Financial Management | AQA A-Level Business (7132)
Financial Management
- 198 questions
- 15 subtopics
- The business functions, assessed on all three papers
- Paper 1, Paper 2 and Paper 3
Financial management can be examined on any of the three papers, and carries most of the calculation in the course.
It covers financial objectives, the analysis used to judge performance, where a business gets its money, and how it improves cash flow and profit.
Sample questions from Financial Management
Answer each one closed book first, then open the answer.
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Financial objectives and return on investment
Calculate the return on investment when net gain = £23,000, cost of investment = £74,000.
Show the answer
Return on investment = (23000 ÷ 74000) × 100 = 31.1 %. -
Gross profit, operating profit and profit for the year
Why is interest deducted when calculating profit for the year?
Show the answer
Interest is deducted because it represents the cost of financing the business through borrowing, which must be paid before profit is available to shareholders. -
Cash flow forecasts
Where does the opening balance for each month of a cash flow forecast come from?
Show the answer
It is the closing balance of the previous month. -
Break-even, contribution and the margin of safety
State the formula for margin of safety.
Show the answer
Margin of safety = Actual output − Break-even output. -
The uses and limits of break-even analysis
How does break-even analysis help evaluate the viability of new products or projects?
Show the answer
It indicates whether projected sales are likely to exceed the break-even point, helping assess whether the venture is worthwhile. -
Profit margins, payables and receivables
How does reducing the time taken by receivables to pay affect cash flow?
Show the answer
It improves cash flow by bringing cash into the business more quickly. -
Short-term external finance
Is debt factoring typically used for short-term or long-term finance needs?
Show the answer
Short-term finance needs. -
Share capital, loans, venture capital and crowd funding
What type of business is venture capital particularly suitable for?
Show the answer
Businesses seeking rapid expansion, particularly for long-term finance.
The 15 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Financial objectives and return on investment | Revenue, cost, profit and cash flow objectives, and calculating return on investment. | 14 |
| Gross profit, operating profit and profit for the year | The three levels of profit, what is deducted at each, and how each is calculated. | 12 |
| Budgets and variance analysis | What a budget is for, favourable and adverse variances, and what budgeting gives a business. | 17 |
| Cash flow forecasts | Cash inflows and outflows, net cash flow and opening and closing balances, worked forecasts, what a negative balance signals, and why forecasts are useful to lenders but only as good as their estimates. | 12 |
| Break-even, contribution and the margin of safety | Calculating break-even output, contribution per unit, total contribution and the margin of safety. | 18 |
| Break-even charts and how they shift | What a break-even chart must show, and what happens to it when price, fixed costs or variable costs change. | 18 |
| The uses and limits of break-even analysis | Setting targets, testing prices and judging viability, and the assumptions the analysis rests on. | 11 |
| Profit margins, payables and receivables | Gross, operating and net profit margin, and how payables and receivables affect cash flow. | 18 |
| Internal sources of finance | Retained profit as internal finance, its advantages, and the limits on what it can fund. | 8 |
| Short-term external finance | Overdrafts and debt factoring, what each costs, and the needs they are suited to. | 9 |
| Share capital, loans, venture capital and crowd funding | The long-term external sources, what each demands in return, and what each suits. | 18 |
| Choosing a source of finance | Amount, purpose, duration, cost, risk and the effect on ownership. | 13 |
| Methods of improving cash flow | Overdrafts, extended payment terms, factoring, sale and leaseback and reducing stock. | 9 |
| Methods of improving profits | Raising sales and prices, cutting overheads and unit costs, and improving asset use. | 8 |
| The difficulties and trade-offs in improving cash flow and profit | Why customers and suppliers resist, and how cash flow and profit measures pull against each other. | 13 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
AQA A-Level Business Active Recall Guide
Every topic, not just this one. 1,819 questions with their answers.