OxfordAQA IGCSE Business: Business in the Real World — 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 available free from your board. In particular: the “Section A/B/C” labels below are organisational only — they do not reproduce either real 9225 paper’s actual profile (Section A 15 marks of multiple choice/short answer; Sections B and C approximately 40 and 35 marks, each built around a case-study/data-response stimulus). This file has no multiple-choice questions and no stimulus material, and neither paper’s duration (2 hours, 90 marks) is represented here.

Related: Business in the Real World revision notes

Scope note: re-summed by topic, questions 1, 2, 7 and 8 (21 marks) test this file’s own named topic (Topic 1, sub-topics 3.1.1/3.1.2/3.1.7); questions 3, 4 and 6 (26 marks) test Topic 2 Influences on Business content (globalisation, the economic climate, legislation, ethics), duplicating that topic’s own practice file; and question 5 (8 marks) tests sources of finance from the Finance section. The finance question is not strictly off-specification — 9225’s ownership sub-topic requires analysing legal structures including by sources of finance available, and the specification stresses the integrated, cross-topic nature of business — but this remains a balance issue: four of Topic 1’s seven sub-topics (aims and objectives, stakeholders, location, and business planning) previously received no marks at all. Section C below adds coverage of those four sub-topics to rebalance the paper toward its named topic, and question 14 sets the topic’s named calculation, average unit costs (3.1.7 Expanding a business).

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Section A

1. State three reasons why a person might start their own business. [3]

2. Explain the difference between a private limited company and a public limited company. [4]

Section B

3. A manufacturer is considering expanding into an overseas market.

(a) Explain two opportunities this could create. [4] (b) Explain two risks. [4]

4. Explain how each of the following external factors could affect a clothing retailer: a rise in interest rates, a fall in the exchange rate, new employment legislation. [9]

5. Explain two internal and two external sources of finance suitable for a small business, giving a drawback of each. [8]

6. Evaluate whether a business should always act ethically even when it reduces profit. [9]

7. A sole trader is considering converting her business into a partnership, or alternatively buying into a franchise.

(a) Explain one advantage and one disadvantage of operating as a sole trader. [4] (b) Explain why buying a franchise might appeal to someone starting a business for the first time. [4]

8. Distinguish between internal growth and external growth, and explain one risk of external growth. [6]

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Answers

1. Any three: to be their own boss and have independence [1]; to earn more money or keep the profit [1]; to exploit a gap in the market or a new idea [1]; because they have been made redundant or want more flexible hours [1].

2. A private limited company (Ltd) cannot sell shares to the general public; shares are sold privately, usually to family and friends, and can only be transferred with the other shareholders’ agreement [1] [1]. A public limited company (plc) is permitted to offer shares to the general public, and may (though need not) have those shares listed and traded on a stock exchange, raising far more capital but exposing it to takeover and to public scrutiny of its accounts [1] [1].

3. (a) Any two, 2 marks each: access to a much larger customer base, raising sales revenue and allowing economies of scale [1] [1]; spreading risk, so a downturn in the home market does not threaten the whole business [1] [1]; extending the life of a product that has reached maturity domestically [1] [1]. (b) Exchange rate movements can wipe out the profit margin on overseas sales [1] [1]; cultural and legal differences mean the product or marketing may need costly adaptation, and local regulations may be unfamiliar [1] [1]; transport costs and tariffs may make the product uncompetitive against local rivals [1] [1].

4. Rise in interest rates — consumers with mortgages and loans have less disposable income, so demand for non-essential clothing falls [1]; the retailer’s own borrowing costs rise, squeezing profit [1]; it may delay investment in new stores [1]. Fall in the exchange rate — imported stock becomes more expensive, raising costs and forcing either higher prices or lower margins [1] [1]; however, if the retailer exports, its goods become cheaper abroad, boosting overseas sales [1]. New employment legislation — for example a higher minimum wage raises the wage bill, increasing costs [1]; the business may respond by raising prices or reducing hours [1]; on the other hand better-paid staff may be more motivated and less likely to leave, reducing recruitment costs [1].

5. Internal: retained profit — no interest and no loss of control, but limited by past profitability and cannot be reinvested elsewhere [1] [1]. Sale of assets — raises cash quickly, but the business loses the use of that asset and may not get its full value [1] [1]. External: bank loan — a known repayment schedule, but interest must be paid and security is usually required [1] [1]. Trade credit — delays payment to suppliers at no cost, but only short-term and may forfeit discounts or damage supplier relations if abused [1] [1].

6. For always acting ethically: ethical behaviour builds reputation and customer loyalty, which supports long-term revenue [1]; it attracts and retains staff, who prefer to work for a business they respect [1]; unethical behaviour risks legal penalties, boycotts and lasting brand damage that far exceed any short-term saving [1]. Against: ethical sourcing and higher wages raise costs, and if competitors do not follow, the business may be undercut on price and lose market share [1]; a business in financial difficulty may have to choose between an ethical policy and survival, and jobs are lost if it fails [1]; consumers often say they value ethics but buy on price, so the commercial benefit is uncertain [1]. Judgement: ethical behaviour is usually profitable in the long run, particularly for a brand with a visible reputation [1]. The answer depends on how price-sensitive the market is and how much of the ethical premium customers will actually pay [1] — a business should set standards it can sustain rather than ones that threaten its survival [1].

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7. (a) Advantage: she keeps all the profit and has full control over decisions, with no need to consult partners or shareholders [1] [1]. Disadvantage: she has unlimited liability, so personal assets are at risk if the business fails, and capital is limited to her own savings and borrowing [1] [1]. (b) A franchise provides a proven business format and brand name, reducing the risk of failure compared with starting from scratch [1] [1]; the franchisor typically provides training, marketing support and bulk-buying discounts, which a first-time owner would otherwise lack [1] [1].

8. Internal growth is organic growth from reinvested profit — slower, but it keeps full control and avoids the risk of clashing with another organisation’s culture [1] [1]. External growth is growth through merger or takeover — much faster, but it risks culture clash and integration failure, since combining two separate workforces, systems and management styles rarely goes entirely smoothly [1] [1] [1] — and it usually requires substantial external finance to fund the deal, increasing the business’s financial risk [1].

Section C — the topic’s own untested sub-topics (new)

9. State three items you would expect to find in a business plan. [3]

10. Explain two objectives a business might pursue once it has moved beyond the survival stage. [4]

11. A furniture manufacturer is choosing between a factory site near its timber supplier and a site near its main retail customers. Explain one factor favouring each location. [4]

12. Identify three stakeholders of a new restaurant and explain one conflict of interest between two of them. [6]

13. Explain one benefit and one drawback of preparing a business plan before starting up. [4]

14. A bakery makes 2,000 loaves a week at a total cost of $1,600. After expanding with a larger oven, it makes 5,000 loaves a week at a total cost of $3,000.

(a) Calculate the bakery’s average unit cost per loaf before and after the expansion. [2] (b) Interpret your answers to part (a), explaining one likely reason for the change. [2]

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Section C — Answers

9. Any three: the business idea and what it will sell [1]; details of the target market and customers [1]; the finance needed and how it will be raised [1]; how the business will be organised/run, including staffing [1] — any three of these.

10. Any two, 2 marks each: profit — once established, the business shifts focus from merely surviving to maximising the surplus over costs [1] [1]; growth — expanding output, sales or market share to build a larger, more secure business [1] [1]; social or environmental goals — an established business may have the surplus resources to pursue ethical or environmental aims that a survival-stage start-up cannot afford [1] [1].

11. Near the timber supplier: reduces transport costs and delivery time for a bulky, heavy raw material, and secures a reliable supply [1] [1]. Near retail customers: reduces delivery time and cost for the finished product to reach the market, and allows closer contact with customer needs and after-sales service [1] [1].

12. Any three stakeholders, e.g. owners, employees, customers, local community, suppliers [1] [1] [1]. Conflict example: owners want to minimise costs (including wages) to maximise profit, while employees want higher pay and job security — the same funds cannot satisfy both [1] [1] [1].

13. Benefit: writing a plan forces the founder to research the market and finances properly, reducing the risk of overlooking a serious problem before money is committed [1] [1]. Drawback: preparing a thorough plan takes time and, since it rests on assumptions about the market, may quickly become out of date if conditions change faster than expected [1] [1].

14. (a) Average unit cost = total costs ÷ output. Before: $1,600 ÷ 2,000 = $0.80 per loaf [1]. After: $3,000 ÷ 5,000 = $0.60 per loaf [1]. (b) Average unit cost has fallen by $0.20 per loaf (25%) even though total costs rose, so the bakery is benefiting from economies of scale as it expands [1]; a likely reason is a technical economy of scale — the larger oven bakes many more loaves at once, so its cost is spread over more units (or a purchasing economy, buying flour in bulk at a lower price per kilogram) [1].

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Where marks are usually lost

• Saying a plc’s shares are sold “to the public” without noting that a plc may (but need not) be listed on a stock exchange — a plc is defined by being permitted to offer shares publicly, not by being listed; conflating the two is a real distinction in a qualification examined across multiple jurisdictions.
• Giving external factors without applying them to the specific business.
• Naming sources of finance without a drawback.
• Not acknowledging the commercial cost of ethical behaviour.
• Describing a franchise’s benefits without linking them to reduced risk for a first-time owner.
• Treating internal and external growth as differing only in speed, without addressing integration risk.