Which one of the following is a short-term source of finance?
Select one answer.
Retained profit
Share capital
Trade credit
Venture capital
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Exam code: 1BS0
Which one of the following is a short-term source of finance?
Select one answer.
Retained profit
Share capital
Trade credit
Venture capital
Choose your answer
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Which one of the following is an example of a cash outflow for a small business?
Select one answer.
Bank loan
Personal savings
Raw materials
Receipts
Choose your answer
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Which one of the following is a definition of market share?
Select one answer.
Market research that can be collected and analysed
The proportion of sales in a market made by one business
The total amount of money from business sales
A group of people who discuss their views on a product
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Which one of the following is an example of variable costs?
Select one answer.
Advertising
Insurance
Salaries
Raw materials
Rent
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On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
Outline one reason why cash would be important to On Your Bike.
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Which one of the following is a long-term source of finance?
Select one answer.
Overdraft
Revenue
Trade credit
Venture capital
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Which one of the following can be interpreted from a break even diagram?
Select one answer.
Insolvency
Margin of safety
Market share
Net cash flow
Liquidity
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Sports Tours Ltd was established in 1989 and is one of the leading online specialist sports tour operators in the United Kingdom. It arranges tours for teams to destinations in the United Kingdom and Europe in sports such as football, rugby, hockey and netball. The business not only organises travel, accommodation and meals, but it also arranges games and entry to tournaments for the sports team whilst on tour.
Sports Tours Ltd has very high standards. It carries out full risk assessments for all tours including possible pre-tour inspection visits. Tours are licensed and authorised through official agencies. All tours have regular contact with a member of staff from Sports Tours Ltd.
In recent years the business has faced increasing competition. This is not only from other sports tour operators but also from teams organising their own tours. Changing levels of consumer income and exchange rates have also had an impact on demand for tours by sports teams.
Sports Tours Ltd are confident that the high level of service they offer will help them to remain competitive. However, it is always looking for more ways to add value to its business activities.
State one fixed cost that Sports Tours Ltd will need to pay.
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That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
State one example of a cash outflow for That Feeling.
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That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
Figure 2 shows the age of entrepreneurs starting businesses in the UK since 2000.

Figure 2
(Source: adapted from https://startups.co.uk/the-average-entrepreneur/ (opens in a new tab))
Using the information in Figure 2, identify what percentage of entrepreneurs were in the same age range as Justin when he started That Feeling.
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Green Cleaners is a small family business that provides eco-friendly cleaning services to households in a suburban area. The business was started three years ago by two sisters, who now employ three cleaners. They use biodegradable cleaning products and market themselves as an environmentally responsible company.
The business advertises through leaflets, social media, and word-of-mouth recommendations. Its main customers are local families with busy lifestyles who want reliable cleaning services. The owners believe their focus on eco-friendly products sets them apart from larger national cleaning companies.
At present, Green Cleaners earns steady income from weekly and fortnightly home cleaning jobs. However, demand can fluctuate, and the owners are looking at ways to grow the business. They are considering two options:
Option 1: Employ more staff to take on additional home cleaning customers.
Option 2: Offer cleaning contracts to local offices, which may provide larger and more regular sources of revenue.
Eco-friendly cleaning products are more expensive than standard alternatives, which raises costs. The owners are confident that “green” cleaning is a growing trend, but they also know that customers often make decisions based on price as well as values. They must decide how best to secure the long-term success of the business.
State one fixed cost for Green Cleaners.
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That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
Outline one benefit to employees at That Feeling from being mentored by Justin.
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Which one of the following are typical objectives for a start-up business?
Select one answer.
Survival
Retrenchment
Expand overseas
Sells shares on the stock market
Become market leader
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Which one of the following is a non-financial business objective?
Profit
Survival
Personal satisfaction
Market share
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Which one of the following is a source of short-term finance?
Retained profit
Mortgage
Venture capital
Trade credit
Share capital
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Green Cleaners is a small family business that provides eco-friendly cleaning services to households in a suburban area. The business was started three years ago by two sisters, who now employ three cleaners. They use biodegradable cleaning products and market themselves as an environmentally responsible company.
The business advertises through leaflets, social media, and word-of-mouth recommendations. Its main customers are local families with busy lifestyles who want reliable cleaning services. The owners believe their focus on eco-friendly products sets them apart from larger national cleaning companies.
At present, Green Cleaners earns steady income from weekly and fortnightly home cleaning jobs. However, demand can fluctuate, and the owners are looking at ways to grow the business. They are considering two options:
Option 1: Employ more staff to take on additional home cleaning customers.
Option 2: Offer cleaning contracts to local offices, which may provide larger and more regular sources of revenue.
Eco-friendly cleaning products are more expensive than standard alternatives, which raises costs. The owners are confident that “green” cleaning is a growing trend, but they also know that customers often make decisions based on price as well as values. They must decide how best to secure the long-term success of the business.
State one fixed cost for Green Cleaners.
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Which one of the following is a short-term source of finance?
Share capital
Overdraft
Venture capital
Retained profit
Choose your answer
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Which one of the following is an example of a variable cost?
Insurance
Packaging
Rent
Salaries
Choose your answer
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Which one of the following is an example of a cash inflow?
Loan repayments
Insurance
Raw materials
Receipts
Wages
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Which one of the following is a definition of insolvency?
A product becoming obsolete
Business failure due to unpaid debts
Generating high levels of revenue
Understanding the business environment
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Little Movers is a business that offers preschool dance and movement classes. It also specialises in themed birthday parties and provides workshops in many local authority children centres. The business was founded in 2007 by Melanie Buck and within weeks of opening hundreds of families were attending the classes.
Little Movers exceeded Melanie’s expectations. She struggled to keep up with the demands of running the business and her commitment to being a mother of two young children. Melanie originally started Little Movers as she felt she could run the classes whilst her children were at school. This independence would also help her achieve a key objective of enjoying all of the school holidays with her own children.
To keep up with the high levels of demand Melanie decided to expand her business through franchising. As a franchisor she believed that she could offer a proven business formula together with a wide range of support to franchisees. This included use of the Little Movers brand, being the only Little Movers franchise in a particular area, full training and a centralised online booking system. Franchisees also receive lesson plans each month for the classes. This approach proved to be highly successful. Little Movers now has franchises throughout the North of England and has recently had enquiries to open franchises in Poland and Dubai.
State one non-financial aim that Melanie may have had when starting Little Movers.
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Digital Allies is a private limited company. It supports clients to create marketing materials that can be used in a wide range of digital communications. This includes online advertising, web design, and digital data analysis to ensure clients are getting the most from their digital communications. It also offers training to businesses on how they could use social media and digital communication to improve their marketing.
The use of social media is something Digital Allies believes is becoming a major influence on how customers interact with businesses. It manages marketing campaigns across Facebook, Twitter, Instagram, Snapchat and LinkedIn. This allows its clients to target a wide range of consumers and to analyse these communications on social media to give businesses a competitive advantage over their rivals.
In February 2019, Digital Allies announced a three-year expansion plan which involved doubling its workforce to 40 employees and moving to new offices. The business believed that this move would allow it to employ people with the most up-to-date knowledge and to become one of the main digital marketing companies in the UK.
State one source of revenue for Digital Allies.
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Which one of the following is a financial aim for a new business?
Challenge
Independence
Personal satisfaction
Survival
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Adikoggz is a small business based in Leeds. It offers the customising of trainers. It was set up by Keilan Kogut in 2018. The business designs personalised trainers including those associated with the colours and images of football teams or music bands. Customers can either supply their own trainers to be customised or pay Adikoggz to source and design a new pair of trainers to meet their needs. Adikoggz charges up to £200 for a new pair of customised trainers. It also offers a service to deep clean trainers. The price for this is £20.
The business started as a hobby but after showing off the designs on social media platforms such as Facebook and Instagram, Keilan started to receive follower requests asking him to customise or source unique styles of trainers. This gave him the inspiration to start Adikoggz and the business now receives orders from all over the world.
Keilan still carries out much of the work himself, but the growing number of orders has led him to struggle to keep up with demand. He now employs four people to help him with customisations. However, he still feels that the USP of Adikoggz is the personalised service it offers and that every customer will receive a unique product at the end of the process.
State one example of a cash inflow for Adikoggz.
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Performance Fitness Centre (PFC) is an independent gym and fitness studio. It has been open for seven years and has over 200 members. Members pay a fee of £39 per month for unlimited access to the gym and fitness classes that take place five days per week. Non-members can also pay to use the gym for each individual session they attend.
The gym at PFC is stocked with high specification equipment and weight machines. As a result, it has become very popular with customers interested in maintaining a high level of personal fitness. It has an equal number of male and female customers, but the owner has noticed that there is a lower number of members from people aged over 50. He believes that this may be because they feel out of place amongst the younger membership.
Over the past year a new gym that is part of a large national chain has opened nearby. It is much larger and membership fees at the new gym are only £19 per month. PFC has seen a reduction in new members joining the gym and is now considering what it can do to compete with its larger and cheaper rival. Its current members are loyal and enjoy the high quality offered at PFC.
State one example of a fixed cost for PFC.
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Adikoggz is a small business based in Leeds. It offers the customising of trainers. It was set up by Keilan Kogut in 2018. The business designs personalised trainers including those associated with the colours and images of football teams or music bands. Customers can either supply their own trainers to be customised or pay Adikoggz to source and design a new pair of trainers to meet their needs. Adikoggz charges up to £200 for a new pair of customised trainers. It also offers a service to deep clean trainers. The price for this is £20.
The business started as a hobby but after showing off the designs on social media platforms such as Facebook and Instagram, Keilan started to receive follower requests asking him to customise or source unique styles of trainers. This gave him the inspiration to start Adikoggz and the business now receives orders from all over the world.
Keilan still carries out much of the work himself, but the growing number of orders has led him to struggle to keep up with demand. He now employs four people to help him with customisations. However, he still feels that the USP of Adikoggz is the personalised service it offers and that every customer will receive a unique product at the end of the process.
The table shows how many pairs of trainers were customised by Adikoggz from July to December 2022.
Month | Pairs of trainers |
|---|---|
July | 52 |
August | 61 |
September | 47 |
October | 34 |
November | 52 |
December | 72 |
Calculate the average number of trainers customised per month from July to December 2022. You are advised to show your workings.
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Amelia Cooper trained as a plumber six years ago. Since then she has worked for a building company that carries out repairs to houses and business premises in the Birmingham area.
Amelia is now in a position where she wants to start her own plumbing business called Lili Heating Ltd. Even though there are many plumbers in the Birmingham area, Amelia feels she has a unique selling point – she is a woman. Many female customers feel that they can relate more closely with a woman doing repairs in their homes.
As part of her business plan, Amelia has identified some clear aims and objectives and conducted a large amount of market research using the internet. Her target market requires clear advice on what work needs to be done and how much she will charge. Amelia also thinks she can cut down on advertising costs by getting her customers to recommend Lili Heating Ltd to their friends and families. For this to happen she knows that her work must be of the highest standard.
Amelia’s business plan also included a wide range of financial information to help her forecast the potential success of the business and see if she would need an overdraft.
The table shows forecasts from the business plan for month one of Lili Heating Ltd.
Cash inflows | £8,600 |
Cash outflows | £11,000 |
Opening balance | £4,000 |
Calculate Lili Heating Ltd’s forecasted closing balance at the end of month one. You are advised to show your workings.
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The table shows the number of units sold per month by a business from February to April. The selling price for each unit was £5.20.
Month | Units sold |
|---|---|
February | 6,100 |
March | 7,200 |
April | 8,100 |
Using the information in Figure 1, calculate the revenue for March. You are advised to show your workings.
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Little Movers is a business that offers preschool dance and movement classes. It also specialises in themed birthday parties and provides workshops in many local authority children centres. The business was founded in 2007 by Melanie Buck and within weeks of opening hundreds of families were attending the classes.
Little Movers exceeded Melanie’s expectations. She struggled to keep up with the demands of running the business and her commitment to being a mother of two young children. Melanie originally started Little Movers as she felt she could run the classes whilst her children were at school. This independence would also help her achieve a key objective of enjoying all of the school holidays with her own children.
To keep up with the high levels of demand Melanie decided to expand her business through franchising. As a franchisor she believed that she could offer a proven business formula together with a wide range of support to franchisees. This included use of the Little Movers brand, being the only Little Movers franchise in a particular area, full training and a centralised online booking system. Franchisees also receive lesson plans each month for the classes. This approach proved to be highly successful. Little Movers now has franchises throughout the North of England and has recently had enquiries to open franchises in Poland and Dubai.
When starting the business in 2007, Melanie took out a loan. The financial details of this loan are in the table.
Loan required from the bank | £10,000 |
Total repayments for loan | £11,100 |
Length of loan | 3 years |
Calculate, to 2 decimal places, the monthly repayments for the loan. You are advised to show your workings.
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Little Movers is a business that offers preschool dance and movement classes. It also specialises in themed birthday parties and provides workshops in many local authority children centres. The business was founded in 2007 by Melanie Buck and within weeks of opening hundreds of families were attending the classes.
Little Movers exceeded Melanie’s expectations. She struggled to keep up with the demands of running the business and her commitment to being a mother of two young children. Melanie originally started Little Movers as she felt she could run the classes whilst her children were at school. This independence would also help her achieve a key objective of enjoying all of the school holidays with her own children.
To keep up with the high levels of demand Melanie decided to expand her business through franchising. As a franchisor she believed that she could offer a proven business formula together with a wide range of support to franchisees. This included use of the Little Movers brand, being the only Little Movers franchise in a particular area, full training and a centralised online booking system. Franchisees also receive lesson plans each month for the classes. This approach proved to be highly successful. Little Movers now has franchises throughout the North of England and has recently had enquiries to open franchises in Poland and Dubai.
When starting the business in 2007, Melanie took out a loan. The financial details of this loan are in the table.
Loan required from the bank | £10,000 |
Total repayments for loan | £11,100 |
Length of loan | 3 years |
Calculate the interest on the loan as a percentage of the total amount borrowed. You are advised to show your workings.
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Here is the cash-flow of a business from May to August.
Month | Cash inflows | Cash outflows |
|---|---|---|
May | £5,000 | £6,000 |
June | £6,000 | £4,000 |
July | £6,000 | £3,000 |
August | £5,000 | £4,000 |
Calculate the total net cash-flow from May to August. You are advised to show your workings.
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The table contains information about a small business for one month.
Number of sales | 2,700 |
Variable costs (per unit) | £6 |
Sales price (per unit) | £20 |
Break-even level of output | 1,500 |
Using the information in Table 1, calculate the margin of safety. You are advised to show your workings.
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Table 1 contains information about a small business for one month. The business sold 340 units in this month.
Fixed costs | £3 600 |
Variable costs (per unit) | £9 |
Table 1
Using the information in Table 1, calculate the total costs for one month. You are advised to show your workings.
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Explain one possible non-financial aim an entrepreneur may have when starting a small business.
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Figure 1 shows information about the financial performance of a business from January to March.

Figure 1
Using the information in Figure 1, calculate the total profit for the period January to March. You are advised to show your workings.
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Last Course Patisserie Ltd is a small private limited company based in Devon which produces hand-made desserts and puddings. The business was established in 1986. Its owners previously worked in the food industry but felt they could offer better value for money to customers. All of the desserts are made fresh to order which has provided Last Course Patisserie with a reputation for being flexible when meeting customer needs.
Getting the best ingredients for the desserts is a vital part of the business. Last Course Patisserie found excellent suppliers of free range eggs and dairy products close to its business location. This means all ingredients could be delivered quickly when needed.
Last Course Patisserie has recently employed a new head chef from Switzerland who has introduced a new range of products to the menu. This has proved to be very popular with customers and the business now struggles to keep up with demand. Last Course Patisserie is receiving increased orders for desserts but, due to the size of its business premises, struggles to meet this increase in demand. The owners have decided that it is the right time for Last Course Patisserie to expand and possibly relocate to new premises
Last Course Patisserie has the following financial information for the month of April.
Raw materials for each dessert | £0.50 |
Packaging for each dessert | £0.20 |
Fixed costs | £2 730 |
Selling price for each dessert | £2.00 |
Table 2
Using the information in Table 2, calculate the level of output required to break-even in April. You are advised to show your workings.
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Last Course Patisserie Ltd is a small private limited company based in Devon which produces hand-made desserts and puddings. The business was established in 1986. Its owners previously worked in the food industry but felt they could offer better value for money to customers. All of the desserts are made fresh to order which has provided Last Course Patisserie with a reputation for being flexible when meeting customer needs.
Getting the best ingredients for the desserts is a vital part of the business. Last Course Patisserie found excellent suppliers of free range eggs and dairy products close to its business location. This means all ingredients could be delivered quickly when needed.
Last Course Patisserie has recently employed a new head chef from Switzerland who has introduced a new range of products to the menu. This has proved to be very popular with customers and the business now struggles to keep up with demand. Last Course Patisserie is receiving increased orders for desserts but, due to the size of its business premises, struggles to meet this increase in demand. The owners have decided that it is the right time for Last Course Patisserie to expand and possibly relocate to new premises
In May suppliers increased the cost of raw materials by 4%.
Raw materials for each dessert | £0.50 |
Packaging for each dessert | £0.20 |
Fixed costs | £2 730 |
Selling price for each dessert | £2.00 |
Table 2
Using the information in Table 2, calculate the variable cost per dessert following the increase in the cost of raw materials.
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Explain one advantage to a small business of using trade credit as a source of finance.
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Table 1 contains information about cash payments of a small business in one month.
The business sold 200 units in this month. All customers paid in cash.
Selling price | £15 |
Rent | £500 |
Wages | £1 000 |
Advertising | £150 |
Table 1
Using the information in Table 1, calculate the net cash flow for this month You are advised to show your workings.
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Figure 1 shows the total costs for a business between May and July.

Figure 1
Using the information in Figure 1, calculate the percentage change in total costs between May and July. You are advised to show your workings.
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On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
On Your Bike has made the following forecasts for the costs and sales of its bikes for 2021.
| Forecast |
Total number of bike sales | 2,000 |
Total revenue | £1 100 000 |
Variable cost per bike | £350 |
Fixed costs | £150 000 |
Table 2
Using the information in Table 2, calculate the selling price per bike.
You are advised to show your workings.
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On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
Using the information in Table 2, calculate the profit On Your Bike is forecast to make from selling bikes in 2021. You are advised to show your workings.
| Forecast |
Total number of bike sales | 2,000 |
Total revenue | £1 100 000 |
Variable cost per bike | £350 |
Fixed costs | £150 000 |
Table 2
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The table shows the cash-flow forecast for a small business.
Complete the table with the two missing figures.
| May (£) | June (£) |
Cash inflows | 12 600 | 13 400 |
Cash outflows | 8 200 | 9 100 |
Net cash flow | 4 400 | (ii) ......................... |
Opening balance | 600 | 5 000 |
Closing balance | (i) ................................. | 9 300 |
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Figure 1 shows the sales revenue of a business from January to April.

Figure 1
Using the information in Figure 1, calculate, to 2 decimal places, the percentage decrease in sales revenue from January to March. You are advised to show your workings.
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Explain one disadvantage to a small business of manufacturing a high quality product.
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Explain the importance of cash to the survival of a small business.
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On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.
The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.
On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.
The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.
The owners of On Your Bike want to lower the break even level of output and have decided to do this by reducing costs.
Analyse the impact on On Your Bike of reducing costs in order to lower its break even level of output.
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A business has fixed costs of £10 000, variable costs of £2.50 per unit, and a selling price of £6 per unit. In one month it sold 3,000 units.
Calculate the break-even level of output.
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Explain one disadvantage to a small business of using trade credit.
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Discuss two disadvantages to a small business of relying on a bank overdraft as a source of finance.
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A business has the following information:
Total revenue = £500,000
Cost of sales = £320,000
Other operating expenses = £120,000
Calculate the net profit margin for this business.
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Explain one advantage to a business of using break-even analysis.
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A business produced 25,000 units in one year. Each unit was sold for £18. The variable cost per unit was £10. Calculate total contribution for the year.
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Explain one disadvantage to a small business of using an overdraft as a source of business finance.
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Explain one way a small business could reduce its variable costs.
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The table contains information about a small business.
Fixed costs | £10,000 |
Variable cost | £2.50 per unit |
Selling price | £5.00 per unit |
Break even level of output | 4,000 units |
The business increases the selling price of its product to £6.50 per unit.
Calculate the decrease in the break-even level of output. You are advised to show your workings.
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Explain one advantage to a small business from using retained profit as a source of finance.
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Amelia Cooper trained as a plumber six years ago. Since then she has worked for a building company that carries out repairs to houses and business premises in the Birmingham area.
Amelia is now in a position where she wants to start her own plumbing business called Lili Heating Ltd. Even though there are many plumbers in the Birmingham area, Amelia feels she has a unique selling point – she is a woman. Many female customers feel that they can relate more closely with a woman doing repairs in their homes.
As part of her business plan, Amelia has identified some clear aims and objectives and conducted a large amount of market research using the internet. Her target market requires clear advice on what work needs to be done and how much she will charge. Amelia also thinks she can cut down on advertising costs by getting her customers to recommend Lili Heating Ltd to their friends and families. For this to happen she knows that her work must be of the highest standard.
Amelia’s business plan also included a wide range of financial information to help her forecast the potential success of the business and see if she would need an overdraft.
Analyse the impact of non-financial aims on Amelia’s decision to start Lili Heating Ltd.
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The table contains information for a small business.
Fixed costs | £7,500 |
Variable cost | £2 per unit |
Selling price | £6 per unit |
Output | 5,000 units |
Calculate the total costs for the small business. You are advised to show your workings.
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Explain one disadvantage to a small business of using retained profit for expansion.
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The table shows the number of units sold by a business each month from June to August. The break-even level of output for each month was 5,000.
Month | Units sold |
|---|---|
June | 4,300 |
July | 6,700 |
August | 6,800 |
Calculate the margin of safety for August. You are advised to show your workings.
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Adikoggz is a small business based in Leeds. It offers the customising of trainers. It was set up by Keilan Kogut in 2018. The business designs personalised trainers including those associated with the colours and images of football teams or music bands. Customers can either supply their own trainers to be customised or pay Adikoggz to source and design a new pair of trainers to meet their needs. Adikoggz charges up to £200 for a new pair of customised trainers. It also offers a service to deep clean trainers. The price for this is £20.
The business started as a hobby but after showing off the designs on social media platforms such as Facebook and Instagram, Keilan started to receive follower requests asking him to customise or source unique styles of trainers. This gave him the inspiration to start Adikoggz and the business now receives orders from all over the world.
Keilan still carries out much of the work himself, but the growing number of orders has led him to struggle to keep up with demand. He now employs four people to help him with customisations. However, he still feels that the USP of Adikoggz is the personalised service it offers and that every customer will receive a unique product at the end of the process.
Using the information in the table below, calculate, to 2 decimal places, the percentage change in sales from November to December 2022.
Month | Pairs of trainers |
|---|---|
November | 52 |
December | 72 |
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Aphrodite is a clothes shop that was formed in 1994 by two brothers, Andrew and Duncan McKenzie. They opened the shop because they had a lifelong enthusiasm for new fashion.
Andrew and Duncan visit Paris, Milan and London each year to buy their stock. They aim to buy well-known brands, such as Stone Island and Hugo Boss, and to also stock clothes from new designers. This range of stock helps provide them with an advantage over their competition.
Customer service has always been an important part of Aphrodite’s success. A polite and friendly attitude greets all customers on arrival at the shop. In 2007 the business launched its website, which sells its range of clothing using e-commerce. The owners looked to maintain existing high standards of service for customers using their website.
A new opportunity was created when the shop premises next to Aphrodite became available to buy. Andrew and Duncan are considering buying the shop in order to convert the two shops into one large premises. They have calculated that this will cost them £250 000 but are undecided on the best way to finance this.
To pay for the conversion of the premises, Aphrodite is considering two options:
Option 1: obtaining a bank loan
Option 2: crowdfunding.
Justify which one of these two options Aphrodite should choose.
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That Feeling is a unique barber shop in Potters Bar, Hertfordshire. Its owner, Justin Carr, started the business, aged 25, because of his passion for being a barber. When he left school after his GCSEs he was advised to follow a different career path. However, he wanted to work in a creative industry. This ambition led him to opening a barber shop where his regular customers include England international footballers such as Kyle Walker, Kieran Trippier and Dele Alli.
The unique nature of That Feeling not only comes from the high quality haircuts but also from the way it looks after its customers. They can play on arcade games and get drinks whilst waiting for their appointment. The shop also sells That Feeling branded clothes and vintage glasses frames.
When asked about his business objectives Justin was very clear that non-financial objectives are crucial. Justin stated:
‘It is important to be passionate about what you do and always try to be the best you can. The financial rewards of running a business will come if you get the other things right.’
Justin now acts as a mentor to staff members at That Feeling by giving help and advice about their career. Most of the employees are aged between 19 and 22. Justin feels that if they are given the opportunity to develop their skills they will bring new ideas and creativity to the business.
Evaluate the importance of achieving non-financial objectives for the success of That Feeling. You should use the information provided as well as your knowledge of business.
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Last Course Patisserie Ltd is a small private limited company based in Devon which produces hand-made desserts and puddings. The business was established in 1986. Its owners previously worked in the food industry but felt they could offer better value for money to customers. All of the desserts are made fresh to order which has provided Last Course Patisserie with a reputation for being flexible when meeting customer needs.
Getting the best ingredients for the desserts is a vital part of the business. Last Course Patisserie found excellent suppliers of free range eggs and dairy products close to its business location. This means all ingredients could be delivered quickly when needed.
Last Course Patisserie has recently employed a new head chef from Switzerland who has introduced a new range of products to the menu. This has proved to be very popular with customers and the business now struggles to keep up with demand. Last Course Patisserie is receiving increased orders for desserts but, due to the size of its business premises, struggles to meet this increase in demand. The owners have decided that it is the right time for Last Course Patisserie to expand and possibly relocate to new premises
In order to improve its cash flow position, Last Course Patisserie is considering two options:
Option 1: reducing the number of workers it employs
Option 2: increasing the average selling price of its desserts
Justify which one of these two options Last Course Patisserie should choose.
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Adikoggz is a small business based in Leeds. It offers the customising of trainers. It was set up by Keilan Kogut in 2018. The business designs personalised trainers including those associated with the colours and images of football teams or music bands. Customers can either supply their own trainers to be customised or pay Adikoggz to source and design a new pair of trainers to meet their needs. Adikoggz charges up to £200 for a new pair of customised trainers. It also offers a service to deep clean trainers. The price for this is £20.
The business started as a hobby but after showing off the designs on social media platforms such as Facebook and Instagram, Keilan started to receive follower requests asking him to customise or source unique styles of trainers. This gave him the inspiration to start Adikoggz and the business now receives orders from all over the world.
Keilan still carries out much of the work himself, but the growing number of orders has led him to struggle to keep up with demand. He now employs four people to help him with customisations. However, he still feels that the USP of Adikoggz is the personalised service it offers and that every customer will receive a unique product at the end of the process.
To help prevent cash-flow problems, Adikoggz is considering two options as a short-term source of finance:
Option 1: an overdraft from the bank
Option 2: trade credit from suppliers
Justify which one of these two options Adikoggz should choose.
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