Key term
Edexcel GCSE Business 1BS0
Enterprise and Entrepreneurship
Spotting a Business Opportunity
Putting a Business Idea Into Practice
Making the Business Effective
Understanding External Influences on Business
Growing the Business
Making Marketing Decisions
Making Operational Decisions
Making Financial Decisions
Making Financial Decisions
- 2 subtopics
- 6 things to know
- Paper 2
What Making Financial Decisions covers
Making Financial Decisions is examined in Paper 2, Building a business (Theme 2). It covers profit, profit margins and ARR and understanding business performance.
Where it is assessed
Paper 2
Theme 2, Building a business, 1 hour 45 minutes and 50% of the GCSE.
Check the Pearson Edexcel specification ↗The 2 subtopics
Each one has its own page.
- Profit, profit margins and ARRGross and net profit, cost of sales, gross and net profit margins, the average rate of return with worked calculations, and what the figures tell a business.Open →
- Understanding business performanceUsing graphs and quantitative data, financial, marketing and market data, worked percentage changes and averages, and the limitations of financial information for decisions.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
What might explain a steady 40% gross margin alongside a net margin falling from 12% to 6%, and what can be done?
Key term
How should Project A's ARR of 9% and Project B's ARR of 14% be read against a 6% loan, and what are the limits of ARR?
Key term
Why do businesses use quantitative data when making decisions?
Key term
Why are graphs and charts useful to a business?
Key term
What should a manager check before drawing conclusions from a graph?
Take Making Financial Decisions further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Gross profit vs Net profit
Gross profit: revenue left after only the cost of sales is deducted. Net profit: revenue left after cost of sales, running expenses and interest are deducted.
Gross profit margin vs Net profit margin
Gross profit margin: the percentage of revenue left after only direct costs. Net profit margin: the percentage of revenue left after every cost including interest.
Cost of sales vs Operating expenses
Cost of sales: money spent directly on buying or making the goods that were sold. Operating expenses: overheads such as rent, salaries and advertising not tied to output.
Questions from this topic
Each one with the model answer underneath.
- 1
What is gross profit, and how is it calculated?
Model answer
Gross profit is the profit left once the direct cost of the goods sold is taken away. Gross profit = sales revenue − cost of sales.
- 2
What is cost of sales?
Model answer
Cost of sales is the direct cost of buying or making the goods a business has sold. For a shop, cost of sales is what it paid for the stock it sold.
- 3
A shop has sales revenue of £120,000 and cost of sales of £72,000. What is its gross profit?
Model answer
The shop's gross profit is £48,000. £120,000 − £72,000 = £48,000.
- 4
What is net profit, and how is it calculated?
Model answer
Net profit is the profit left after every cost, including operating expenses and interest, has been deducted. Net profit = gross profit − operating expenses − interest.
- 5
A shop has gross profit of £48,000, operating expenses of £30,000 and interest of £3,000. What is its net profit?
Model answer
The shop's net profit is £15,000. £48,000 − £30,000 − £3,000 = £15,000.
- 6
What does the gross profit margin measure, and how is it calculated?
Model answer
The gross profit margin shows the percentage of sales revenue left after cost of sales. Gross profit margin (%) = gross profit ÷ sales revenue × 100.
What is inside Levo
Six ways to work the same material.
Making Financial Decisions revision questions
- What does Making Financial Decisions cover in Edexcel GCSE Business?
- 2 subtopics: profit, profit margins and arr and understanding business performance. Each one has its own page with questions and model answers.
- How is Making Financial Decisions organised?
- By the Edexcel 1BS0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Making Financial Decisions, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
Or £46 a year, about £3.83 a month. Cancel anytime.