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Paper 2
Finance
Both
Finance questions reward clear working and interpretation.
Key Facts
- Revenue minus costs equals profit.
- Break-even point is where total costs equal total revenue.
- Liquidity issues can stop a profitable business from trading.
Topics Covered
Profit and Loss
What you need to know
- •Gross profit = revenue minus cost of sales.
- •Net profit accounts for all expenses.
Exam Tips
- Show working clearly for calculation questions.
Cash Flow
What you need to know
- •Cash flow forecasts predict money in and out.
- •Negative cash flow can lead to insolvency.
Exam Tips
- Explain why cash flow is different from profit.
Financial Ratios
What you need to know
- •Profit margin shows efficiency.
- •Liquidity ratios show ability to pay short-term debts.
Exam Tips
- Interpret what the ratio means, not just calculate it.
Key Terms
break-even
The point where costs equal revenue.
cash flow
Money flowing in and out of the business.
profit margin
Profit as a percentage of revenue.
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Common Exam Questions
Calculate the profit margin if profit is 12,000 and revenue is 80,000.
2 markseasyPaper 2
Model Answer
12,000 / 80,000 x 100 = 15 percent.
What examiners want to see
- ✓Correct formula
- ✓Percentage
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