Year 10 Paper 5: Enterprise and Finance
Enterprise and entrepreneurship, spotting a business opportunity, business aims and objectives, cash flow and external influences on business.
Year 10 here means a typical teaching order, not a syllabus rule. No exam board defines what belongs to Year 10, and schools sequence the course differently. Check it against your own scheme of work before using it to decide what a class has covered.
Questions
Question 1 [3 marks]
Enterprise and Entrepreneurship
A qualified electrician earns 32000 pounds a year working for a large firm and is considering leaving to set up his own electrical contracting business.
Explain one opportunity cost the electrician gives up by leaving his job to start the business.
Question 2 [3 marks]
Business Aims and Objectives
A well-established chain of five supermarkets has traded successfully and profitably for over twenty years.
Explain one reason why profit maximisation, rather than survival, is likely to be this business's main objective.
Question 3 [3 marks]
External Influences on Business
Explain one way a rise in interest rates could affect a small business that has a bank loan.
Question 4 [3 marks]
Spotting a Business Opportunity
Explain one disadvantage to a new restaurant of using only secondary research, without ever asking potential customers directly.
Question 5 [4 marks]
Business Aims and Objectives
A family-run bakery has grown steadily for five years.
Explain two reasons why the owners might now set an objective of growth rather than survival.
Question 6 [5 marks]
Cash Flow
A wedding florist has irregular cash inflows through the year, with most bookings in spring and summer, but steady monthly outflows for a lease and van costs.
Explain two ways the florist could manage cash flow to cope with this seasonal pattern.
Question 7 [5 marks]
Spotting a Business Opportunity
In a local area, four coffee shops share a total market worth 800000 pounds a year in sales.
Bean and Co has annual sales of 184000 pounds in that market.
Calculate Bean and Co's market share as a percentage, and state whether this gives Bean and Co the largest share, given that the other three shops hold 26 percent, 22 percent and 29 percent.
Question 8 [5 marks]
Business Aims and Objectives
A family-owned garden centre has always balanced modest profit with an objective of supporting the local community, such as running free gardening workshops for schools.
Explain two reasons the family might continue to prioritise this social objective, even though a purely profit-focused garden centre could probably earn more.
Question 9 [5 marks]
Spotting a Business Opportunity
In a small town, three plumbing firms share a market worth 500000 pounds a year.
Firm A has annual revenue of 175000 pounds and Firm B has annual revenue of 235000 pounds.
Calculate Firm A's market share and Firm B's market share as percentages, and state which firm has the larger share.
Question 10 [6 marks]
External Influences on Business
A furniture manufacturer is considering investing in new automated cutting machinery that would replace some of the manual work currently done by its staff, reducing labour costs but requiring a large upfront investment.
Evaluate whether the manufacturer should invest in this automated machinery.
Question 11 [6 marks]
Cash Flow
A building supplies merchant is considering offering 60 days' credit to trade customers for the first time, to compete with a rival merchant who already offers credit, even though the merchant currently sells everything for cash on collection.
Evaluate whether the merchant should start offering 60 days' credit to trade customers.
Question 12 [6 marks]
Business Aims and Objectives
A small independent cinema's main objective has always been community and cultural service, showing arts films at low prices rather than maximising profit.
A large chain offers to buy the cinema, promising to keep it open but switch its objective to profit maximisation by raising ticket prices and screening only major blockbusters.
Evaluate whether the current owners should sell to the chain given this change in objective.
Question 13 [6 marks]
Cash Flow
A small printing business holds large amounts of paper and ink stock just in case, which ties up a significant amount of cash, and has recently struggled to pay its own suppliers on time.
Evaluate two ways the printing business could improve its cash flow position.
Model solutions
| Question 1[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying an opportunity cost, such as the guaranteed 32000-pound salary | B1 |
| developing it, such as this being the next best alternative given up by choosing self-employment | B1 |
| linking this to the electrician needing the new business to eventually replace or exceed this income | B1 |
| Final answer: The opportunity cost is the guaranteed 32000-pound salary given up, the next best alternative, which the new business must eventually replace or exceed | |
| Question 2[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that the business is well-established with a proven, reliable customer base | B1 |
| developing it, such as no longer needing to prioritise simply staying open, unlike a brand-new business | B1 |
| concluding that it can instead focus on maximising the return generated from its existing, secure position | B1 |
| Final answer: As a well-established business with a proven customer base, it no longer needs to prioritise survival, so it can focus on maximising the profit from its secure position | |
| Question 3[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that the cost of borrowing increases, so monthly loan repayments rise | B1 |
| developing this, such as leaving the business with less cash available for other costs such as wages or stock | B1 |
| concluding that this could reduce the business's profit or force it to raise its own prices | B1 |
| Final answer: Higher interest rates increase loan repayments, leaving less cash for other costs and potentially reducing profit or forcing higher prices | |
| Question 4[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that secondary data was collected for another purpose and not for this specific restaurant | B1 |
| developing this, such as it not answering specific questions about the restaurant's own planned menu or location | B1 |
| concluding that this could lead to decisions based on data that does not really fit the restaurant's own situation | B1 |
| Final answer: Secondary data was collected for another purpose and may not answer specific questions about the restaurant's own menu or location, risking decisions that do not fit its situation | |
| Question 5[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a reason, such as the business now being established with a reliable, loyal customer base | B1 |
| developing it, such as being able to use stable income to invest in expansion, such as a second shop, rather than needing to focus on basic costs | B1 |
| identifying a second reason, such as growth increasing market share or bringing economies of scale | B1 |
| developing it, such as lowering the average cost per unit and increasing profit as ingredients are bought in greater bulk | B1 |
| Final answer: Two developed reasons, such as an established, reliable customer base allowing investment in expansion, and growth bringing economies of scale that lower average costs | |
| Question 6[5 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a method, such as building up a cash reserve during the busy spring and summer months | B1 |
| developing it, such as keeping back some of the surplus rather than spending it all, so there is a buffer for quieter winter months | B1 |
| identifying a second method, such as taking deposits well in advance for future bookings | B1 |
| developing it, such as this bringing cash in earlier, smoothing out the gap during quiet months | B1 |
| a concluding link, such as combining reserves with earlier deposits helping the florist cope with the seasonal pattern | B1 |
| Final answer: Two developed methods, such as building a cash reserve during busy months, and taking deposits well in advance of bookings to bring cash in earlier, helping cope with the seasonal pattern | |
| Question 7[5 marks] | |
|---|---|
| Answer or working | Marks |
| dividing 184000 by 800000 | M1 |
| multiplying the result by 100 | M1 |
| 23 percent | A1 |
| comparing 23 percent with 26, 22 and 29 percent | B1 |
| the correct conclusion that Bean and Co does not have the largest share, since the 29 percent shop is larger | B1 |
| Final answer: 23 percent; no, the shop with a 29 percent share has the largest share | |
| Question 8[5 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a reason, such as building reputation and goodwill with the local community | B1 |
| developing it, such as this encouraging loyal repeat custom and positive word of mouth that supports sales in the long run | B1 |
| identifying a second reason, such as the personal values and satisfaction of the owning family | B1 |
| developing it, such as private owners being free to prioritise objectives beyond pure profit, unlike a business answering to outside shareholders | B1 |
| a concluding link, such as this showing that objectives are not purely financial and can reflect the priorities of the people who own the business | B1 |
| Final answer: Two developed reasons, such as building loyal local goodwill that supports sales long-term, and the family's own values, which as private owners they are free to prioritise over pure profit | |
| Question 9[5 marks] | |
|---|---|
| Answer or working | Marks |
| Firm A's share = 175000 divided by 500000, multiplied by 100 | M1 |
| 35 percent | A1 |
| Firm B's share = 235000 divided by 500000, multiplied by 100 | M1 |
| 47 percent | A1 |
| correctly concluding that Firm B has the larger market share | B1 |
| Final answer: Firm A's market share = 35 percent; Firm B's market share = 47 percent; Firm B has the larger share | |
| Question 10[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour, such as lower ongoing labour costs once the machinery is in place | B1 |
| developing it, such as the machinery also potentially working faster and more consistently than manual cutting, increasing output | B1 |
| a point against, such as the large upfront cost of buying the machinery | B1 |
| developing it, such as this being a significant risk if demand later falls and the investment cannot be recovered | B1 |
| a further factor, such as the effect on existing staff, including potential redundancies and the cost or disruption this could cause | B1 |
| a justified conclusion weighing the long-term cost savings against the upfront investment risk and the impact on staff | B1 |
| Final answer: A justified judgement weighing the long-term labour cost savings and faster output of automation against the large upfront investment risk and the impact on existing staff | |
| Question 11[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour, such as attracting trade customers who need credit terms and currently buy from the rival merchant instead | B1 |
| developing it, such as this potentially increasing sales revenue and market share | B1 |
| a point against, such as cash coming in much more slowly, since payment is delayed by up to 60 days | B1 |
| developing it, such as this risking a cash flow shortfall if the merchant still has to pay its own suppliers quickly | B1 |
| a further factor, such as checking the creditworthiness of trade customers before offering credit, to reduce the risk of late or non-payment | B1 |
| a justified conclusion on whether the extra sales from offering credit are likely to outweigh the cash flow risk, related to the merchant's own cash position | B1 |
| Final answer: A justified judgement weighing the extra sales and competitiveness of offering 60 days' credit against the cash flow risk of delayed payment, related to checking customer creditworthiness and the merchant's own cash position | |
| Question 12[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour of selling, such as receiving a large one-off financial payment | B1 |
| developing it, such as this funding the owners' retirement or new projects while guaranteeing the building stays open rather than risking closure | B1 |
| a point against, such as ending the cinema's original cultural and community objective | B1 |
| developing it, such as the loyal local audience, who valued arts films and low prices, losing access to that service even though the building remains open | B1 |
| a further factor, such as whether the owners value the financial payment or their original purpose more, and whether another buyer sharing the current objective could be found | B1 |
| a justified conclusion weighing the financial benefit and certainty of selling against the loss of the cinema's original social objective | B1 |
| Final answer: A justified judgement weighing the financial benefit and certainty of selling against the loss of the cinema's original cultural and community objective, related to the owners' own priorities and whether another buyer might exist | |
| Question 13[6 marks] | |
|---|---|
| Answer or working | Marks |
| a first method, such as reducing the amount of stock held and ordering paper and ink more frequently in smaller amounts | B1 |
| developing it, such as freeing up cash that was tied up in stock, which can then be used to pay suppliers on time | B1 |
| a second method, such as asking its own customers for a deposit or faster payment on large printing orders | B1 |
| developing it, such as bringing cash in sooner rather than waiting for the full amount after the job is finished | B1 |
| a further evaluative point, such as reducing stock risking running out of paper or ink during a busy period | B1 |
| a justified conclusion recommending one method, or a combination, with a reason tied to the business's situation | B1 |
| Final answer: A justified recommendation such as combining lower stock levels with deposits from customers, weighing the risk of running short of materials against the need to free up cash and pay suppliers on time | |