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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... 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
- E Share capital
Loan capital refers to borrowed funds that must be repaid, qualifying as an external source of finance. Share capital represents funds raised by issuing shares, also considered external financing.
Step 2
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, we use the formula:
Assuming Sales Revenue is £625,000 and Cost of Goods Sold is £145,000, we calculate:
Therefore, the gross profit made by the business is £480,000.
Step 4
Explain one benefit to a business of withdrawing a product when it enters the decline phase of its product life cycle.
Answer
One benefit of withdrawing a product during its decline phase is resource reallocation. By discontinuing the product, a business can free up resources, including time and finances, allowing focus on more profitable products. This strategic withdrawal can improve overall profitability as it enables the business to concentrate efforts on products with higher market demand.
Step 5
Explain one benefit to a business from improving the aesthetic element of a product's design mix.
Answer
Improving the aesthetic element of a product can enhance its market appeal, making it more attractive to consumers compared to competitors. This attractiveness can lead to increased sales volume, allowing the business to potentially charge a premium price, thereby enhancing overall revenue. Additionally, a well-designed product can foster brand loyalty and positively influence the overall brand image.