Financial information and decisions

Worked examples (6)

• 1Define 'retained profit' (2 marks)
• 2Explain internal sources of finance (4 marks)
• 3Match the finance source to the need (6 marks)
• 4Explain factors in choosing finance, applied (8 marks)
• 5Evaluation: bank loan or share issue for new machinery? (12 marks)
• 6Evaluation: should a business only use internal finance? (12 marks)

Model answers (6)

• ✓Model answer — Paper 1, part (a) style
• ✓Model answer — Paper 1, part (b) style
• ✓Model answer — Paper 1 analysis style
• ✓Model answer — Paper 2, part (a) style — 8 marks (applied)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'

Worked examples (6)

• 1Define 'cash flow' (2 marks)
• 2Explain why cash is not the same as profit (4 marks)
• 3Complete a cash-flow forecast (6 marks)
• 4Explain ways to overcome a cash-flow problem (8 marks)
• 5Evaluation: should the business worry about its cash flow? (12 marks)
• 6Evaluation: will a profitable business never run out of cash? (12 marks)

Model answers (6)

• ✓Model answer — Paper 1, part (a) style
• ✓Model answer — Paper 1, part (b) style
• ✓Model answer — Paper 1 / Paper 2 data response with calculation
• ✓Model answer — Paper 2, part (a) style — 8 marks (applied)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer' (with calculation)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'

Worked examples (6)

• 1Define 'gross profit' (2 marks)
• 2Explain gross profit vs profit for the year (4 marks)
• 3Calculate gross profit, net profit and margin (6 marks)
• 4Explain ways to increase profit, applied (8 marks)
• 5Evaluation: which product is more profitable? (12 marks)
• 6Evaluation: does high gross profit mean success? (12 marks)

Model answers (6)

• ✓Model answer — Paper 1, part (a) style
• ✓Model answer — Paper 1, part (b) style
• ✓Model answer — Paper 1 / Paper 2 data response with calculation
• ✓Model answer — Paper 2, part (a) style — 8 marks (applied)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'

Worked examples (6)

• 1Define 'non-current asset' (2 marks)
• 2Explain current vs non-current assets (4 marks)
• 3Apply the accounting equation and interpret (6 marks)
• 4Explain what a bank learns from the statement, applied (8 marks)
• 5Evaluation: is the business financing itself safely? (12 marks)
• 6Evaluation: is the statement of financial position more useful than the income statement? (12 marks)

Model answers (6)

• ✓Model answer — Paper 1, part (a) style
• ✓Model answer — Paper 1, part (b) style
• ✓Model answer — Paper 1 analysis style
• ✓Model answer — Paper 2, part (a) style — 8 marks (applied)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer' (with interpretation)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'

Worked examples (6)

• 1Define 'liquidity' (2 marks)
• 2Explain current ratio vs acid test (4 marks)
• 3Calculate profitability ratios (6 marks)
• 4Explain why a bank examines accounts, applied (8 marks)
• 5Evaluation: does the business have a liquidity problem? (12 marks)
• 6Evaluation: are profitability ratios more useful than liquidity ratios? (12 marks)

Model answers (6)

• ✓Model answer — Paper 1, part (a) style
• ✓Model answer — Paper 1, part (b) style
• ✓Model answer — Paper 1 / Paper 2 data response with calculation
• ✓Model answer — Paper 2, part (a) style — 8 marks (applied)
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'
• ✓Model answer — Paper 2, part (b) style — 12 marks, 'Justify your answer'