Paper 2 quick revision set

What is the formula for revenue?

Sales × Selling price

What is the formula for total costs?

Fixed costs + Variable costs

What is the formula for profit?

Revenue – Total costs

What is the formula for break-even output?

Fixed costs ÷ Contribution per unit

What is the formula for contribution per unit?

Selling price – Variable cost per unit

What is the benefit of knowing break-even?

Helps decide how many products need to be sold to make profit

One drawback of break-even analysis?

Assumes all goods are sold and conditions stay the same

What is the benefit of using profit as a performance measure?

Clearly shows if the business is financially successful

What is a drawback of relying only on profit to judge success?

Does not show cash flow or long-term stability

One advantage of job production?

High quality and tailored to customer needs

One disadvantage of job production?

High cost and slow production speed

One advantage of batch production?

More efficient and allows variation

One disadvantage of batch production?

Time lost changing between batches

One advantage of flow production?

Very efficient and low unit costs

One disadvantage of flow production?

High set-up costs and less flexibility

One benefit of using quality control?

Ensures defective products don’t reach customers

One drawback of quality control?

Does not prevent waste earlier in the process

One advantage of quality assurance?

Prevents faults during production, improves reliability

One disadvantage of quality assurance?

Requires training and time, increasing cost

How does good customer service benefit a business?

Increases loyalty and positive word of mouth

What is a drawback of poor customer service?

Leads to complaints, bad reviews and lost customers

One advantage of consumer law for customers?

Protects against faulty or unsafe products

One disadvantage of consumer law for businesses?

Increases responsibility and compliance costs

How can a good location benefit a business?

Attracts more customers and improves delivery efficiency

How can poor location choices harm a business?

Increases costs or limits access to key markets

What is a benefit of working with reliable suppliers?

Reduces delays and maintains product quality

What is a risk of unreliable suppliers?

May cause production stoppages or unhappy customers

One benefit of just in time stock control?

Reduces storage costs and waste

One drawback of just in time stock control?

Risk of running out of stock if deliveries are late

Why is cash flow forecasting important?

Helps avoid cash shortages and manage payments

One advantage of using trade credit?

Gives more time to pay, improving short-term cash flow

One disadvantage of trade credit?

Late payments can damage supplier relationships

One benefit of an overdraft?

Flexible and useful in emergencies

One drawback of an overdraft?

High interest rates and short repayment terms

One benefit of using retained profit?

No interest and no need to repay

One drawback of retained profit?

Not available to new or unprofitable businesses

One benefit of a loan?

Fixed repayments help planning

One drawback of a loan?

Interest must be paid and repayments must be made

One advantage of share capital?

Can raise large amounts of finance

One disadvantage of share capital?

Owners lose some control to shareholders

What is globalisation?

The process of businesses operating internationally and markets becoming interconnected

One benefit of globalisation for businesses?

Access to wider markets and cheaper resources

One drawback of globalisation for businesses?

Increased competition and potential ethical concerns

What is outsourcing?

Hiring an external company to handle certain business functions

One benefit of outsourcing?

Can lower costs and improve efficiency

One drawback of outsourcing?

Loss of control over quality or service

One advantage of ethical business behaviour?

Improves brand image and attracts ethical consumers

One disadvantage of ethical behaviour?

Can increase costs and reduce profitability

One advantage of reducing environmental impact?

Attracts eco-conscious customers and meets legal standards

One disadvantage of being environmentally responsible?

May increase production or material costs

How does high interest affect businesses?

Makes borrowing more expensive and may reduce investment

How does low interest affect businesses?

Encourages borrowing and consumer spending

How does inflation affect costs?

Makes materials and wages more expensive

How does unemployment affect labour supply?

Higher unemployment gives access to more workers

What does positive cash flow mean?

More money is coming into the business than going out

What does negative cash flow mean?

Business may not be able to meet short-term obligations

Why is working capital important?

Ensures a business can pay its short-term bills and keep running

One benefit of using social media in business?

Fast, low-cost communication with customers

One drawback of using social media?

Risk of negative reviews and public criticism

How can poor interdependence harm a business?

Miscommunication or poor decisions between departments reduce efficiency

How does marketing affect operations?

Promotions increase demand which operations must meet

How does finance support human resources?

Provides funding for recruitment, training, and salaries

How can operations affect marketing?

Delays or poor quality can ruin a marketing campaign

What is sustainability in business?

Operating without damaging the environment for future generations

How do pressure groups influence business?

Campaign to change unethical or harmful practices

What is the benefit of offshoring?

Access to cheaper labour and lower production costs

What is the risk of offshoring?

Loss of quality control or reputational damage

Why is interdependence important in decision making?

Decisions in one area affect all others – must be coordinated

What is the purpose of using financial data?

To analyse performance and make decisions

What is average rate of return?

A calculation to assess profitability of an investment

Why is average rate of return useful?

Helps compare different investment opportunities

How does good quality improve competitiveness?

Encourages repeat purchases and customer trust

What is the risk of poor quality control?

Increased returns, complaints, and brand damage

What are fixed costs?

Costs that do not change with output (e.g., rent)

What are variable costs?

Costs that change with output (e.g., raw materials)

What is total revenue?

All money received from sales

What is net cash flow?

Cash inflows minus cash outflows

Why might a business use a loan instead of retained profit?

It allows growth without using current reserves

Why is customer service part of the sales process?

It supports purchases and builds long-term relationships