Business Studies Multiple Choice Question – 3 August 2017

Most of the customers of a furniture shop buy items through borrowing the money. The furniture shop has a bank overdraft and a bank loan. Interest rates come down. What is the MOST LIKELY to be the effect on this firm?
Select ONE answer:

1. Its sales will rise and it will pay more interest on its borrowings
2. Its sales will rise and it will pay less interest on its borrowings
3. Its sales will fall and it will pay more interest on its borrowings
4. Its sales will fall and it will pay less interest on its borrowings
5. It sales will fall and it will pay the same interest on its borrowings

Which institution sets interest rates in the UK
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This is multiple choice question is suitable for Business Studies KS4 classes.

The answer is 2 – It will pay less interest on the bank overdraft which are often variable rate, and although it is not specified in the preamble it is a possibility that the loan is also on a variable rate and the interest costs will decrease each month. Sales will rise as buying furniture is often seen as a luxury item to purchase by consumers which is often done via borrowing money.

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