AQA AS-Level Business: What Is Business? — Practice Questions

These are original questions written for Marlbridge, in the style and at the standard of the examination. They are not reproduced past-paper questions — AQA holds copyright in its own papers. Use these alongside the official past papers available free from AQA.

Related: What Is Business? revision notes

---

Section A

1. State the formula for calculating added value. [2]

2. Identify two ways a business can increase added value other than raising its price. [2]

3. State the two named external environment factors highlighted in this topic. [2]

---

Section B

4. A sole trader wants to expand but needs significant new capital and is reluctant to lose control of the business.

(a) Recommend a suitable alternative business form. [1] (b) Justify your recommendation, referring to liability, capital access and control. [4]

5. A bakery increases the quality of its ingredients and improves customer service, allowing it to charge a higher price than a rival selling a similar product at similar input cost.

(a) Explain how this scenario illustrates added value. [3] (b) Explain why this is not the same as simply increasing profit. [2]

6. A business states its objective as “we want our company to grow.”

(a) Explain why this is not a SMART objective. [2] (b) Rewrite it as a SMART objective. [2]

---

Section C

7. A small manufacturing business is told that interest rates are expected to rise significantly over the next year. Explain how this external environment change might affect the business’s investment decisions, and evaluate one action the business could take in response. [8]

8. Evaluate whether a private limited company is always the best choice of business form for a sole trader seeking to expand. [6]

---

Worked answers

1. Added value = the price a customer is willing to pay minus the cost of the inputs used to produce it. [2]

2. Any two of: branding, quality, service, convenience, design. [2]

3. Economic conditions; costs and demand. [2]

4. (a) A private limited company. [1] (b) A private limited company offers limited liability, replacing the sole trader’s unlimited liability and reducing the owner’s personal financial risk; it also allows outside investors to buy shares, improving access to capital compared with a sole trader; the trade-off is some reduction in control, since decisions may need to be shared with other shareholders, and a new requirement to publish annual accounts, though this loss of control is generally less than converting to a public limited company. [4]

5. (a) The bakery’s input costs are similar to its rival’s, but it charges a higher price because of the added value created by higher-quality ingredients and better service — added value being the difference between what a customer is willing to pay and the cost of the inputs used, which here has increased through quality and service rather than through raising price on an identical product. [3] (b) Added value is calculated before overheads are deducted, so a larger gap between input cost and selling price does not automatically mean higher profit — the bakery’s actual profit will also depend on its overheads (such as staff wages, rent and the extra cost of higher-quality ingredients), which added value alone does not account for. [2]

6. (a) It states a general purpose (“grow”) without being specific, measurable, achievable, realistic or time-bound, so there is no way to judge whether the objective has actually been achieved. [2] (b) For example: “Increase annual revenue by 10% within the next 18 months.” [2]

7. Rising interest rates increase the cost of borrowing, which typically makes new investment (such as purchasing machinery or expanding premises) more expensive to finance, since loan repayments will be higher; this may lead the business to delay or scale back planned investment, particularly if the investment was to be funded through borrowing rather than retained profit. One possible response is to fund planned investment through retained profit rather than new borrowing, if sufficient reserves exist, avoiding the higher cost of borrowing at the new interest rate; however, this uses funds that might otherwise support day-to-day operations or provide a buffer against other risks, so the business must weigh the benefit of avoiding higher borrowing costs against the reduced financial flexibility this creates elsewhere. [8] (Marks for correctly explaining the mechanism linking interest rates to investment decisions, and a genuinely evaluated response with both a benefit and a limitation.)

8. A private limited company offers real advantages over a sole trader for a business seeking to expand — limited liability and improved access to capital being the two most significant — but it is not automatically the best choice in every case. If the sole trader’s expansion needs only a modest amount of additional capital, the costs and requirements of incorporating (such as publishing annual accounts and sharing some control with other shareholders) may outweigh the benefit, and a sole trader might instead expand more slowly using retained profit or a bank loan without changing business form at all. The best choice therefore depends on the scale of capital needed, how much control and privacy the owner is willing to give up, and whether the ongoing administrative requirements of a private limited company are proportionate to the size of the expansion being planned, rather than a private limited company being unconditionally superior for every expanding sole trader. [6] (Marks for a genuine evaluation weighing the benefits of incorporation against a specific limitation or alternative, rather than asserting one form is always best.)

Official syllabus

AQA AS Business (7131) specification, specification-at-a-glance page, with subject content confirmed against the shared AQA A-level Business (7132) specification pages (Topic 1 content is identical across both qualifications) — the same source cited by the What Is Business? study guide and its revision notes. Verified 2026-09-03.