CAIE A-Level Business 5 Finance and Accounting Question Bank

Cambridge International AS & A Level Business 9609 syllabus for exams in 2026, 2027 and 20282026–2028

Practise Finance and Accounting through funding, costs, cash flow, statements, ratios, investment appraisal and budgets, using calculations to support business judgements.

Covered syllabus points

5.1 Business finance 5.2 Sources of finance 5.3 Forecasting and managing cash flows 5.4 Costs 5.5 Budgets

(a)

Define the term direct cost.

[ 2 ]

(b)

Explain one method of improving cash flow for a business.

[ 3 ]

[Maximum number: 6]

Town Trucks (TT)

TT is a private limited company in country J. TT has contracts to deliver products to secondary, tertiary and quaternary sector businesses.

QZ is one of the largest manufacturers in country J and plans to outsource its supply chain management. A contract has been agreed between TT and QZ based on the following cost and revenue data (see Table 1.1). TT's Sales Manager has forecast that TT will make 5000 deliveries with the new contract.

Table 1.1 Cost and revenue forecast for the QZ contract

TT employs 120 drivers. The majority of these drivers are white men aged between 40 and 60 . A national newspaper has recently criticised the truck industry in country J for not having diversity and equality in the workplace.

Klide, the Marketing Manager, has been set an objective to increase TT's revenue. He has decided to target small online retailers. TT will pick up individual products from the small online retailers and deliver them to households. This would require a new fleet of smaller trucks but has the potential to increase TT's revenue. Klide plans to use digital promotion to target these small online retailers.

(a)

Refer to Table 1.1 and other information. Calculate TT's forecast total profit from the QZ contract.

[ 3 ]

(b)

Explain one reason why TT needs accurate cost information.

[ 3 ]

(a)

Explain the term working capital.

[ 3 ]

(b)

Refer to Table 1.1. Calculate the profit variance for SF in 2024. State whether the variance is favourable or adverse.

[ 3 ]

(c)

Explain one drawback to SF of using budgets.

[ 3 ]

[Maximum number: 18]

Office Furniture Designs (OFD)

Markus is an entrepreneur and is planning to set up a private limited company called OFD in four weeks' time. OFD will be an online retailer selling office furniture directly to business customers. Products will be sent directly to customers from OFD's warehouse. OFD's product range will include office chairs, desks and filing cabinets.

Markus will have limited start-up funds. OFD will operate in a competitive market and Markus is keen to offer high-quality customer service. He also will have to think carefully about opportunity cost.

As part of his business planning, Markus has prepared a cash flow forecast (see Table 1.1).

$Table 1.1 OFD's cash flow forecast June - August 2023 (\$ 000)$

Table 1.1 OFD's cash flow forecast June - August 2023 (\$ 000)

Markus plans to offer all customers one month trade credit. However, as OFD is a new business, suppliers may insist on payment on delivery. Markus is currently researching sources of finance to improve OFD's cash flow.

OFD will need five employees who will work in the warehouse and three customer service assistants. Markus plans to offer two weeks of induction training to all employees.

(a)

Refer to Table 1.1. Calculate the forecast closing balance for August 2023.

[ 3 ]

(b)

Explain one factor that will influence Markus' choice of a source of finance.

[ 3 ]

(c)

Evaluate whether Markus needs accurate cost information before setting up OFD.

[ 12 ]

(a)

Define the term liquidation.

[ 2 ]

(b)

Explain one external source of finance for a business.

[ 3 ]

(a)

Define the term full costing.

[ 2 ]

(b)

Explain one limitation of contribution costing.

[ 3 ]

[Maximum number: 6]

Fresh Farm (FF)

FF is a partnership in country Q that grows a range of fruits and vegetables, such as apples, carrots and potatoes. FF also provides an advisory service to other farmers. The partnership was established in 2018 by three friends, Amrit, Harry and Sally, who provided the working capital. Their aim was to produce healthy and tasty food for themselves and others.

FF grows crops using natural methods and practices. The produce is free from chemicals and pesticides. It only uses renewable energy sources, such as solar panels and wind turbines. It harvests the crops by hand or using simple machines that minimise damage or waste, but this is labour intensive.

FF sells its products directly to consumers through its own farm shop and online delivery service. It also sells to local restaurants. Table 2.1 shows information on FF's revenue and costs in 2024.

Table 2.1 Extract from FF's financial data for 2024

FF has gained a loyal customer base who appreciate the quality, flavour and nutrition of its products. However, FF also faces some challenges and risks in the competitive and uncertain food market. FF has limited capacity in producing crops. Weather conditions affect its yield and quality. It also must deal with pests, diseases and natural disasters that could damage or destroy its crops.

Another challenge that FF faces is the high level of demand for its products in the market. The partnership must meet the expectations and requirements of its customers who want fresh, varied and consistent products throughout the year.

(a)

Explain the term working capital.

[ 3 ]

(b)

Refer to Table 2.1. Calculate FF's profit in 2024.

[ 3 ]

[Maximum number: 1]

Personalised Blankets (PB)

Kaia left university with a degree in textile design. Using her entrepreneurial qualities, Kaia set up PB as a sole trader. Her current objective is to break even.

Kaia uses job production to make blankets which are personalised with a picture. Each customer logs into the PB website and chooses the size of blanket. The customer then uploads a picture that they want printed onto the blanket.

Many of Kaia's customers buy the blankets as gifts for special occasions.
Kaia has employed a social media influencer to promote her blankets. The influencer will be paid a salary of $ 250 a week and a 5% commission on revenue that comes directly from the influencer. Fig 2.1 shows the revenue that came directly from the social media influencer in February.

Fig. 2.1 Revenue directly from the social media influencer in February

Kaia would like to relocate PB to larger premises. She is applying for external sources of finance, and she has written a five-year business plan to support her applications.

Identify one external source of finance.

[Maximum number: 6]

Law Advice Forum (LAF)

Drake has a law degree and works for a partnership of lawyers during the day. Drake owns a website that gives free legal advice. He works on the website in the evenings and at the weekend.

He started the website as a hobby, but the website has grown to over 20000 users and he now sells advertising on his videos and on the website.

Drake uses outsourcing for some areas of his website. He has recently been sent a report showing variances in the budget from the previous month (see Table 2.1).

Table 2.1 Budget report for Drake's website in the previous month

Drake has now left his job and is focusing full time on the website. He rebranded the website as Law Advice Forum (LAF). Drake's business plan for LAF included:
- Operating as a sole trader.
- Continuing to develop and expand the website to provide legal advice and paid legal services.
- Renting an office in city G where all employees would work.
- Hiring five fully qualified lawyers.
- Hiring three administrators.
- Leasing IT equipment.

However, Drake is concerned about the limitations LAF will face as a labour intensive operation.

(a)

Refer to Table 2.1. Calculate the profit variance for Drake's website in the previous month. State whether the variance is favourable or adverse.

[ 3 ]

(b)

Explain one way Drake could use the budget data in Table 2.1.

[ 3 ]

(a)

Analyse two uses of cost information for a business.

[ 8 ]

(b)

'A large bank loan is the most appropriate source of finance for the expansion of a furniture retailer.'

Evaluate this view.

[ 12 ]

Covered syllabus points

Question 1

Question 1(a)

Question 1(b)

Question 1

Question 1(b)(i)

Question 1(b)(ii)

Question 1

Question 1(a)(ii)

Question 1(b)(i)

Question 1(b)(ii)

Question 1

Question 1(b)(i)

Question 1(b)(ii)

Question 1(d)

Question 2

Question 2(a)

Question 2(b)

Question 2

Question 2(a)

Question 2(b)

Question 2

Question 2(a)(ii)

Question 2(b)(i)

Question 2(a)(i)

Question 2

Question 2(b)(i)

Question 2(b)(ii)

Question 6

Question 6(a)

Question 6(b)