5.5.1 Profitability: • The concept and importance of profitability 5.5.2 Liquidity: • The concept and importance of liquidity 5.5.3 How to interpret the financial performance of a business by calculating and analysing profitability ratios and liquidity ratios: • Gross profit margin • Profit margin • Return on Capital Employed • Current ratio • Acid test ratio 5.5.4 Why and how accounts are used: • Needs of different users of accounts and ratio analysis • How users of accounts and ratio results might use information to help make decisions, e.g. whether to lend to or invest in the business Questions and suggested answers

5.4.1 The main elements of a statement of financial position: • The main classifications of assets and liabilities, using examples 5.4.2 Interpret a simple statement of financial position and make deductions from it, e.g. how a business is financing its activities and what assets it owns, sale of inventories to raise finance (constructing statements of financial position will not be assessed) Questions and suggested answers*

5.3.1 What profit is and why it is important: • How a profit is made • Importance of profit to private sector businesses, e.g. reward for risk-taking/enterprise, source of finance • Difference between profit and cash 5.3.2 Income statements: • Main features of an income statement, e.g. revenue, cost of sales, gross profit, profit and retained profit • Use simple income statements in decision making based on profit calculations (constructing income statements will not be assessed) *Questions and suggested answers"

5.2.1 The importance of cash and of cash-flow forecasting: • Why cash is important to a business • What a cash-flow forecast is, how a simple one is constructed and the importance of it • Amend or complete a simple cash-flow forecast • How to interpret a simple cash-flow forecast • How a short-term cash-flow problem might be overcome, e.g. increasing loans, delaying payments, asking debtors to pay more quickly 5.2.2 Working capital: • The concept and importance of working capital *questions and suggested answers"

6.1.1 Business cycle: • Main stages of the business cycle, e.g. growth, boom, recession, slump • Impact on businesses of changes in employment levels, inflation and Gross Domestic Product (GDP) 6.1.2 How government control over the economy affects business activity and how businesses may respond: • Identify government economic objectives, e.g. increasing Gross Domestic Product (GDP) • Impact of changes in taxes and government spending • Impact of changes in interest rates • How businesses might respond to these changes Questions and suggested answers

5.1.1 The need for business finance: • The main reasons why businesses need finance, e.g. start-up capital, capital for expansion and additional working capital • Understand the difference between short-term and long-term finance needs 5.1.2 The main sources of finance: • Internal sources and external sources with examples • Short-term and long-term sources with examples, e.g. overdraft for short-term finance and debt or equity for long-term finance • Importance of alternative sources of capital, e.g. micro-finance, crowd-funding • The main factors considered in making the financial choice, e.g. size and legal form of business, amount required, length of time, existing loans • Recommend and justify appropriate source(s) of finance in given circumstances questions and suggested answers

4.4.1 The main factors influencing the location and relocation decisions of a business: • Factors relevant to the location decision of manufacturing businesses and service businesses • Factors that a business could consider when deciding which country to locate operations in • The role of legal controls on location decisions • Recommend and justify an appropriate location for a business in given circumstances Sample questions and answers

4.3.1 Why quality is important and how quality production might be achieved: • What quality means and why it is important for all businesses • The concept of quality control and how businesses implement quality control • The concept of quality assurance and how this can be implemented Sample questions and answers

4.2.1 Identify and classify costs: • Classifying costs using examples, e.g. fixed, variable, average, total • Use cost data to help make simple cost-based decisions, e.g. to stop production or continue 4.2.2 Economics and diseconomies of scale: • The concept of economies of scale with examples, e.g. purchasing, marketing, financial, managerial, technical • The concept of diseconomies of scale with examples, e.g. poor communication, lack of commitment from employees, weak coordination 4.2.3 Break-even analysis: • The concept of break-even • Construct, complete or amend a simple break-even chart • Interpret a given chart and use it to analyse a situation • Calculate break-even output from given data • Define, calculate and interpret the margin of safety • Use break-even analysis to help make simple decisions, e.g. impact of higher price • Understand the limitations of break-even analysis Sample questions and answers

4.1.1 The meaning of production: • Managing resources effectively to produce goods and services • Difference between production and productivity • Benefits of increasing efficiency and how to increase it, e.g. increasing productivity by automation and technology, improved labour skills • Why businesses hold inventories • The concept of lean production: how to achieve it, e.g. just-in-time inventory control and Kaizen; benefits of lean production 4.1.2 The main methods of production: • Features, benefits and limitations of job, batch and flow production • Recommend and justify an appropriate production method for a given situation 4.1.3 How technology has changed production methods, e.g. using computers in design and manufacturing Sample questions and answers

3.4.1 Justify marketing strategies appropriate to a given situation: • Importance of different elements of the marketing mix in influencing consumer decisions in given circumstances • Recommend and justify an appropriate marketing strategy in given circumstances 3.4.2 The nature and impact of legal controls related to marketing: • Impact of legal controls on marketing strategy, e.g. misleading promotion, faulty and dangerous goods 3.4.3 The opportunities and problems of entering new foreign markets: • Growth potential of new markets in other countries • Problems of entering foreign markets, e.g. cultural differences and lack of knowledge • Benefits and limitations of methods to overcome such problems, e.g. joint ventures, licensing *Unit 3 review sample questions and answers

3.3.3 Place – distribution channels: • Advantages and disadvantages of different channels, e.g. use of wholesalers, retailers or direct to consumers • Recommend and justify an appropriate distribution channel in given circumstances 3.3.4 Promotion: • The aims of promotion • Different forms of promotion and how they influence sales, e.g. advertising, sales promotion • The need for cost-effectiveness in spending the marketing budget on promotion 3.3.5 Technology and the marketing mix: • Define and explain the concept of e-commerce • The opportunities and threats of e-commerce to business and consumers • Use of the internet and social media networks for promotion *Unit 3 review sample questions and answers

3.3.1 Product: • The costs and benefits of developing new products • Brand image; impact on sales and customer loyalty • The role of packaging • The product life cycle: main stages and extension strategies; draw and interpret a product life cycle diagram • How stages of the product life cycle can influence marketing decisions, e.g. promotion and pricing decisions 3.3.2 Price: • Pricing methods (benefits and limitations of different methods), e.g. cost plus, competitive, penetration, skimming, and promotional • Recommend and justify an appropriate pricing method in given circumstances • Understand the significance of price elasticity: difference between price elastic demand and price inelastic demand; importance of the concept in pricing decisions (knowledge of the formula and calculations of PED will not be assessed *Unit 3 review sample questions and answers

3.2.1 The role of market research and methods used: • Market-orientated businesses (uses of market research information to a business) • Primary research and secondary research (benefits and limitations of each) • Methods of primary research, e.g. postal questionnaire, online survey, interviews, focus groups • The need for sampling • Methods of secondary research, e.g. online, accessing government sources, paying for commercial market research reports • Factors influencing the accuracy of market research data 3.2.2 Presentation and use of market research results: • Analyse market research data shown in the form of graphs, charts and diagrams; draw simple conclusions from such data *Unit 3 review sample questions and answers

3.1.1 The role of marketing: • Identifying customer needs • Satisfying customer needs • Maintaining customer loyalty • Building customer relationships 3.1.2 Market changes: • Why customer/consumer spending patterns may change • The importance of changing customer needs • Why some markets have become more competitive • How businesses can respond to changing spending patterns and increased competition 3.1.3 Concepts of niche marketing and mass marketing: • Benefits and limitations of both approaches to marketing 3.1.4 How and why market segmentation is undertaken: • How markets can be segmented, e.g. according to age, socio-economic grouping, location, gender • Potential benefits of segmentation to business • Recommend and justify an appropriate method of segmentation in given circumstances sample questions and answers

2.4.1 Why effective communication is important and the methods used to achieve it: • Effective communication and its importance to business • Benefits and limitations of different communication methods including those based on information technology (IT) • Recommend and justify which communication method to use in given circumstances 2.4.2 Demonstrate an awareness of communication barriers: • How communication barriers arise and problems of ineffective communication; how communication barriers can be reduced or removed Questions and suggested answers