Tag: A-Level

Lucy, owner of the jewellery business Lucy’s Jewels, always buys her materials from the same local Staffordshire suppliers.

Which one of the following would be the most suitable source of finance for her weekly purchases of these materials?

Select ONE answer:

1. Trade credit
2. Debentures
3. Share issue
4. Commercial 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 1

1. Correct – Definition of Trade credit e.g. given by suppliers allowing a business to purchase stock and material with payment at a later date. Trade credit is the most suitable because it allows Maris Sal to obtain small amounts of raw materials to manufacture products for sale. Because payments can be made to suppliers once the stock is sold
2. Not correct – because debentures offer longer term finance usually to develop larger capital projects, which is not what Maris Sal requires to purchase materials to make jewellery.
3. Not correct – Maris Sal would not issue share capital to purchase materials to produce their jewellery because share ca[ital. is used to raise large sums of money, not to purchase stock.
4. Not correct – because if Maris Sal took out a medium term method of finance like a commercial bank loan they would be required to make immediate repayments and pay interest and may have to refinance to re-stock when everything was sold.

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Alex Chocolate Goodies aims to support its suppliers and their communities by paying above market prices for cocoa beans.

Alex Chocolate Goodies’s aim is most likely to be influenced by which one of the following?

Select ONE answer:

1. Government legislation
2. Ageing population
3. Profit maximisation
4. Ethical consideration

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 – because even if the government intervene Alex Chocolate Goodies will still pay above the market price.
2. Not correct – because this potentially relates to their target market but not to the price they pay for the beans.
3. Not correct – paying a higher price will reduce the profit margin which is not a profit maximising action.
4. Correct – Definition of ethical consideration e.g. set of moral values that a business follows for the greater good. This means that it creates a better image for the business as consumer perceive the business is behaving responsibly to its suppliers. Therefore, giving Alex a competitive advantage.

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After years of working for other people, Lucy left her full-time job to set up her own design business, Lucy Art Design.

Which one of the following is the most likely motive for Lucy’s decision to set up her own business?

Select ONE answer:

1. To work fixed hours
2. To gain more job security
3. To work independently
4. To ensure regular income

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 3

1. Not correct – because self employed people will work the hours necessary to make their business successful.
2. Not correct – because setting up a business is risky and does not offer any guarantee of job security.
3. Correct – Definition of independence e.g. free from outside control/not depending on authority of others. To work on her own/to make her own decisions rather than take instructions from managers. Develop/shape the business/drive the business in the direction she wants to go.
4. Not correct – because regular income cannot be guaranteed as it will be dependent on gaining revenues.

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