the integration of wearable devices with smartphones and health apps.
However, the market is characterised by:
Rapid technological change
Short product life cycles
High levels of research and development spending
PulseTech’s senior managers must decide how best to position the business to benefit from future market growth.

Using the data in Extract F, calculate PulseTech plc's gross profit margin for 2023. You are advised to show your working

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8 marks

Extract E
Company profile: Sweetcraft Ltd
Sweetcraft Ltd is a family-owned business based in Burnley, Lancashire, specialising in traditional boiled sweets, toffee, and fudge. Founded in 1992, the company employs 72 people and generates annual revenue of approximately £9.8 million.
Operating from a single site, Sweetcraft sells through independent retailers, farm shops, garden centres, tourist attractions, and its website. The business has built a reputation for high-quality, handcrafted products using traditional recipes, priced 40-60% above mass-market equivalents.
The core customer base consists of older consumers valuing traditional British confectionery. The company has developed a growing gift range, with seasonal assortments popular for Christmas and Easter.
Co-founders Sarah and Michael Chen remain hands-on in operations. Sweetcraft faces rising ingredient costs, competition from larger manufacturers, and difficulties attracting younger consumers.

Extract F
Financial performance 2022-2024
Additional data (2024)
Non-current assets: £3.2m
Current assets: £1.8m
Current liabilities: £1.4m
Long-term loans: £1.5m
Rising cost of sales (sugar, glucose syrup, butter, packaging) increased from 60% to 65% of revenue
Competitive pressures and retailer price sensitivity limited price increases
Operating expenses rose due to higher energy costs, wage inflation, and digital marketing investment
Source: adapted from Sweetcraft Ltd financial statements

Extract G
Operations and workforce challenges
Sweetcraft's factory operates at 68% capacity, producing around 780 tonnes annually using traditional batch production with semi-automated packaging. Production is highly seasonal, peaking before Christmas and Easter. During peaks, the factory runs extended shifts with up to 20 temporary workers. Outside peaks, underutilisation causes fixed cost inefficiencies.
Labour turnover averaged 24% in 2024, above the industry average of 15%. Employees leave for higher-paid positions in nearby distribution centres. The workforce is ageing - 45% of production employees are over 50 - and the company struggles to attract younger workers.
Sarah Chen commented: "We're competing with logistics operators offering higher wages. Our traditional sweet-making roles require specialist skills that are increasingly rare. Training takes time and impacts productivity."

Extract H
Strategic options
Sweetcraft's management has identified two growth strategies:
Management is divided. Some argue contract manufacturing offers lower-risk capacity utilisation, while others believe protecting the Sweetcraft brand and pursuing direct sales creates greater long-term value.
Source: adapted from strategic planning documents

Assess two possible reasons for the decline in Sweetcraft Ltd's operating profit between 2022 and 2024 (Extract F)

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12 marks

Extract E
Company profile: Sweetcraft Ltd
Sweetcraft Ltd is a family-owned business based in Burnley, Lancashire, specialising in traditional boiled sweets, toffee, and fudge. Founded in 1992, the company employs 72 people and generates annual revenue of approximately £9.8 million.
Operating from a single site, Sweetcraft sells through independent retailers, farm shops, garden centres, tourist attractions, and its website. The business has built a reputation for high-quality, handcrafted products using traditional recipes, priced 40-60% above mass-market equivalents.
The core customer base consists of older consumers valuing traditional British confectionery. The company has developed a growing gift range, with seasonal assortments popular for Christmas and Easter.
Co-founders Sarah and Michael Chen remain hands-on in operations. Sweetcraft faces rising ingredient costs, competition from larger manufacturers, and difficulties attracting younger consumers.

Extract F
Financial performance 2022-2024
Additional data (2024)
Non-current assets: £3.2m
Current assets: £1.8m
Current liabilities: £1.4m
Long-term loans: £1.5m
Rising cost of sales (sugar, glucose syrup, butter, packaging) increased from 60% to 65% of revenue
Competitive pressures and retailer price sensitivity limited price increases
Operating expenses rose due to higher energy costs, wage inflation, and digital marketing investment
Source: adapted from Sweetcraft Ltd financial statements

Extract G
Operations and workforce challenges
Sweetcraft's factory operates at 68% capacity, producing around 780 tonnes annually using traditional batch production with semi-automated packaging. Production is highly seasonal, peaking before Christmas and Easter. During peaks, the factory runs extended shifts with up to 20 temporary workers. Outside peaks, underutilisation causes fixed cost inefficiencies.
Labour turnover averaged 24% in 2024, above the industry average of 15%. Employees leave for higher-paid positions in nearby distribution centres. The workforce is ageing - 45% of production employees are over 50 - and the company struggles to attract younger workers.
Sarah Chen commented: "We're competing with logistics operators offering higher wages. Our traditional sweet-making roles require specialist skills that are increasingly rare. Training takes time and impacts productivity."

Extract H
Strategic options
Sweetcraft's management has identified two growth strategies:
Management is divided. Some argue contract manufacturing offers lower-risk capacity utilisation, while others believe protecting the Sweetcraft brand and pursuing direct sales creates greater long-term value.
Source: adapted from strategic planning documents

Using the information provided, calculate Sweetcraft Ltd's current ratio for 2024 (Extract F). Assess whether this indicates that Sweetcraft is in a strong financial position.

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12 marks

Extract D
51 years of independent retail
Jonathan Trumbull Ltd was founded in 1971 in Norwich, by John and Roger Kingsley. John’s son, David Kingsley, is still a director and manager and is one of 20 staff. Jonathan Trumbull Ltd owns three stores: Trumbull, a traditional men’s clothing store; Ginger, a high-end women’s fashion store; and Hatters, which focuses more on contemporary fashion. Estimated expansion costs for one of these stores ranges between £25,000 and £30,000.
Trumbull, Hatters, and Ginger offer a range of fashionable classic and casual wear, aimed at adult customers on a range of incomes. The business sells clothing from a variety of brands, including Armani, Tom Ford, and Moschino.
Jonathan Trumbull Ltd’s website cost approximately £2,000 to set up. It stocks a wide variety of additional labels, including an extensive range of suits and formalwear, which may not appear in stores. Its IT-based stock system is managed by Swan Retail, which provides a fully integrated customer ordering, stock management and accounting system. Expansion of e-commerce could cost 30% more than the original set-up cost.
Norwich is the largest city in the East of England and is the main regional centre for shopping. It has regularly been voted one of the top five retail destinations in the UK.
(Source: adapted from https://www.jonathantrumbull.co.uk/about-us-i2 and interview with manager)

Extract E
Ginger reopens in its former shop
Ginger is part of the Jonathan Trumbull Ltd retail group, one of Norwich’s longest-established businesses. It has moved back to its original premises in Timberhill, after a short spell being based in the Trumbull store in Norwich.
Beckie Kingsley is the store manager. She is the daughter of David Kingsley, a Jonathan Trumbull director, and is likely to be his successor. Beckie said: “When the building became available, we thought we would come back. It is lovely being back in Timberhill. It has a great community spirit, and it is full of thriving independent shops, including other fashion retailers. Everybody is willing to help each other out and we all share ideas. Timberhill is a beautiful street, near lovely green areas. Customers have welcomed us back.”
(Source: adapted from https://www.eveningnews24.co.uk/news/business/22321802.high-end-boutique-reopens-former-shop/)

Extract F
Extract from Jonathan Trumbull Ltd’s statement of financial position
(Source: adapted from © Crown copyright)

Extract G
Competition for Jonathan Trumbull Ltd
In 2023, the multinational clothing retailer, Urban Outfitters, announced the opening of its store in Chantry Place, Norwich’s biggest shopping mall. Urban Outfitters became the latest competitor to Jonathan Trumbull Ltd to open, after its planning application was approved by Norwich City Council.
Urban Outfitters began in 1970 in the USA, and now operates more than 200 stores in North America and Europe. Urban Outfitters sells a mix of on-trend women’s and men’s clothes, including shoes, hats, bags, and a collection of handpicked vintage clothing known as Urban Renewal.
Online sales increased by 150% in 2022, however Urban Outfitters is also opening new stores. Brick and mortar stores serve as a showroom for products and give customers the opportunity to touch and feel products. Its store layouts are more varied between locations than other retailers, based on stylish loft apartments, with features such as exposed ceilings and wooden floors.
(Source: adapted from https://www.eveningnews24.co.uk/news/business/22318417.urban-outfitters-confirmed-new-shopping-malladdition/ and https://marker.medium.com/urban-outfitters-knowswhat-gen-z-wants-brick-and-mortar-stores-593c67406275)

Using the data in Extract F, and liquidity ratios, assess whether Jonathan Trumbull Ltd's liquidity position has improved from 2021 to 2022.

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12 marks

Extract A
Universal Music Group
Universal Music Group (UMG) is the world’s largest music label, responsible for producing and distributing music. It has the largest market share, with 33.90%, followed by Sony Music Entertainment with 26.91%, Indies with 23.21% and Warner Music Group with 15.98%
UMG’s artists include American and British acts: Taylor Swift, Kendrick Lamar, Elton John, and Sabrina Carpenter. UMG receives a proportion of each artist’s sales of music.
In 2024 its revenue increased by 14.4%, helped by the strong sales for The Tortured Poets Department by Taylor Swift. In the UK alone the album has moved 255,515 copies on physical formats.
However, the potential of Artificial Intelligence (AI) to use artist material owned by UMG and TikTok’s global influence on music consumption, provide challenges to UMG.
(Source: adapted from https://www.universalmusic.com and https://www.musicbusinessworldwide.com/this-analyst-has-watcheduniversal-music-group-closely-for-years-and-hasnt-always-been-megapositive-he-just-upgraded-umgs-stock-for-the-second-time-in-a-year/)

Extract B
Rough Trade Records
Rough Trade is an independent record store, with 7 shops in cities including London and Liverpool.
Its owners are happy to remain small. They avoid locating in areas that already have a strong independent record shop, so as not to create competition for that store. The owners recognise that there are probably 5 or 6 cities where it could open a new Rough Trade record store.
For the year ending December 31, 2022, Rough Trade’s Sales Revenue was £14 348 884, Gross Profit of £5 210 500, and Operating Profit was £528 330. Rough Trade’s cost of sales and operating expenses both increased significantly during 2022.
Rough Trade pay its staff well above the minimum wage. It makes sure its staff have a good working environment and have the support they need to give great customer service. It also paid out a profit bonus to all staff.
Rough Trade increased its share of the UK market for vinyl to 8.4% (up from 7%). Sales of books and turntables also increased.
(Source: adapted from https://www.musicweek.com/labels/read/rough-trade-retail-reportsrecord-revenue-amid-vinyl-sales-boom/088586)

Extract C
Emerging markets and the global music industry
The music industry’s focus has slowly moved towards emerging markets. Labels such as UMG brought Western music influences into these markets through international marketing of global artists. However, regional scenes and local artists are taking on global sounds. K-pop, Reggaeton and Afrobeats are examples of this influence. Sales of artists, such as Tiara Andini in Indonesia and Chris Mj in Chile, are expected to grow.
Emerging markets are vital for streaming services and major labels. Spotify and Apple Music were late to realise the potential of emerging markets. This allowed local streaming services such as JioSaavn in India to provide local consumers with easier access to local music. It also enabled local artists to find new opportunities to become superstars in their home markets. These local streaming services lack a global presence, but successfully focus on regional music.
European and North American artists who are looking for global relevance are turning to local sounds and cultures to differentiate their music.
(Source: adapted from https://www.midiaresearch.com/blog/emergingmarket-music-cultures-are-shaping-the-global-music-industry)

Using the data in Extract B, and profitability ratios, assess the ways in which Rough Trade Records could improve its profitability.

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