A business will make a profit if it:
A - OCR - GCSE Business - Question 5 - 2020 - Paper 1
Question 5
A business will make a profit if it:
A. ends the year with a positive bank balance
B. exceeds its break-even quantity
C. has costs that are greater than its reven... show full transcript
Worked Solution & Example Answer:A business will make a profit if it:
A - OCR - GCSE Business - Question 5 - 2020 - Paper 1
Step 1
A. ends the year with a positive bank balance
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Answer
While having a positive bank balance may indicate that a business is managing its finances well, it does not necessarily mean that the business is profitable. Profit is determined by comparing revenues and costs, not merely by the bank balance.
Step 2
B. exceeds its break-even quantity
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Answer
Correct. A business makes a profit when it sells more units than its break-even quantity. The break-even point is where total revenues equal total costs; exceeding this point means revenues surpass costs, leading to profit.
Step 3
C. has costs that are greater than its revenues
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Answer
This statement is false. If costs are greater than revenues, the business operates at a loss, not a profit.
Step 4
D. pays off all of its debts
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Answer
Paying off debts does not equate to generating profit. A business can be debt-free but still operate at a loss if its revenues do not cover its expenses.
