2.3 Demand 2.4 Supply 2.5 Price determination 2.7 PED 2.8 PES 2.10 Market failure Question format

Locally, nationally and internationally. Questions and suggested answers

6.3.1 The importance of globalisation: • The concept of globalisation and the reasons for it • Opportunities and threats of globalisation for businesses • Why governments might introduce import tariffs and import quotas 6.3.2 Reasons for the importance and growth of multinational companies (MNCs): • Benefits to a business of becoming a multinational and the impact on its stakeholders • Potential benefits to a country and/or economy where a MNC is located, e.g. jobs, exports, increased choice, investment • Potential drawbacks to a country and/or economy where a MNC is located, e.g. reduced sales of local businesses, repatriation of profits 6.3.3 The impact of exchange rate changes: • Depreciation and appreciation of an exchange rate • How exchange rate changes can affect businesses as importers and exporters of products, e.g. prices, competitiveness, profitability Questions and suggested answers

6.2.1 Environmental concerns and ethical issues as both opportunities and constraints for businesses: • How business activity can impact on the environment, e.g. global warming • The concept of externalities: possible external costs and external benefits of business decisions • Sustainable development; how business activity can contribute to this • How and why business might respond to environmental pressures and opportunities, e.g. pressure groups • The role of legal controls over business activity affecting the environment, e.g. pollution controls • Ethical issues a business might face: conflicts between profits and ethics • How business might react and respond to ethical issues, e.g. child labour “including questions and suggested answers”

5.5.1 Profitability: • The concept and importance of profitability 5.5.2 Liquidity: • The concept and importance of liquidity 5.5.3 How to interpret the financial performance of a business by calculating and analysing profitability ratios and liquidity ratios: • Gross profit margin • Profit margin • Return on Capital Employed • Current ratio • Acid test ratio 5.5.4 Why and how accounts are used: • Needs of different users of accounts and ratio analysis • How users of accounts and ratio results might use information to help make decisions, e.g. whether to lend to or invest in the business Questions and suggested answers

5.4.1 The main elements of a statement of financial position: • The main classifications of assets and liabilities, using examples 5.4.2 Interpret a simple statement of financial position and make deductions from it, e.g. how a business is financing its activities and what assets it owns, sale of inventories to raise finance (constructing statements of financial position will not be assessed) Questions and suggested answers*

5.3.1 What profit is and why it is important: • How a profit is made • Importance of profit to private sector businesses, e.g. reward for risk-taking/enterprise, source of finance • Difference between profit and cash 5.3.2 Income statements: • Main features of an income statement, e.g. revenue, cost of sales, gross profit, profit and retained profit • Use simple income statements in decision making based on profit calculations (constructing income statements will not be assessed) *Questions and suggested answers"

5.2.1 The importance of cash and of cash-flow forecasting: • Why cash is important to a business • What a cash-flow forecast is, how a simple one is constructed and the importance of it • Amend or complete a simple cash-flow forecast • How to interpret a simple cash-flow forecast • How a short-term cash-flow problem might be overcome, e.g. increasing loans, delaying payments, asking debtors to pay more quickly 5.2.2 Working capital: • The concept and importance of working capital *questions and suggested answers"

6.1.1 Business cycle: • Main stages of the business cycle, e.g. growth, boom, recession, slump • Impact on businesses of changes in employment levels, inflation and Gross Domestic Product (GDP) 6.1.2 How government control over the economy affects business activity and how businesses may respond: • Identify government economic objectives, e.g. increasing Gross Domestic Product (GDP) • Impact of changes in taxes and government spending • Impact of changes in interest rates • How businesses might respond to these changes Questions and suggested answers

5.1.1 The need for business finance: • The main reasons why businesses need finance, e.g. start-up capital, capital for expansion and additional working capital • Understand the difference between short-term and long-term finance needs 5.1.2 The main sources of finance: • Internal sources and external sources with examples • Short-term and long-term sources with examples, e.g. overdraft for short-term finance and debt or equity for long-term finance • Importance of alternative sources of capital, e.g. micro-finance, crowd-funding • The main factors considered in making the financial choice, e.g. size and legal form of business, amount required, length of time, existing loans • Recommend and justify appropriate source(s) of finance in given circumstances questions and suggested answers

4.4.1 The main factors influencing the location and relocation decisions of a business: • Factors relevant to the location decision of manufacturing businesses and service businesses • Factors that a business could consider when deciding which country to locate operations in • The role of legal controls on location decisions • Recommend and justify an appropriate location for a business in given circumstances Sample questions and answers

4.3.1 Why quality is important and how quality production might be achieved: • What quality means and why it is important for all businesses • The concept of quality control and how businesses implement quality control • The concept of quality assurance and how this can be implemented Sample questions and answers

4.2.1 Identify and classify costs: • Classifying costs using examples, e.g. fixed, variable, average, total • Use cost data to help make simple cost-based decisions, e.g. to stop production or continue 4.2.2 Economics and diseconomies of scale: • The concept of economies of scale with examples, e.g. purchasing, marketing, financial, managerial, technical • The concept of diseconomies of scale with examples, e.g. poor communication, lack of commitment from employees, weak coordination 4.2.3 Break-even analysis: • The concept of break-even • Construct, complete or amend a simple break-even chart • Interpret a given chart and use it to analyse a situation • Calculate break-even output from given data • Define, calculate and interpret the margin of safety • Use break-even analysis to help make simple decisions, e.g. impact of higher price • Understand the limitations of break-even analysis Sample questions and answers

4.1.1 The meaning of production: • Managing resources effectively to produce goods and services • Difference between production and productivity • Benefits of increasing efficiency and how to increase it, e.g. increasing productivity by automation and technology, improved labour skills • Why businesses hold inventories • The concept of lean production: how to achieve it, e.g. just-in-time inventory control and Kaizen; benefits of lean production 4.1.2 The main methods of production: • Features, benefits and limitations of job, batch and flow production • Recommend and justify an appropriate production method for a given situation 4.1.3 How technology has changed production methods, e.g. using computers in design and manufacturing Sample questions and answers