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Cambridge IGCSE and O Level Business Studies examinations Test Bank 2nd-edition

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IGCSE and O Level Business Studies

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You may wish to use it to supplement your understanding of the different topics as you work through each chapter of the textbook, or you may prefer to use it to reinforce your skills in dealing with particular topics as you prepare for the examination. The Workbook is intended to be sufficiently...

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IGCSE® and O Level

Business
Studies
Second edition

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Cambridge
IGCSE® and O Level

Business
Studies
Second edition

Karen Borrington
Peter Stimpson

,Introduction
Welcome to the Cambridge IGCSE® and O Level Business Studies workbook. The aim of this Workbook
is to provide you with further opportunity to practise the skills you have acquired through using the
Cambridge IGCSE® and O Level Business Studies Student’s Book. It is designed to complement the fifth
edition of the Student’s Book and to provide additional exercises to help you in your preparation for the
Cambridge IGCSE® and O Level Business Studies examinations.
The chapters in this Workbook reflect the topics in the Student’s Book. There is no set way to approach
using this Workbook. You may wish to use it to supplement your understanding of the different topics
as you work through each chapter of the textbook, or you may prefer to use it to reinforce your skills
in dealing with particular topics as you prepare for the examination. The Workbook is intended to be
sufficiently flexible to suit whatever you feel is the best approach for your needs.

Every effort have been made to trace all copyright holders, but if any have been inadvertently
overlooked the publishers will be pleased to make the necessary arrangements at the first
opportunity.
Although every effort has been made to ensure that website addresses are correct at time of going
to press, Hodder Education cannot be held responsible for the content of any website mentioned
in this book. It is sometimes possible to find a relocated web page by typing in the address of the
home page for a website in the URL window of your browser.
Hachette UK’s policy is to use papers that are natural, renewable and recyclable products and made
from wood grown in sustainable forests. The logging and manufacturing processes are expected to
conform to the environmental regulations of the country of origin.
Orders: please contact Bookpoint Ltd, 130 Milton Park, Abingdon, Oxon OX14 4SB. Telephone:
(44) 01235 827827. Fax: (44) 01235 400454. Lines are open 9.00–5.00, Monday to Saturday, with
a 24-hour message answering service. Visit our website at www.hoddereducation.com
IGCSE® is a registered trademark.
The questions, example answers, marks awarded and/or comments that appear in this book were
written by the author(s). In examination, the way marks would be awarded to answers like these
may be different.
© Karen Borrington and Peter Stimpson 2018
First published in 2017 by
Hodder Education
An Hachette UK Company
Carmelite House, 50 Victoria Embankment, London EC4Y0 DZ
This second edition published 2018
Impression number 5 4 3 2 1
Year 2020 2021 2020 2019 2018
All rights reserved. Apart from any use permitted under UK copyright law, no part of this
publication may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopying and recording, or held within any information storage and
retrieval system, without permission in writing from the publisher or under licence from the
Copyright Licensing Agency Limited. Further details of such licences (for reprographic reproduction)
may be obtained from the Copyright Licensing Agency Limited, www.cla.co.uk.
Cover photo © Shutterstock/Lesia_G
Typeset in ITC Officina Sans Book 11.5/13 pts by Aptara Inc.
Printed and bound in the UK
A catalogue record for this title is available from the British Library
ISBN 978 1510 421 257

2

,Contents
SECTION 1 Understanding business activity
1 Business activity 4
2 Classification of business 7
3 Enterprise, business growth and size 9
4 Types of business organisation 12
5 Business objectives and stakeholder objectives 15
Case study

SECTION 2 People in business
6 Motivating employees 20
7 Organisation and management 23
8 Recruitment, selection and training of employees 26
9 Internal and external communication 29
Case study

SECTION 3 Marketing
10 Marketing, competition and the customer 34
11 Market research 37
12 The marketing mix: product 40
13 The marketing mix: price 42
14 The marketing mix: place 45
15 The marketing mix: promotion 47
16 Technology and the marketing mix 50
17 Marketing strategy 52
Case study

SECTION 4 Operations management
18 Production of goods and services 56
19 Costs, scale of production and break-even analysis 59
20 Achieving quality production 62
21 Location decisions 64
Case study

SECTION 5 Financial information and financial decisions
22 Business finance: needs and sources 69
23 Cash flow forecasting and working capital 72
24 Income statements 75
25 Statement of Financial Position 78
26 Analysis of accounts 80
Case study

SECTION 6 External influences on business issues
27 Economic issues 85
28 Environmental and ethical issues 88
29 Business and the international economy 91
Case study

Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition 3

,1 Understanding business activity
Student’s Book Chapters 1–5
1 Business activity
Farah opened her business, Farah’s Salon (FS) just after leaving school. She offers hairdressing and beauty
services for women. She employs three workers who have quite different skills. One is a hair stylist, one is
a beauty specialist and the other is a receptionist. This means that Farah is able to offer a very wide range
of beauty and hairdressing services very efficiently. Shampoos, hair sprays and many other beauty products
are bought in from several suppliers. Farah’s business is now very busy. Farah is planning to use some of
FS’s capital to buy a computer to keep customer records of treatments they have received and to allow an
accurate record of appointments to be kept. However, she is worried about the opportunity cost of this.
Farah is keen to increase the added value of her business. She has not yet decided on how to achieve
this but she thinks that buying cheaper shampoos and other beauty products is probably the best way.
Farah needs to recruit another employee. She has to choose between one applicant who is an
experienced and specialist hair stylist but who has no other beauty experience and the other applicant
who has some experience of both hair and beauty but is not a specialist in either.
1 a Identify two different factors of production used by Farah. [2 marks]

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b Define ‘opportunity cost’. [2 marks]

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c Outline two ways in which specialisation of its employees could benefit FS. [4 marks]

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4 Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition

, 1 Business activity

d Explain two examples of how the business activities undertaken by FS benefit the
local economy. [6 marks]
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e Do you think that buying in cheaper shampoos and other beauty products is the
best way to increase added value by FS? Justify your answer. [6 marks]

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Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition 5

,1 Understanding bUsiness activity

2 a Define ‘capital’. [2 marks]

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b Identify two pieces of equipment or furniture that Farah could purchase if she did
not buy the computer. [2 marks]

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c Outline two ways in which the economic problem affects FS. [4 marks]

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d Do you think that Farah should employ the experienced and specialist hair stylist or
the other applicant? Justify your answer. [6 marks]

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6 Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition

, 2 Classification of business

2 Classification of business
FS operates in country X. The business uses several suppliers to obtain all of the materials, furniture and
other equipment it needs. FS is in the tertiary sector of industry and depends on other businesses in this
sector for important services.
Country X industrialised over 100 years ago and used to have some major secondary sector businesses.
Now, tertiary businesses employ more people and produce a higher value of output than manufacturing
businesses. Average incomes are high in country X and the demand for important public sector services
such as healthcare and public transport is growing.
The government of country X plans to increase the importance of the public sector by buying out some
private sector businesses in transport and energy. Taxes might have to be increased to pay for these
state purchases of other businesses (nationalisation).
1 a Define ‘tertiary sector’. [2 marks]

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b Identify two examples of services provided by other businesses that FS needs. [2 marks]

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c Outline the role of two secondary sector industries that supply products to FS. [4 marks]

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Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition 7

,1 Understanding bUsiness activity

d Explain two likely reasons why the relative importance of the secondary sector in
country X has declined. [6 marks]

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e Do you think that FS would benefit from the government policy to expand the public
sector of the economy? Justify your answer. [6 marks]

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8 Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition

, 3 Enterprise, business growth and size

3 Enterprise, business growth and size
Farah is very ambitious and she wants to expand her business quickly. She works long hours and
her commitment as an entrepreneur is a good example to her employees. She likes taking important
decisions by herself. Her many ideas for expanding the business include offering a wider range of
services to male customers as well as female. FS now employs 10 workers. The average sized business in
hairdressing and beauty employs five workers. The total value of FS sales this year increased by 15 per
cent. Farah believes that FS has more advanced equipment – such as sunbeds and steam baths – than
local competitors.
Farah is considering both internal growth and external growth for FS. She could open a new hair and
beauty salon in another part of the city. She also knows about two other businesses for sale. Business
A is a men’s hairdressing salon that has been trading for many years. The owner is retiring and wants to
sell quickly. Business B is a specialist producer of hand-made organic cosmetics. FS uses some of these in
the salon and they are very popular. The owner is ill and no longer wants the stress of harvesting natural
products and meeting production deadlines. Farah wants to draw up a new Business Plan to help guide
her through the next expansion stage of FS.
1 a Define ‘entrepreneur’. [2 marks]

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b Identify two important characteristics that allow Farah to be a successful entrepreneur. [2 marks]

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c Outline two ways the size of FS could be compared to similar businesses. [4 marks]

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Photocopying prohibited Cambridge IGCSE® and O Level Business Studies Workbook 2nd edition 9

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