About Finance and accounting in A Level Business
Finance and accounting is one of the 6 main topics in our A Level Business (Cambridge (CAIE) 9609) question bank, and about 17% of its real questions come from it. Tayyari Karo has 29 real questions on this topic from 2021 to 2026, from Paper 1, Paper 2, Paper 3, Paper 4. By difficulty: 13 medium, 11 hard, 5 easy.
Work through the questions below, then open the explanation for each one. Redo the ones you missed a few days later.
Try 8 real questions
These are real past-paper questions. Think of your answer first, then open the explanation.
May/June 2026 · Paper 1 · Finance and accounting
(a) Define the term 'fixed cost'. [2]
(b) Explain one way that a business may reduce its variable costs. [3]
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(a) Fixed costs do not change when a business alters its level of output of goods or services (2). Partial: costs that do not change (1).
(b) Knowledge (1 mark): identify one way, e.g. reduce expenditure; efficient production; optimise inventory levels; lower cost of materials/gain supplier discounts; reduce waste; outsourcing. Application (developed 2 / limited 1): find a cheaper utilities provider; alter logistics to cut fuel costs; buy cheaper raw materials; buy in bulk to gain discounts; reduce waste so material cost per unit falls; reduce overstocking and storage handling fees using demand forecasting; vertical integration (taking over suppliers); train workers to make better use of re …
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May/June 2025 · Paper 3 · Finance and accounting
Evaluate the most effective method WS could use to improve investor return.
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Knowledge (2 marks): Identification of investors with shareholders. Understanding of investor return measures — dividend cover, earnings, dividend per share, dividend yield, P/E ratio. Knowledge that shares may be held for long term or short-term reasons. Directors decide on dividends. Methods to increase investor return — increase revenue relative to costs; decrease costs. Application (2 marks): Nature of WS's products — medium to high price, value for money leather footwear. Shareholders take an active interest. Recognition of changes in investment indicators in last three years — operating profit has risen, EPS has risen, share price has increased, P/E ratio has increased. …
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October/November 2024 · Paper 1 · Finance and accounting
Define the term 'zero budgeting'.
Explain one cause of a favourable variance.
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Budgets are automatically set to zero and budget holders must argue their case to receive any finance/funds. Budgets are set to zero. Budgets set without consideration of historical data. Potential costs evaluated from 0 each year. Clear understanding (2 marks). Partial understanding (1 mark).
Causes include: income higher than expected; increase in demand/sales; loss of competition; effective promotion; costs less than expected/decreased spending; profit higher than expected. …
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October/November 2024 · Paper 4 · Finance and accounting
Advise DF on the likely impact of ratio results on its choice of future growth strategy.
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Knowledge: ratio analysis for a business — current ratio, acid test ratio, gross profit margin, operating profit margin, ROCE, trade receivables turnover, trade payables turnover, rate of inventory turnover, gearing, price/earnings ratio; explaining the use of each ratio. Application: Strategy A — external growth through horizontal takeover of competitor with high competitive rivalry, high chance of success, need for organisational restructure; Strategy B — internal growth through increased R&D spending on AI, low competitive rivalry, medium chance of success, cost of recruiting research engineers. …
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October/November 2023 · Paper 1 · Finance and accounting
Define the term 'margin of safety'.
Explain one way a business can decrease its break-even level of output.
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The amount/quantity by which a firm's current level of output/sales/revenue exceeds the break-even level of output/sales/revenue. Current level of output/sales/revenue minus break-even output/sales/revenue. Difference between current output/sales/revenue and break-even output/sales/revenue. Clear understanding (2 marks). Partial understanding (1 mark).
Ways include: increase the price per unit; reduce fixed costs of business; reduce variable costs per unit; increase contribution per unit. Application: increases revenue per unit, especially if demand is price inelastic — shown as revenue line being steeper; can add value and/or increase promotion to increase price; cheaper fixed costs e.g. …
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October/November 2022 · Paper 1 · Finance and accounting
Explain the internal sources of finance a business could use to support its growth and development.
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Internal sources of finance are those sources generated internally by a business. The main internal sources: retained profits, sale of assets, sale and leaseback of assets, leasing assets out to other businesses, reducing working capital. Money/reserves of the owner/partners. Retained profits — the profit left after paying taxes and dividends to shareholders — business has control over this finance, no dilution of control, no interest payments — the product of past success. Sale of assets — assets are sold to generate cash — long-term assets such as land, buildings and machinery. Working capital — speed up the cycle of account receivables/factoring and inventory. …
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October/November 2022 · Paper 3 · Finance and accounting
Refer to lines 39–44. Calculate, for the new government contract: (i) total contribution.
Refer to lines 39–44. Calculate, for the new government contract: (ii) total profit or loss.
You may refer to your answer to 4(a) and other information. Recommend how the Marketing Manager should respond to the proposed government contract. Justify your recommendation.
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Total contribution = Total Revenue – Total Direct Cost. TR = 7000. Total Direct Cost = 50 × 100 = 5000. Total contribution = ($)2000 (3 marks). OR Unit contribution = 70 – 50 = 20. Total contribution = 100 × 20 = ($)2000.
Profit = TR – TC. TR = 100 × 70 = 7000. TC = 100 × 80 = 8000. Loss = $1000 or profit = –$1000 or $(1000). OR Profit = total contribution – average indirect costs × quantity = 2000 – 3000 = –1000.
Knowledge: Quantitative factors — Contribution focuses on the difference between price and average variable cost. Profit = TR – TC. If contribution is positive, then worth considering accepting the order. …
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May/June 2021 · Paper 1 · Finance and accounting
'An accurate cash flow forecast is the most important financial document for a clothing retailer when planning to enter a new market.' Discuss the extent to which you agree with this view.
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Level 5 (17–20 marks): Effective evaluation. Knowledge (4 marks): Clear understanding of cash flow forecasts, financial documents, and entering a new market. Application (4 marks): Reference to the importance of cash flow forecasts, the use of financial documents, and a business planning to enter a new market. Analysis (6 marks): Cash flow forecast is a prediction of cash inflows and outflows the business knows will occur. It is a prediction of things that have not yet happened. Other financial documents include income statement etc. — most are historic. …
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