Business

TOPICS 1–6
1

Samuel Stones

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 Contents
1 What is business?............................... 5 5 Decision making to improve
• Understanding the nature and purpose financial performance...................... 70
of business • Setting financial objectives
• Understanding different business forms • Analysing financial performance
• Understanding that businesses operate within • Making financial decisions: sources of finance
an external environment
• Making financial decisions: improving cash flow
Exam-style questions.....................................15 and profits
Exam-style questions.....................................84
2 Managers, leadership and
decision making................................ 19 6 Decision making to improve
• Understanding management, leadership and human resource performance........88
decision making
• Setting human resource objectives
• Understanding management decision making
• Analysing human resource performance
• Understanding the role and importance of
• Making human resource decisions: improving
stakeholders
organisational design and managing the human
Exam-style questions.....................................28 resource flow
• Making human resource decisions: improving
3 Decision making to improve motivation and engagement
• Making human resource decisions: improving
marketing performance...................33 employer–employee relations
• Setting marketing objectives Exam-style questions...................................100
• Understanding markets and customers
• Making marketing decisions: segmentation,
targeting, positioning
• Making marketing decisions: using the
marketing mix
Exam-style questions.....................................45

4 Decision making to improve

operational performance................. 51
• Setting operational objectives
• Analysing operational performance
• Making operational decisions to improve
performance: increasing efficiency and
productivity
• Making operational decisions to improve
performance: improving quality
• Making operational decisions to improve
performance: managing inventory and supply
chains
Exam-style questions.....................................67

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 About this book
1 This workbook will help you to prepare for the AQA Business A-level exams.

2 Each exam is 2 hours long and includes a range of questions.

3 The first exam, Paper 1: Business 1, is divided up into four topics. Topic A is made up of 15
multiple-choice questions worth 1 mark each. Topic B is made up of a range of short-answer
questions worth approximately 35 marks in total. Topics C and D each offer two essay
questions and you must answer one from each section. These are worth 25 marks each.
The second exam, Paper 2: Business 2, offers three data response stimuli and each has a
selection of multi-part questions worth approximately 33 marks. The third exam, Paper 3:
Business 3, is made up of one case study and approximately six questions. All three exams
are synoptic, which means that they will assess your knowledge and understanding of the
connections between the different topics you have studied.

4 The questions are divided by assessment objective, starting with AO1 (knowledge and
understanding) and progressing to AO2 (application), AO3 (analysis) and AO4 (evaluation).
Each topic ends with some exam-style questions, bringing all the knowledge and skills from
the assessment together and applying this to what you would find in the exams.

5 Worked answers are included throughout the practice questions to help you understand how
to gain the most marks.

6 Icons next to the question will help you to identify:

• where your calculations skills are tested

• where questions draw on synoptic knowledge, i.e. content from more than one topic

60 how long this question should take you

7 You still need to read your textbook and refer to your revision guides and lesson notes.

8 Marks available are indicated for all questions so that you can gauge the detail required in
your answers.

9 Timings are given for the exam-style questions to make your practice as realistic as
possible.

10 Answers are available at: www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
Topic 1 What is business?
Understanding the nature and purpose of
business
A business is an organisation providing goods and services to satisfy customers’
needs and wants. Businesses set objectives to work towards achieving in the
future.
Common business objectives include:
• profit
• growth
• survival
• cash flow
• social and ethical objectives
Profit is the reward that business owners receive for the risks they take. To
calculate profit, businesses must understand:
• revenue (also known as turnover and sales)
• fixed costs
• variable costs
• total costs

Practice questions
AO1: Knowledge and understanding
1 What is meant by the term survival? 2 marks

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2 Use one example to describe what is meant by the term fixed cost. 3 marks

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AQA A-level Business 5

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 3 Why is it important for businesses to set objectives? 3 marks

Worked example
AO1: Knowledge and understanding:
Setting objectives gives This states a benefit of setting
businesses a sense of objectives.
direction. This allows
them to monitor and AO2: Knowledge and understanding:
measure their progress This describes how the benefit helps
the business.
so that they can take
action to address any AO3: Knowledge and understanding:
potential concerns This explains why objectives are
important to the business.
before they arise.

4 A factory manager has calculated that variable costs are £22 per unit and fixed
costs are £783. What will the factory’s total costs be if 130 units are produced? 3 marks

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AO2: Application
5 Explain why a small start-up business is likely to set objectives. 4 marks

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6 Explain the importance of cash flow for a new start-up business. 4 marks

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6 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
7 Explain why business objectives may change in the future. 4 marks

Worked example
Business objectives
AO1: Knowledge and understanding:
may change because of This states a reason why objectives
increasing competition may change.
in the local area. When
competitors open stores
in the local area, the AO2: Application: This describes how
business may need to the reason may affect the business.
focus on maintaining
existing market share.
This will mean that it no AO3: Application: This explains
why the business moves from one
longer focuses on growth objective to another.
or profit maximisation.

AO3: Analysis
8 Analyse the importance to a business of setting objectives. 12 marks

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AQA A-level Business 7

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 9 Analyse the importance to a small business of forecasting its profit. 12 marks

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AO4: Evaluation
10 A small food retailer has recently opened a new store in a town centre that
already has three large supermarkets. Recommend which objective may be
the most suitable for the business. 25 marks
Write your answer to this question on a separate sheet of paper and keep it
with your workbook.
11 The owners of a start-up hairdressing salon have decided to set a cash flow
objective. Evaluate the importance of this objective to the business. 25 marks
Write your answer to this question on a separate sheet of paper and keep it
with your workbook.

Understanding different business forms

The term business form refers to the type of ownership. Different forms of business
include:
• sole traders
• private limited companies
• public limited companies
• private sector organisations
• public sector organisations
• non-profit organisations such as charities and mutuals

8 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
There are key differences between each of these different business forms. These
include:
• unlimited and limited liability
• the availability of finance
• the expectations of owners and how profit may be used

Practice questions
AO1: Knowledge and understanding
1 What is meant by the term public sector organisation? 2 marks

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2 Describe one feature of a private limited company. 2 marks

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3 Describe the difference between unlimited and limited liability. 3 marks

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4 Describe one drawback of operating as a sole trader. 2 marks

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AO2: Application
5 Explain one reason why entrepreneurs operate in the private sector. 4 marks

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AQA A-level Business 9

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 6 Explain one reason why shareholders may be concerned about receiving a
dividend. 4 marks

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7 Explain one benefit to a sole trader of becoming a private limited company. 4 marks

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AO3: Analysis
8 Analyse two drawbacks to a business of operating as a partnership rather than
as a sole trader. 12 marks

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10 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
9 Analyse two factors that may influence the share price of a well-established
supermarket. 12 marks
This worked example provides some analysis of one factor. Read this carefully
and then attempt to write a full response to the question on additional paper.
Remember that your full answer should address two separate factors.

Worked example
One factor that may
AO1: Knowledge and understanding:
influence the share price is This identifies one factor that may
the release of unexpected influence the share price.
company news. If the
supermarket admits to using
food items that are not fit AO2: Application: This applies the
for human consumption, factor to the specific context of the
for example, potential supermarket industry.
shareholders might decide
not to buy company shares.
This would decrease AO3: Analysis: This explains
demand for shares, which the impact of the factor on the
would reduce their value. company’s share price.

AO4: Evaluation
10 To what extent does the form of ownership have the greatest influence on the
choice of objectives? 25 marks
Write your answer to this question on a separate sheet of paper and keep it
with your workbook.
11 The shareholders of a public limited company are concerned about recent changes
in the share price. To what extent is financial performance the largest influence
on share price? 25 marks
This worked example suggests a possible argument to support the view that
financial performance has a large influence on share price. Read it carefully and then
attempt to write a full response to the question on additional paper. Remember that your full
answer should be balanced and then provide an overall judgement.

Worked example
To some extent, financial
performance does have a AO1: Knowledge and understanding:
large influence on share This outlines the direction of the
price. This is because argument.
shareholders seek a return
on their investment and
will not purchase shares AO2: Application: This develops the
if the company’s financial response with a specific focus on the
objectives of shareholders.
performance is worsening.
This would reduce demand
for shares, which would
potentially result in the
share price falling, so it is AO3: Analysis: This provides an
clear that the company’s impact and a clear link to the
financial performance will demands of the question.
have a significant impact on
share price.

AQA A-level Business 11

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 Understanding that businesses operate within
an external environment
Businesses are influenced by changes in the external environment and these
changes are beyond the control of the business. However, it is important that
businesses are aware of them as the changes can influence business costs and the
demand for goods and services.
The external environment includes:
• competition
• market conditions
• incomes
• interest rates
• demographic factors
• environmental issues and fair trade.

Practice questions
AO1: Knowledge and understanding
1 Calculate the amount of interest that will be paid if a loan of £5,000 is taken out
with an interest rate of 3.39%. 2 marks

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2 The average salary of a joiner in 2018 was £38,900. In 2019, the average salary
increased by 4.5%. Calculate the monthly increase. 3 marks

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3 What is the relationship between market conditions and the demand for goods and
services? 3 marks

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4 How might increasing competition affect business costs? 3 marks

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12 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
AO2: Application
5 Explain one demographic factor likely to affect the demand for luxury holidays
aimed at those aged 60 and over. 4 marks

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6 Explain how falling income may affect the demand for goods sold by a budget
supermarket. 4 marks

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7 Explain one disadvantage to a new start-up business of an increase in interest

rates. 4 marks

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AQA A-level Business 13

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 AO3: Analysis
8 Analyse how a fall in interest rates may affect demand for goods and services. 12 marks

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9 Analyse how two environmental issues may affect the demand for overseas
holidays. 12 marks

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14 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
AO4: Evaluation
10 To what extent does the external environment determine whether business
costs increase? 25 marks
Write your answer to this question on a separate sheet of paper and keep it with
your workbook.
11 Pharmaceutical companies research and develop drugs for use as medication.
To what extent do demographic factors determine the success of large
pharmaceutical companies? 25 marks
Write your answer to this question on a separate sheet of paper and keep it with
your workbook.

Exam-style questions
Paper 1 Section A Multiple choice questions
1 Which one of the following actions would support a business to behave ethically?
A Paying employees on time 5
B Asking suppliers to reduce their prices
C Selling extended warranties to customers
D Using responsibly sourced ingredients
2 The overall vision of a business is most likely to be referred to as:
A A functional objective
B A corporate aim
C A target
D A mission statement
3 Which of the following is most likely to result in an increase in a company’s share price?
A A reduction in annual profits
B The closure of a competitor
C News outlets reporting concerns about the performance of the industry
D Consumer complaints being published online
4 Which of the following statements is true for market capitalisation?
A Market capitalisation is the original value of the market’s capital
B Market capitalisation is the original value of the company’s share issue
C Market capitalisation is the current value of the company’s share issue
D Market capitalisation is the average value of the market’s capital
5 Which one of the following is an example of a public sector organisation?
A Public Transfers Ltd
B A hairdresser
C The NHS
D A large supermarket selling to all members of the general public

AQA A-level Business 15

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 Exam-style questions
Paper 1 Section B Short-answer questions
6 The following data has been collected in relation to the performance of a
company in the years 2018 and 2019. Calculate the change in profit between 35
these years. 4 marks

2018 2019
Sales revenue £650,000 £800,000
Fixed costs £150,000 £120,000
Variable costs 45% of sales revenue 52% of sales revenue
Total labour costs £110,000 £130,000

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7 Based on the data in Question 6, calculate the change in employee costs as a

percentage of turnover. 4 marks

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8 A car dealer selling new cars is concerned about changes in the external
environment. Explain one possible consequence for the business of a fall in
interest rates. 4 marks

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16 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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 Topic 1 What is business
9 Explain why setting up as a partnership might help two experienced entrepreneurs
to access sources of finance. 6 marks

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10 A window cleaning business offers customers the choice of a basic or premium

cleaning service. The directors of the business have collected the following information
about their price elasticities of demand:

Basic cleaning service −1.9

Premium cleaning service −0.3

Analyse how a change in price is likely to affect demand for each of the window
cleaning services. 9 marks

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AQA A-level Business 17

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 11 In 2015, RP PLC became a public limited company. In 2016, 2017 and 2018 the
company directors did not pay a dividend. Analyse two reasons why the
shareholders may support this decision. 9 marks

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Exam-style questions
Paper 1 Section C/D Essay questions
12 It is highly likely that changes in the external environment will affect demand.
To what extent do you think that the external environment has the largest 50
influence on the demand for goods and services? 25 marks
Write your answer to this question on a separate sheet of paper and keep it with
your workbook.
13 A business is attempting to increase its labour productivity. To what extent is this
likely to improve business profitability? 25 marks
Write your answer to this question on a separate sheet of paper and keep it with
your workbook.

18 Workbook answers at www.hoddereducation.co.uk/workbookanswers

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