Category: Business Studies

Stafford Pants is a company limited by guarantee manufacturing ‘underwear with style’. For every pair of boxer shorts it sells, Stafford Pants pays Alex to plant ten deciduous trees to further beautify Cannock Chase.

The most likely motivation for Stafford Pants for being in business is to…?

Select ONE answer:

1. make a contribution to society
2. pay employees the minimum wage
3. maximise and retain its profits
4. keep costs to a minimum

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – This is a business that has a clear mission to improve social and/or environmental well- being alongside their profit-making activities.  Stafford Pants pays for planting trees from every pair sold, which improves the local area.  Therefore, it clearly aims to make a difference by ensuring every pair of shorts sold makes a positive contribution to society.
2. Not correct – Stafford Pants have to pay its employees a minimum wage regardless of their motivation because it is the law.
3. Not correct – if it wanted to maximise and retain its profits, Stafford Pants would not pay for planting trees, it would keep all its money in the business.
4. Not correct – planting trees will incur extra costs.

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In 2000 Ruritania joined the European Union (EU). Many Ruritanian workers then migrated to other European countries to seek work.

The most likely impact of this migration on businesses in Ruritania is?

Select ONE answer:

1. average wage rates are reduced
2. economic growth is sustained
3. more people are willing to work
4. skills gaps cannot be filled

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct – average wage rates are likely to rise when there is a shortage of skilled labour in Ruritania, who will then command a premium price.
2. Not correct – it will be difficult to sustain economic growth when the workforce is reduced, and many Ruritanian business may not be able to maintain current output.
3. Not correct – the Ruritanian population is being reduced which means fewer people are available and willing to work.
4. Correct – migration is the movement of people from one country to another. Skilled Ruritanian workers found employment in other EU countries.  Therefore from 2000 onwards businesses in Ruritania could not find enough skilled workers to fill vacancies.

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Woolies is an international supermarket chain offering high-quality products at prices 40% lower than rival supermarkets.

The most likely reason for Woolies to use this strategy is to …?

Select ONE answer:

1. sample the market
2. gain a competitive advantage
3. test the market
4. reduce production costs

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct – Woolies is selling all its products to all of the market. 
2. Correct – competitive advantage is a unique aspect of the business that competitors cannot easily imitate which can be based on innovation, reputation, quality, cost and price. Woolies differentiates itself from its retail rivals by charging lower prices, therefore gaining a competitive advantage, because lower prices are likely to attract more customers thereby increasing revenues and or profit.
3. Not correct – the products have already been tested in the market before being offered for sale in Woolies.
4. Not correct – the Woolies’s strategy is to do with sales revenue and not costs which are dependent on the price of factor inputs such as wages, electricity and rent. 

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Stafford Roofing has cash flow problems. It needs to pay its employees their wages but is waiting for £24 300 from customers.

Which one of the following options is the most suitable source of finance to overcome this problem? 

Select ONE answer:

1. Leasing
2. Overdraft
3. Debenture
4. Bank loan

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct – leasing is a long-term agreement to use expensive capital equipment and is not suitable for short term cash flow problems. 
2. Correct – an overdraft is a short term, prior arrangement for a bank customer to be able to withdraw an agreed amount of money that is not in their current account. The overdraft arrangement means the wages can be paid before the money owed goes into the bank account. When customers pay their bills, the overdraft can be paid off and interest is only paid on the balance that is outstanding.
3. Not correct – debentures are large long-term loans raised by public limited companies for major capital projects, which is not relevant to Stafford Roofing for paying its employees.
4. Not correct – a bank loan would mean making a monthly repayment with interest over a longer period than Stafford Roofing need the money for. 

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Stafford Holdings plc is one of the world’s biggest public limited companies.

Which one of the following is an advantage of being a public limited company for Stafford Holdings?

Select ONE answer:

1. need close supervisionIt publishes its annual accounts
2. It can control who buys its shares
3. Its shareholders have unlimited liability
4. It can raise funds through the stock exchange

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct – Theory Y managers assume that employees like to lead rather Not correct – has to publish its full accounts meaning its competitors can gain information that will help them to plan competitive strategies.
2. Not correct – since the shares can be bought and then sold on by any member of the general public through a stock exchange.  Stafford Holdings has no control over who owns it shares which could be bought in large quantities by rivals planning a takeover. 
3. Not correct – shareholders can only be held liable up to the value of the shares they have bought and paid for, their liability is limited. 
4. Correct – a public limited company as a company that sells it shares to members of the general public/ & the shares are traded on the stock exchange.  Stafford Holdings has greater access to potential investors in order to raise funds.  This means it can raise higher amounts of capital than other business structures.

This work is licensed under a Creative Commons Attribution 4.0 International License.