A level Business 3.7 AQA Revision Exam
Questions With Solved Solutions.
What are mission statements and what are the influences on missions? - Answer A mission statement
sets out the purpose of a business existing. The mission statement relates to all stakeholders and
typically focuses on the following.
Influences:
-Value of the founders
-Industry the business is in
-Views of society
-Size of business and ownerships
-Culture of business
What are corporate objectives and what are the internal and external influences affecting corporate
objectives? - Answer The corporate objectives of a business quantify the mission of a business and set
specific and measurable targets for the whole population eg innovation, sustainability, growth,
shareholder value, social responsibility, profitability, market standing
External influences:
-Economic conditions
-Social changes
-Tech changes
Global prices
-Competitors
Internal influences:
-Poor performance
-New leadership
-Business ownership, culture and growth.
What is a strategy and tactics? - Answer Strategy is a long term plan or approach that a business will
take to achieve its objectives. Strategies often involve a major commitment to resources. Clear strategies
guide tactical decisions. Tactics are the day to day decisions take by middle managers, they are frequent
,and involve fewer resources. An example is if a business has a strategy to be a market leader by having
the widest range of innovative products on the market. However, a tactical decisions to support this
strategy might be to divert an extra £5 million into research and development.
What is the objectives hierarchy? - Answer
What is a SWOT analysis and what are the benefits and limitations? - Answer A strategic tool that a
business can use to analyse its current position and external factors that might affect it.
Benefits- assists strategic thinking in a structural way, low cost (simple approach) and can be combined
with their decision-making models.
Limitations- subjective (depends on managers opinions), doesn't offer clear solutions and classification
may depend on perspective.
Whats an income statement? - Answer An income statement communicates the revenue generated by
a business and then its profits at various levels following expenses and incomes.
Whats the balance sheet? - Answer A financial document that records the assets and liabilities of a
business. A balance sheet gives a snap shot of the value and financial strength of a business.
What are non current assets (fixed assets)? - Answer Used to operate business. Tangible non current
assets are land and machinery. Intangible non current assets are the brands and patents.
What are current assets? - Answer Assets that the business expects to use or sell within the year, can
be converted into cash to pay off liabilities.
What are current liabilities? - Answer Payments that are due within 1 year
What are non-current liabilities? - Answer Debts that a business doesn't expect to pay within a year
What are net current assets? - Answer the working capital a business has
, Define financial ratios and give examples - Answer A financial ratio compares 2 pieces of information.
Types:
-Profitability ratio- provides a key measure of success for a business comparing profit to revenue and
investment
-Liquidity ratio- assesses the ability of a business to pay its debts
-Gearing ratio- assesses the extent to which a business is based on borrowed finance
-Efficiency ratio- provides an indication of how well an aspect of a business has been managed
What are profit margins and how do you interpret them? - Answer It is a performance ratio
Gross Profit Margin = Gross Profit/Sales Rev x 100
Op Profit Margin = Op Profit/ Sales Rev x 100
Profit margins are able to give an indication of the quality of the profit and how well the business is
managing different areas of the business eg direct and indirect cost
So for gross profit margin, it allows a business to understand the way direct costs affects the level of
profit and for operating profit margin it allows the business to understand how indirect costs affect the
level of profit
What is ROCE and how do you interpret them? - Answer Its a performance ratio
ROCE= Operating Profit/Capital Employed x 100
Compares operating profit earned with the amount of capital employed by the business. Capital
employed is its total equity plus any non-current liabilities.
Shows how effectively the business was able to make a profit from investments placed in the business.
ROCE can be improved by increasing the operating profit or by decreasing the capital employed
What is current ratio and how do you interpret them? - Answer It is a liquidity ratio
Current ratio = Current Assets / Current Liabilities
Compares current assets with current liabilities in doing so it works out whether or not a business has
sufficient working capital to pay its short term debts
What is the acid test ratio and how do you interpret them? - Answer Its a liquidity ratio
Acid Test = (Current Assets -Stock) / Current liabilities
Questions With Solved Solutions.
What are mission statements and what are the influences on missions? - Answer A mission statement
sets out the purpose of a business existing. The mission statement relates to all stakeholders and
typically focuses on the following.
Influences:
-Value of the founders
-Industry the business is in
-Views of society
-Size of business and ownerships
-Culture of business
What are corporate objectives and what are the internal and external influences affecting corporate
objectives? - Answer The corporate objectives of a business quantify the mission of a business and set
specific and measurable targets for the whole population eg innovation, sustainability, growth,
shareholder value, social responsibility, profitability, market standing
External influences:
-Economic conditions
-Social changes
-Tech changes
Global prices
-Competitors
Internal influences:
-Poor performance
-New leadership
-Business ownership, culture and growth.
What is a strategy and tactics? - Answer Strategy is a long term plan or approach that a business will
take to achieve its objectives. Strategies often involve a major commitment to resources. Clear strategies
guide tactical decisions. Tactics are the day to day decisions take by middle managers, they are frequent
,and involve fewer resources. An example is if a business has a strategy to be a market leader by having
the widest range of innovative products on the market. However, a tactical decisions to support this
strategy might be to divert an extra £5 million into research and development.
What is the objectives hierarchy? - Answer
What is a SWOT analysis and what are the benefits and limitations? - Answer A strategic tool that a
business can use to analyse its current position and external factors that might affect it.
Benefits- assists strategic thinking in a structural way, low cost (simple approach) and can be combined
with their decision-making models.
Limitations- subjective (depends on managers opinions), doesn't offer clear solutions and classification
may depend on perspective.
Whats an income statement? - Answer An income statement communicates the revenue generated by
a business and then its profits at various levels following expenses and incomes.
Whats the balance sheet? - Answer A financial document that records the assets and liabilities of a
business. A balance sheet gives a snap shot of the value and financial strength of a business.
What are non current assets (fixed assets)? - Answer Used to operate business. Tangible non current
assets are land and machinery. Intangible non current assets are the brands and patents.
What are current assets? - Answer Assets that the business expects to use or sell within the year, can
be converted into cash to pay off liabilities.
What are current liabilities? - Answer Payments that are due within 1 year
What are non-current liabilities? - Answer Debts that a business doesn't expect to pay within a year
What are net current assets? - Answer the working capital a business has
, Define financial ratios and give examples - Answer A financial ratio compares 2 pieces of information.
Types:
-Profitability ratio- provides a key measure of success for a business comparing profit to revenue and
investment
-Liquidity ratio- assesses the ability of a business to pay its debts
-Gearing ratio- assesses the extent to which a business is based on borrowed finance
-Efficiency ratio- provides an indication of how well an aspect of a business has been managed
What are profit margins and how do you interpret them? - Answer It is a performance ratio
Gross Profit Margin = Gross Profit/Sales Rev x 100
Op Profit Margin = Op Profit/ Sales Rev x 100
Profit margins are able to give an indication of the quality of the profit and how well the business is
managing different areas of the business eg direct and indirect cost
So for gross profit margin, it allows a business to understand the way direct costs affects the level of
profit and for operating profit margin it allows the business to understand how indirect costs affect the
level of profit
What is ROCE and how do you interpret them? - Answer Its a performance ratio
ROCE= Operating Profit/Capital Employed x 100
Compares operating profit earned with the amount of capital employed by the business. Capital
employed is its total equity plus any non-current liabilities.
Shows how effectively the business was able to make a profit from investments placed in the business.
ROCE can be improved by increasing the operating profit or by decreasing the capital employed
What is current ratio and how do you interpret them? - Answer It is a liquidity ratio
Current ratio = Current Assets / Current Liabilities
Compares current assets with current liabilities in doing so it works out whether or not a business has
sufficient working capital to pay its short term debts
What is the acid test ratio and how do you interpret them? - Answer Its a liquidity ratio
Acid Test = (Current Assets -Stock) / Current liabilities
