IGCSE Business: Enterprise, business growth and size (Cambridge 0264) – 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 section 1.3, Enterprise, business growth and size, of the Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029. All businesses are invented. Revise first with the study guide and the revision notes. The course hub and the printable checklist track your progress. Not sure where to start? Try the free diagnostics.

Questions

1. State two characteristics of a successful entrepreneur. [2]

2. Identify three key elements of a business plan. [3]

3. Explain two reasons why a government might support business start-ups. [4]

4. Sami Rehman is starting Ladykirk Printing. The start-up costs are £60,000. He has a £12,000 government grant and an £18,000 low-cost loan. The rest comes from his own savings.

(a) Calculate how much comes from his own savings. [1] (b) Calculate his savings as a percentage of the start-up costs. [2] (c) Explain one way the government help could benefit Ladykirk Printing. [2]

5. (a) State two methods of measuring business size, other than the number of people employed. [2] (b) Explain why profit is not used as a method of measuring business size. [2] (c) Explain one problem of using the number of people employed to measure size. [2]

6. Wynstow Candles has 18 employees, sales revenue of £1.8 million and capital employed of £0.6 million. Tweedmouth Fitness has 60 employees, sales revenue of £2.4 million and capital employed of £9.0 million.

(a) Calculate the sales revenue per employee for each business. [2] (b) Calculate how many times larger Tweedmouth Fitness is than Wynstow Candles (i) by number of employees and (ii) by sales revenue. Give each answer to one decimal place. [2] (c) Explain why the three measures give different impressions of the size of the two businesses. [3]

7. Dunsterley Foods makes jam. It buys the fruit farm that supplies most of its fruit. (a) Define the term takeover. [2] (b) Identify the type of integration shown. [1] (c) Explain one advantage to Dunsterley Foods of this decision. [2]

8. Explain two ways in which a business can grow internally. [4]

9. Marlowdene Soaps has sales revenue of £4.2 million. It plans to take over a rival, Cadgwith Bath Care, which has sales revenue of £2.8 million. (a) Calculate the combined sales revenue of the two businesses. [1] (b) Calculate Marlowdene’s share of the combined sales revenue, as a percentage. [2] (c) Explain one advantage and one problem of this takeover for Marlowdene Soaps. [4]

10. Wynstow Candles has stayed small. Its owner makes each candle by hand and says she does not want to employ more staff. Explain two reasons why a business such as this might stay small. [4]

11. Explain two reasons why a new cafe might fail within its first year. [4]

12. Wexby Pet Supplies has sales revenue of £3.6 million. The owner has two options. Option A: spend £250,000 of retained profit on online ordering and a new product range. The business forecasts that sales revenue will rise by 15%. Option B: merge with a rival, Pellmere Pets, which has sales revenue of £2.4 million. The owner worries about losing control of decisions and about cash flow.

(a) Calculate the forecast increase in sales revenue under Option A. [2] (b) Calculate the combined sales revenue under Option B. [1] (c) Justify which option you would recommend. [8]

Answers

1. Any two characteristics, for example risk-taking [1] and determination [1]. Accept innovation, hard work, self-confidence or leadership. [2] Examiner insight: A short list of two named traits is enough for a state question. Adding a sentence of explanation will not usually earn more.

2. One mark each [1] [1] [1] for any three of: overview/summary, objectives, resources, market research, marketing, finance, people, operations. [3] Examiner insight: An identify question needs names only. A common slip is to give headings that are not in a business plan, such as profit, or to repeat one heading in two forms.

3. Reason 1: to create jobs [1], which reduces unemployment and gives people incomes to spend [1]. Reason 2: new firms pay tax once they are established [1], which gives the government more revenue for public services [1]. Accept increased competition, innovation or economic growth with development. [4] Examiner insight: The question asks why the government wants this, so answers about the benefit to the entrepreneur tend to gain little. Each reason is stronger with a second sentence that says why it matters.

4. (a) 60,000 − 12,000 − 18,000 = £30,000 [1]. [1] (b) 30,000 ÷ 60,000 [1] × 100 = 50% [1]. [2] (c) A low-cost loan means lower interest payments [1], so Ladykirk keeps more cash for running costs in the early months [1]. Accept the grant need not be repaid, so it lowers what Sami must borrow or invest himself. [2] Examiner insight: Show the working in a percentage question so a slip in the last step can still be followed. In part (c), link the help to this business and its cash position, not to start-ups in general.

5. (a) One mark each [1] [1] for any two of: value of output/sales, volume of output/sales, capital employed. [2] (b) A small firm can make a large profit [1] and a large firm can make a loss, so profit does not show how big the business is [1]. [2] (c) A firm with many machines may employ few people [1], so it looks small even if it produces and sells a lot [1]. Accept that part-time and full-time staff are counted differently. [2] Examiner insight: Answers that offer profit in part (a) tend to lose the mark, because the syllabus is explicit that profit is not a size measure. In part (c), a problem needs an effect on the measurement, not just a label.

6. (a) Wynstow: 1,800,000 ÷ 18 = £100,000 [1]. Tweedmouth: 2,400,000 ÷ 60 = £40,000 [1]. [2] (b) (i) 60 ÷ 18 = 3.3 times [1]. (ii) 2.4 ÷ 1.8 = 1.3 times [1]. [2] (c) By employees Tweedmouth looks over three times larger [1], but by sales revenue only 1.3 times larger, as its staff each produce less sales [1]. By capital employed it is 15 times larger (9.0 ÷ 0.6) because a fitness business needs costly equipment and premises, while candle making needs little [1]. [3] Examiner insight: Strong answers use figures from the case in the explanation, such as the 15 times capital figure, and say why the businesses differ. Repeating the numbers without an explanation tends to earn less.

7. (a) A takeover is when one business buys enough of another [1] to gain control of it [1]. [2] (b) Vertical integration (backward, towards suppliers) [1]. [1] (c) It secures the supply of fruit [1], so Dunsterley is less likely to run short or face higher supplier prices [1]. Accept control of ingredient quality. [2] Examiner insight: A definition of takeover needs the idea of control. Saying only “buying another firm” is thinner. For part (c), the advantage should be tied to jam and fruit.

8. Way 1: develop new products [1], such as a new flavour or range, which attracts new customers and more sales [1]. Way 2: develop new markets [1], such as selling in another region or online, which widens the customer base [1]. Accept opening more outlets from the firm’s own funds. [4] Examiner insight: Naming the method alone earns little. A second sentence that says how it produces growth is usually what turns a point into an explained one. Growth by merger belongs to external growth and does not answer this question.

9. (a) 4.2 + 2.8 = £7.0 million [1]. [1] (b) 4.2 ÷ 7.0 [1] × 100 = 60% [1]. [2] (c) Advantage: sales and market share rise immediately [1], so Marlowdene is larger without years of slow internal growth [1]. Problem: the takeover may be costly and need a loan [1], which strains cash flow if the new business does not produce enough sales [1]. Accept clashing cultures or difficulty of managing a bigger firm. Credit one advantage and one problem. [4] Examiner insight: The question asks for one of each, so two advantages tend not to meet the requirement. Using the soap and bath care context makes an answer applied rather than general.

10. Reason 1: the market is small or specialised [1], so hand-made candles appeal to a niche set of customers and there is little demand for large output [1]. Reason 2: the owner wants to keep control and a manageable workload [1], so she prefers not to take on staff and the extra responsibility [1]. Accept personal service or lack of finance. [4] Examiner insight: The stem gives clues, hand-made and no wish to employ staff. Answers that use them tend to read as applied, while generic reasons gain less.

11. Reason 1: shortage of finance [1], because a new cafe has high costs before it has regular customers and may run out of cash [1]. Reason 2: weak management skills [1], such as poor ordering of stock or pricing too low to cover costs [1]. Accept strong competition, falling demand or a recession. [4] Examiner insight: A good answer links the reason to a cafe. Two reasons in the same area, for example both about money, can still be credited if each is explained, but different reasons are safer.

12. (a) 15% of 3.6 million = 3.6 × 0.15 [1] = £0.54 million (£540,000) [1]. [2] (b) 3.6 + 2.4 = £6.0 million [1]. [1] (c) Option A advantage: Wexby keeps control of decisions [1] and the forecast extra sales revenue of £540,000 is well above the £250,000 outlay, paid from retained profit [1]. Option A drawback: growth is forecast and may not happen, and the new range could fail [1]. Option B advantage: sales revenue rises to £6.0 million immediately [1] and a rival is removed [1]. Option B drawback: it may need finance that strains cash flow, and merging may cause conflict and job losses [1]. Judgement: Option A is the better choice because it answers the owner’s worries about control and cash [1], provided the 15% forecast is reliable and the extra sales cover the costs of the new range [1]. [8] Examiner insight: A justified recommendation needs both options weighed and a decision that follows from the evidence given. A reasoned choice of Option B can also gain credit if its figures and risks are discussed.

Where marks are usually lost

• Listing characteristics or plan elements with no link to the business in the question.
• Answering why a government helps start-ups from the point of view of the entrepreneur.
• Offering profit as a way of measuring business size.
• Forgetting to show the sum for a percentage or per-employee calculation.
• Confusing a merger with a takeover, or horizontal with vertical integration.
• Giving two advantages when the question asks for one advantage and one problem.
• Writing a recommendation in the evaluation question without weighing the alternative option.
• Naming a reason for failure without saying how it leads to failure.

Next steps

• Re-read the revision notes and the study guide.
• Visit the Cambridge IGCSE Business course page and the checklist.
• Take the free diagnostics to find your weakest areas.
• Book a free trial class.

Frequently asked questions

Can profit be used to measure business size? No. Profit is not a method of measuring business size, because a small firm can earn a high profit and a large firm can make a loss. Giving profit as a size measure is a common error.

What are common mistakes on enterprise and growth questions in IGCSE Business 0264? Students often list characteristics or plan elements with no link to the business, answer why a government helps start-ups from the entrepreneur’s point of view, confuse a merger with a takeover or horizontal with vertical integration, and forget to show working in percentage calculations. A recommendation that does not weigh the alternative option also loses marks.

What is the difference between horizontal and vertical integration? Horizontal integration joins firms at the same stage of the same industry, such as two garden centres. Vertical integration joins firms at different stages, either backward towards suppliers or forward towards retailers or customers.

Which syllabus section covers enterprise, business growth and size? It is section 1.3 of the Cambridge IGCSE Business 0264 syllabus, covering enterprise and entrepreneurship, measuring business size, growth and staying small, and why businesses succeed or fail.

Official syllabus

Cambridge IGCSE Business 0264 syllabus for examination in 2027, 2028 and 2029, published by Cambridge University Press & Assessment (Cambridge International), section 1.3.