Edexcel GCSE Business: Business growth and changing aims (1BS0) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover Topic 2.1 Growing the business (items 2.1.1 and 2.1.2) of the Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0) specification, Issue 2, July 2022. All businesses are invented. The specification says calculators may be used and workings should be given, and that formulae are not provided in the examinations. Command words follow the specification’s table. Study first with the study guide or the revision notes.

Course links: the Business hub, the printable checklist and the free diagnostics.

Questions

1. Define the term “takeover”. [2]

2. Krestow Preserves, a jam maker, has started selling to shops in Ireland. It paid for the move out of its own profits. State whether this is organic or inorganic growth and give one piece of evidence from the information. [2]

3. Krestow’s revenue was £110,000 in 2024 and £132,000 in 2025. Calculate the percentage increase in revenue. [3]

4. Krestow borrows £36,000 for new equipment and will repay £41,400 in total. Calculate the interest charged, expressed as a percentage of the sum borrowed. [3]

5. Explain one advantage of retained profit as a source of finance. [3]

6. Krestow buys a machine for £70,000. Its profits from the machine over four years are £9,000, £14,000, £16,000 and £17,000. Calculate the average rate of return. [4]

7. Pontrilas Print and Ostend Signs agree to merge. Pontrilas staff work flexible hours and are paid monthly. Ostend staff work fixed hours and are paid weekly. Outline one problem the merged business may face. [2]

8. Give two features of a public limited company (plc). [2]

9. Varnholt Outdoor Ltd is owned by one family, who hold 1,200,000 shares. To pay for a new factory it plans a stock market flotation, issuing 400,000 new shares at £5.00 each. Analyse one benefit and one drawback of flotation for Varnholt. [6]

10. Dunlith Courier Ltd aimed to grow until a rival launched a cheaper app-based service. Dunlith’s revenue then fell from £820,000 to £738,000. Analyse how these changes may lead Dunlith to change its aims, and give one action it might take. [6]

11. Fenmere Bakery has cash reserves of £120,000. The owner is choosing between two ways to grow.

• Option A: develop a gluten-free range at a total cost of £50,000, with an expected total profit of £75,000 over 5 years.
• Option B: take over a rival bakery for £600,000, with an expected total profit of £240,000 over 5 years and 8% more market share.

Justify which option the owner should choose. [9]

12. Ardeen Windows has 30 staff and sells in two regions. Its revenue is £750,000 in each of the last two years. Last year its net profit margin was 8%. This year it is 3%, because a change in the law added to its costs and a rival cut prices. The owner is deciding whether to keep the aim of opening in a third region or switch to a survival aim of cutting costs and closing the weaker region’s depot. Evaluate which aim the owner should follow. [9]

Answers

1. One business buys enough shares in another business to gain control of it [1], so the target becomes part of the buyer [1]. [2] Examiner insight: Credit tends to follow when the answer mentions shares being bought and control passing. Writing only “one business takes over another” repeats the word.

2. Organic (internal) growth [1], because the expansion into Ireland was paid for from its own profits and no other business was bought or joined [1]. [2] Examiner insight: State questions ask for a short answer tied to the information given. A correct label with no evidence from the stem usually leaves a mark unclaimed.

3. Change = 132,000 - 110,000 = £22,000 [1]. 22,000 / 110,000 × 100 [1] = 20% increase [1]. [3] Examiner insight: On Calculate questions the workings are asked for. A wrong answer with a correct method can still earn credit, but dividing by 132,000 gives 16.7% and shows a method error.

4. Interest = 41,400 - 36,000 = £5,400 [1]. (5,400 / 36,000) × 100 [1] = 15% [1]. [3] Examiner insight: The formula divides by the amount borrowed. Answers that divide by the total repayment, or that give £5,400 and stop, usually lose the final mark.

5. Retained profit has no interest to pay [1], so the business keeps more of its profit [1], which leaves more cash to put into the next stage of growth [1]. [3] Examiner insight: An Explain answer needs a point and two expansions, with no case context required. Saying only “it is cheap” gives the point without the development.

6. Total profit = 9,000 + 14,000 + 16,000 + 17,000 = £56,000 [1]. Average annual profit = 56,000 / 4 = £14,000 [1]. ARR = 14,000 / 70,000 × 100 [1] = 20% [1]. [4] Examiner insight: Dividing the four-year profit total by the cost gives 80%, which is a slip. The formula uses the average annual profit, so find that first and show it.

7. Staff may be unhappy about the different hours and pay arrangements [1], which could lower morale and lead some to leave, disrupting production [1]. [2] Examiner insight: Outline wants two connected points set in the stated business. A general remark such as “mergers are hard” is less likely to gain credit than one that uses the pay and hours details.

8. Any two of: limited liability for the owners (shareholders) [1]; shares can be offered to the public and traded on the stock market [1]; can raise large sums by selling shares; ownership spread over many shareholders. [2] Examiner insight: Give questions test recall. Two distinct features usually earn full credit; repeating the same feature in different words usually earns one.

9. Money raised = 400,000 × £5.00 = £2,000,000 [1]. Benefit: this can fund the factory without a loan [1], so Varnholt avoids interest and fixed repayments, which protects cash flow while the factory starts to earn [1]. Drawback: total shares = 1,600,000, so the family’s holding falls to 1,200,000 / 1,600,000 = 75% [1]. New shareholders now share in profits and the family is less able to decide alone [1], and as a public company its shares could be bought by an outside business seeking control [1]. [6] Examiner insight: Analyse answers gain credit when each point is developed using the case. Using the 75% figure shows that the drawback was worked out from the information, not recalled.

10. Market conditions changed because a rival offered a cheaper service [1]. Revenue fell by 82,000 / 820,000 × 100 = 10% [1], which is weak performance [1]. A growth aim is hard to pursue when sales are falling, so the aim may move to survival [1]. Action: reduce the workforce or cut costs [1], to protect cash flow until sales recover [1]. [6] Examiner insight: Strong answers link a named cause (market conditions, performance) to a change of aim and then to an action. Listing the reasons without using the figures stays general.

11. ARR of Option A = (75,000 / 5) / 50,000 × 100 = 30% [1]. ARR of Option B = (240,000 / 5) / 600,000 × 100 = 8% [1]. Option A costs less than the £120,000 reserves, so no borrowing is needed [1] and it keeps control and its own culture [1]. Option B would need about £480,000 more (600,000 - 120,000), so borrowing and interest, or new shares, and integration problems could follow [1]. Its benefit is an immediate 8% extra market share [1]. Risk: Option A depends on the new range selling, and R&D may fail [1]. Recommend Option A [1] because its return is higher, it is affordable from reserves and it carries less debt, even though Option B gives faster growth. [1] [9] Examiner insight: Justify means recommending one of two options using the information given. Credit tends to follow when an answer uses the figures, answers the weaker option and ends on a clear choice.

12. Net profit last year = 8% of 750,000 = £60,000; this year = 3% of 750,000 = £22,500 [1]. A fall of 37,500 is 62.5% [1]. For survival: the law change raised costs, which is a lasting issue [1], and a rival price cut limits the price Ardeen can charge [1]. Opening a third region needs finance, and with little retained profit Ardeen may have to borrow [1]. Against: closing a depot and cutting staff gives up revenue and may harm quality or morale [1], and if Ardeen stops growing it may lose position to rivals once costs settle [1]. Judgement: switch to survival now, because the profit fall is large and expansion would be risky [1], then review the aim once margins recover, as the decision depends on whether the cost rise is permanent [1]. [9] Examiner insight: Evaluate asks for a supported conclusion. Answers tend to gain credit when they weigh both aims using the figures and say what the judgement depends on, not only list points for each.

Where marks are usually lost

• Using the later figure, not the starting one, as the divisor for percentage change.
• Giving a final number with no workings on a Calculate question, or no percentage sign.
• Calling growth funded from a business’s own profits “external” because the sales are in a new country.
• Mixing up retained profit (profit kept) with cash in the bank.
• On Explain, giving one point with no expansion. On Analyse, not using the case.
• On Justify, describing both options without recommending one.
• On Evaluate, listing points for each side but offering no judgement or reason for it.
• Writing “a loan is cheap” with no mention of interest or repayments.

Next steps

• Re-read the revision notes and the study guide.
• Visit the Business hub and the printable checklist.
• Take the free 10-minute diagnostics to see which topics to revisit.
• Book a free trial class if you would like live help.

Frequently asked questions

Which part of Edexcel GCSE Business (1BS0) do these questions cover? Topic 2.1 Growing the business, items 2.1.1 and 2.1.2, covering methods of growth, sources of finance for growth and why business aims and objectives change.

Which figure is the divisor in a percentage change? The starting figure. Using the later figure as the divisor is a common error.

Is retained profit the same as cash in the bank? No. Retained profit is profit kept in the business rather than paid out, which is not the same as the cash it holds. Mixing the two up loses marks.

How do I answer a Justify question in Edexcel GCSE Business? Use the information given to compare both options, then recommend one and give your reasons. Describing both options without choosing one limits the marks.

Official syllabus

Pearson Edexcel Level 1/Level 2 GCSE (9-1) in Business (1BS0), Specification, Issue 2, July 2022, published by Pearson Education Limited. Theme 2: Building a business, Topic 2.1 Growing the business, items 2.1.1 and 2.1.2.