Bridging work for Sept 2020

Bridging Work: Business Studies

Week 1
Sources of Finance

A source of finance means where a business can get money from.

 Sources of finance are the options available to a business when seeking to raise funds to support
future business actions

For a start-up business this might be raising sufficient capital to establish the business

For an established business this might be to fund growth or implement a new strategy e.g. relocation

 Sources of finance can be:

Internal i.e. from within the business e.g. retained profit

External i.e. from outside of the business e.g. loans

Task 1 – Retained Profit

 Profit kept within a business from profit for the year to help finance future activities

 Retained profit can be used as a short term source e.g. to fund day to day activities or accumulated over
time and used as a long term source

Read this article about a business who has used retained profit to finance growth.
https://www.bbc.co.uk/news/uk-scotland-tayside-central-31815131

Now complete this table

Advantages of retained profit Disadvantages of retained profit

Task 2

RETAINED PROFIT – is usually an important source of finance for Business. This is even more so at the moment,
where for some businesses this is all they have to survive at a time where they can’t make any money.

Read this article

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 https://www.capitalspace.co.uk/Information/Latest-News/21374-/Coronavirus-business-survival--the-steps-
you-need-to-take

TASK 2: Using the information in the article, and examples of your own… explain what steps businesses can take to
survive during lockdown. Try to evaluate how effective your suggestions (consider pro’s and con’s) 12 Marks

You should write approximately one side of A4.

Task 3 – Bank Loans

 A set amount of money provided for a specific purpose, to be repaid with interest, over a set period of time

 May be secured against an asset and if there is a default on repayments the asset can be taken

 Financial institutions can vary interest rates depending upon the amount of risk placed on the loan

 An external source of finance generally considered to be more suitable for longer-term projects

 However this will depend upon the size of the loan and the repayment period

Use the information in this page to explain the pro’s and con’s of using a bank loan (6 MARKS)
https://www.tutor2u.net/business/blog/what-is-a-bank-loan

Watch this short video to help you understand how bank loans are used by businesses

https://youtu.be/fVU5Ofn1TCg

Task 4 – Bank Loans during Coronavirus

The government has made available business loans for small businesses to help them during the Coronavirus
outbreak.
https://www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme
Look at the link above and answer the following questions:
Who is eligible and who is exempt from applying? (3 marks)
One of the things businesses are asked to provide is what the loan is for and how they will repay it. Pick any small
business. Suggest what they might need a loan for, and what strategies they would put in place to make sure they
could repay it (6 marks)
Use this link to summarise what a bounce back loan is https://www.business.natwest.com/business/support-
centre/service-status/coronavirus/bounce-back-loan.html (4 marks)
Task 5 – Crowd Funding
Crowd funding is a relatively new but increasingly important source of finance for small businesses.
Watch these short video clips. Use these any other research of your own, to answer the following question.
What is crowd funding, how is it used by businesses and how important has it become as a way of raising
money? (8 marks)
https://www.bbc.co.uk/news/av/uk-28138286/how-does-crowdfunding-work
https://www.bbc.co.uk/news/av/magazine-26166343/us-athletes-use-crowdfunding-to-support-olympic-dream
https://www.bbc.co.uk/news/av/business-24802558/superwoman-nicola-horlick-on-crowdfunding-venture

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Week 2
Calculations and Analysis

A big part of the finance exam is calculations of business costs, revenue and profits, and then analysing the figures.
This week’s bridging work focuses on that skill.

To complete this task, you will probably have to do some reading and note taking on the formulas and methods
first. The links for that provided below.

Calculating and understanding profit - https://www.tutor2u.net/business/reference/calculating-and-

interpreting-profit-revision-presentation

Understanding Business Costs - https://www.tutor2u.net/business/reference/business-costs-1

Calculations help - https://www.tutor2u.net/business/blog/buss1-profit-and-breakeven-calculations

When you are doing calculations, it is very important that each answer includes:

 clear workings
 a formula where relevant
 a clear answer in the correct units (e.g. £’s / units)

SECTION 1: Calculating Profit

1. Missing words

Profit is the value of sales minus the total __________ incurred in generating those sales. Revenue is the total
value of sales in a given time period and can be calculated by the formula: Price x _________________. Total
costs comprise the fixed overheads plus the total variable costs. These must be deducted from
__________________ to give ____________. HINTS: revenue, profit, costs, quantity sold

2. Calculations 1.

2.1 If a firm sells 400 burgers at £3.20 per unit, and 50 burger meals at £5 each, what is its total revenue?

2.2 If each burger costs £1.20 to make and each meal costs £1.50 to make, what are the total variable costs?

2.3 If fixed costs are £400, what profit is the business making?

3. Explain exactly how the following changes might affect profit

3.1 A firm in a highly competitive industry increases its prices by 10%

3.2 The demand for a hat firm’s tennis caps falls by 25% due to changing fashions.

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 3.3 New production methods increase a firm’s productivity.

4. Profit. True or false?

4.1 Increasing the price of a product will increase the profit made by that business

4.2 Profit is calculated by the formula: Total revenue – total costs

4.3 If total costs exceed total revenue, the firm will make a loss

4.4 Increasing advertising will result in an increase in profit

5. Calculations 2

5.1 Jeff’s Jukeboxes Ltd has sales of 500 units a month, a price of £1,000, fixed costs of £120,000 and variable costs
of £700 per unit. Calculate its profit.

5.2 At full capacity of 24,000, a firm’s costs are as follows:

Salaries of management £48,000 Materials ` £12,000

Rent and rates £24,000 Piece-rate labour £36,000

a) What are the firm’s total costs at 20,000 units?

b) What profit will be made at 20,000 units if the selling price is £6?

SECTION 2: Improving profitability

1. Missing words

Profit is the difference between total _____________________ and total costs. Improving profit can only be
achieved by cutting ________________ or increasing _________________________. The problem is that
neither is easy. In recent years companies such as Tesco have put huge pressure on suppliers to cut prices and to
provide more promotional discounts. Inevitably, there are strict limits on what’s possible; suppliers need to be able
to make a profit too.

2. Calculations.

Mars sells Maltesers to sweetshops for 30p a pack. Their variable costs per pack are 10p and the fixed costs of
running the Malteser division amount to £60,000 a day. Daily sales are 500,000 packs.

a) Calculate current daily profit.

b) Calculate the effect on profit of a 10% price rise, assuming that sales would fall by 5%.

c) Calculate the % increase in profit.

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 d) Recalculate the effect on profit if Cadbury’s responded to the 10% price rise by a huge advertising campaign on
their products, causing the sales of Maltesers to fall by 15% instead of 5%.

3. Analysis. Look at this break-even chart then answer the questions

£s Break-even chart for FJ Ltd

60000

50000

40000 R e v e nue
F ixe d c o s t s

30000 V a ria ble c o s t s

T o tal co sts

20000

10000

0
0 1000 2000 3000 4000 5000 6000 Units

3a) Explain what would happen to the chart if FJ Ltd increased its prices by 10%.

3b) Explain what would happen to the chart if FJ Ltd could find a way to cut its variable costs per unit.

3c) Identify two ways in which FJ Ltd could lower its variable costs per unit.

4. Match the methods on the left to the potential drawbacks on the right.

ways to improve profitability potential drawbacks

1. Use less expensive raw materials
2. Cut back on marketing staff
3. Increase prices
4. Bulk buying to cut unit costs
5. Cut back on R&D spending
A. Risks reducing the effectiveness of your advertising
B. Hits cash flow for the sake of profit
C. Risks destroying customer image for quality
D. Risk of fewer innovative products in the longer
term
E. Lower sales may risk losing distribution in major
outlets

SECTION 3: Profit margins

1. Missing words

When you pay 70p at a sweetshop for a Mars bar, what do you think the shopkeeper gets out of it? Not 70p,
clearly, as she has to pay Mars about 40p for the bar, then must pay for all the fixed overheads of the business
out of the remaining 30p. The 30p is the contribution made by the sale towards covering those fixed costs. Once
the fixed costs are paid for, all further contribution will be profit. The net profit made during the year is the

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 revenue minus all the ______________. Net profit as a % of sales revenue gives you the net profit
__________________. As you can see in the bar chart below, the net profit made by big businesses can vary
hugely. Among small firms the differences can be even greater.

2. Analysis. Look at this bar chart then answer the questions that follow.

Net profit margins in 2014 (from company accounts)

%
30
25.7
25 21.6
20
15
8.8
10
5 2.7

0
Apple Ryanair Sainsbury's Ted Baker

2a) Outline two possible reasons why Sainsbury plc has such a low net profit margin

2b) Give one possible reason why Ryanair has such a high profit margin

3. Calculations

3.1 Terry’s Café opens 6 days a week and for 9 hours a day. Its average weekly revenue is £3,800, variable costs
amount to £1,050 and fixed costs are £2,560. a) Calculate the café’s net profit margin.

b) Identify two ways to improve it.

3.2 After its first full year’s trading, Gupta Clothing had a 4% profit margin. Now, after a year of focusing upon
boosting sales, the business has made £40,000 net profit from its sales revenue of £320,000.

a) Calculate the net margin of the firm

b) Explain how boosting sales could increase not just the profit, but the profit margin.

4. Match the profit margin improvements on the left to the methods suggested on the right.

PROFIT MARGIN METHODS

IMPROVEMENTS
6. Increase sales value per
customer
7. Cut wastage rates
8. Cut fixed overhead costs
9. Cut the salary bill
A. Don’t replace staff who are leaving; ask remaining staff to work
harder
B. Move the Head Office to smaller, cheaper premises
C. Order smaller quantities, to avoid goods going past sell-by dates
D. Move profitable, impulse-purchase goods to just by the check-out
counter

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 SECTION 4: Calculating Percentages

1. Missing words

Per cent just means ‘per hundred’. Therefore 25% means 25 out of _________. It is useful to change numbers to
percentages as it enables ______________________ to be made between figures. For example a large company
is likely to make a much higher profit than a small company but by calculating profit as a
____________________ of sales, one company’s performance can be compared with another. It is also
important to be able to calculate % change, which is found by the formula: CHANGE x 100

ORIGINAL

HINT Words from: comparisons, 100, percentage

2. Percentages

No of Labour turnover data for XYZ Ltd

staff Average number
Average number employed, This
employed, Last year, 220
year, 200
Staff leaving

Staff leaving , This Average

Staff leaving , Last year, 55 number
year, 42
employed

2.1 Calculate the percentage change in the average number of staff employed this year compared with last.

2.2 Calculate the labour turnover last year (staff leaving as a % of average staff employed)

2.3 Calculate the labour turnover this year.

3. Calculations

The market for foot spas was £3,000,000 in 2013, £3,500,000 in 2014 and £4,000,000 in 2015. FabFeet Ltd sold
40,000 foot spas in 2013, 42,000 in 2014 and 45,000 in 2015 – the price of their footspas stayed at £20 throughout
the 3 year period.

3.1 Calculate FabFeet’s market share for:

a) 2013

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b) 2014

c) 2015

3.2 What was the % change in the foot spa market from:

a) 2013 to 2014

b) 2014 to 2015

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Week 3
The external environment

The final two weeks bridging work are focused on Unit 1 – which is about the environment in which
businesses operate.
In this topic you will learn about
 Political, e.g. government support, membership of trading communities such as the European Union
 Economic, fiscal, monetary and other government policies e.g. supply side policy, economic growth,
exchange rates
 Social attitudes to saving, spending and debt; social responsibility requirements; change e.g. to demographic
trends, consumers’ tastes/preferences
 Technological change, e.g. Automation; improved communications
 Environmental factors and ethical trends, e.g. carbon emissions, waste, recycling, pollution
 Legal environment, e.g. Partnership Act 1890, Companies Act 2006, Charities Act 2011, Competition Act
1998, UK Corporate Governance Code, financial services regulation, industry regulators, government
departments
Your task for this work will be to do research and then some analysis on different external
issues affecting businesses in the UK.

TASK 1 – POLITICAL ISSUES

Remember when Brexit was all we talked about on the news (Before Coronavirus!!) – Well, it’s still
happening, and it will still have quite a big impact on business in the UK.
TASK 1 : Read this article. https://www.bbc.co.uk/news/business-36537906
It is all about how BREXIT will affect individuals, but of course this will have a knock on effect on people too
– they will change what they spend money on as a result.
For each issue mentioned, can you
a) Briefly explain the impact
b) Give a couple of examples of businesses that you think will be affected, how and why

E.g. buying goods or services from other countries will become more expensive
Examples of businesses that would be affected are:
Supermarkets who buy lots of products from overseas, so will have to put their prices up to cover the higher
costs

TASK 2 – SOCIAL ISSUES

The social environment is influenced by the make up of humans within a specific area or business
This influences the behaviour of businesses and customers
Social change can occur as a result of demographic change
 Demographics is the statistical study of human populations e.g. the make up of society

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  Demographics can include:
 Gender
 Age
 Ethnic background
 Education

https://www.livepopulation.com/country/united-kingdom.html
TASK 2 Summarise the UK population and trends in just 10 bullet points

TASK 3 - As we head towards a new era of urbanisation - half of the world's population will live in cities by 2050.
Watch this clip https://www.bbc.co.uk/news/av/technology-24173817/london-tomorrow-s-city and then
summarise how London is becoming a smart city to meet the demands of the future.
TASK 4 – Read this article https://www.ft.com/content/bf189450-ef22-11e4-87dc-00144feab7de
Explain how social changes are affecting McDonalds – and suggest three ways in which they could respond to these
changes. Give actual examples.

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 Week 4
The external environment - Technological Change

 Technology is impacting heavily with social media and developments in technological products transforming lives
 This has created big data for businesses, allowing them to analyse the buying habits of consumers
 Businesses have adapted their marketing to reflect changes in consumer lifestyle and buying behaviour. This
includes:
 Viral marketing
Use of social media to encourage the spread of promotional activities and increase brand awareness
Use of blogs and online forums
 Social media
The use of virtual communities to communicate with actual and potential customers
 Emotional branding
Building a brand that will directly tap in to the consumers’ feelings, personal psychological needs and
aspirations e.g. presents a feeling of belonging or success
A brand sells a status or a life style choice

TASK 1 – TECHNOLOGICAL ISSUES

This final task is an extended research task – which is a key skill for BTEC Level 3 Business.

Your task is to write an evaluation of how Coronavirus has changed the way that businesses use technology, and
how you think they will continue to use technology as we move out of lockdown, and into a new way of
working.

This evaluation should be approximately 2 sides (hand written) or 1 side (typed) of A4.

You should include as many examples as you can from actual businesses in this work.

Some examples of links you can use are below – but also try to find your own.

https://www.bbc.co.uk/news/technology-52453296
https://www.bbc.co.uk/news/business-52376022
https://www.gov.uk/government/news/2-billion-package-to-create-new-era-for-cycling-and-walking
https://www.weforum.org/agenda/2020/04/coronavirus-covid19-pandemic-gadgets-innovation-technology/
https://www.weforum.org/agenda/2020/03/coronavirus-china-the-challenges-of-online-learning-for-universities

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