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2 (a) Which two of the following are external sources of finance? Select two answers - Edexcel - GCSE Business - Question 2 - 2020 - Paper 1
Question 2
2 (a) Which two of the following are external sources of finance? Select two answers. ☐ A Loan capital ☐ B Retained profit ☐ C Sales revenue ☐ D Selling assets ☐ E ... show full transcript
Worked Solution & Example Answer:2 (a) Which two of the following are external sources of finance? Select two answers - Edexcel - GCSE Business - Question 2 - 2020 - Paper 1
Step 1
Which two of the following are external sources of finance?
Answer
The correct answers are A - Loan capital and E - Share capital.
Loan capital refers to funds borrowed from external sources, while share capital is derived from issuing shares in the business. Both are essential for financing a business's operations.
Step 2
Which two of the following are methods of external growth for a business?
Answer
The correct answers are C - Merger and E - Takeover.
A merger occurs when two businesses combine to form one entity, while a takeover happens when one business acquires control over another. Both strategies are vital for expanding business operations and market reach.
Step 3
Using the information in Table 1, calculate the gross profit made by the business. You are advised to show your workings.
Answer
To calculate gross profit, use the formula:
ext{Gross Profit} = ext{Sales Revenue} - ext{Cost of Goods Sold} $$. Assuming the sales revenue is £625,000 and cost of goods sold is £145,000, the calculation is:ext{Gross Profit} = 625000 - 145000 = 480000
Step 4
Explain one benefit to a business of withdrawing a product when it enters the decline phase of its product life cycle.
Answer
Withdrawing a product in decline allows the business to conserve resources and focus on more profitable items. This can help improve overall operational efficiency and redirect investment to products with a higher market potential.
Step 5
Explain one benefit to a business from improving the aesthetic element of a product’s design mix.
Answer
Enhancing the aesthetic appeal of a product can make it more attractive to consumers, potentially increasing sales. A more appealing product can also justify a higher price point, leading to greater profit margins and customer satisfaction.