GCSE Business: Finance Calculations II

This material trains the calculations that GCSE Business papers set on finance and, just as important, what the answers mean for the business. It follows the quantitative skills in the DfE GCSE subject content for business: revenue, costs and profit, average rate of return, cash-flow forecasts with net cash flow, and the interpretation of graphs and financial data. It also covers interest on loans and the margin of safety, which some boards list by name (for example Pearson Edexcel, topic 1.3.2).

The average rate of return is worked the way exam questions set it: sometimes the total profit on an investment is given, and sometimes you are given the net cash inflows and must first take off the cost of the machine or van. You then compare the ARR with the interest rate on the loan that would pay for it, and with a second project.

Loan questions ask for the interest in pounds and as a percentage of the amount borrowed, and show why lower monthly repayments can hide a more expensive loan. Margin of safety is read from a break-even chart described in words and compared between businesses of different sizes. Cash-flow questions run over two months, so the closing balance of one month has to become the opening balance of the next, and a negative balance has to be read as a cash shortage rather than a loss. Two questions show how the lines of a break-even chart move when fixed costs rise or the price is cut.

The quiz has twelve questions whose wrong options are the usual slips: dividing by the total repayment, forgetting the number of years, reusing the wrong opening balance. The flashcards hold the formulae and the chart rules. The written work has eight longer tasks with every figure given in the question: calculate, then advise or evaluate, which is how the higher-mark finance questions are built.

No formulae are provided in the GCSE Business exams, so the cards are there to be learned. The material is practice written by Zestly and is independent of any exam board.

• Calculate the average rate of return, including when the cost of the investment must first be subtracted from net inflows
• Calculate interest on a loan in pounds and as a percentage of the amount borrowed, and compare two loan offers
• Identify break-even output and margin of safety from a break-even chart and interpret the margin of safety
• Complete a two-month cash-flow forecast, carrying each closing balance forward
• Explain how a break-even chart changes when fixed costs or price change
• Use ARR, interest rates and forecasts to support an investment or finance decision, and state their limitations

Practice material written by Zestly, based on the DfE GCSE subject content for business (December 2015: finance and use of quantitative skills) and, for example, Pearson Edexcel GCSE Business topics 1.3.2, 1.3.3 and 2.4.1 and AQA GCSE Business 3.6.2–3.6.3.