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IGCSE/O Level Practice Paper

Business Studies Paper 1 (Option 1) 1 hour 30 minutes

Read these instructions first

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen in the spaces provided on the Question Paper. Do not use staples,
paperclips, highlighters, glue or correction fluid.
Answer all questions.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The businesses described in this question paper are entirely fictitious.

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 Business studies paper 1 (option 1)

1 (a) What is meant by a ‘public sector enterprise’?

[2]

(b) Give an example of a business that you would expect to find in the public sector.

[2]

(c) Identify two features of a business partnership.

[4]

(d) Identify and explain two possible advantages to the partners in a partnership if their business is
converted into a private limited company.

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 Business studies paper 1 (option 1)

[6]

(e) Recommend two methods a public limited company (plc) could use to communicate important
information to its shareholders. Justify your answer.

[6]

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 Business studies paper 1 (option 1)

2 
Li Tang has recently been on a management training course. She learnt that work helps to satisfy
human needs. Li went back to her father’s business and told him about the course. Her father, Jun,
disagreed. “Nonsense,” he said, “money satisfies human needs. People only work to earn money.”
(a) What is meant by ‘work helps to satisfy human needs’?

[2]

(b) Jun Tang has recently reduced the number of employees in his business by 40 per cent.
Despite this, sales and output have not fallen. How can the output of Mr Tang’s company
stay the same if the number of employees has fallen by 40 per cent?

[2]

(c) In most countries workers have an employment contract. Explain why such contracts might
benefit both employer and employee.

[4]

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 Business studies paper 1 (option 1)

(d) Identify and explain three possible effects that reducing the number of employees could
have on Mr Tang’s business.

[6]

(e) Do you think that Li’s father is correct in saying people only work for money? Justify your answer.

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 Business studies paper 1 (option 1)

[6]

3 Fusion Fabrics is a sole trader business that manufactures a range of clothing. It sells directly to
retail shops. Shahana, the owner, is looking at the most recent income statement of the business.
A summary is given in table 1.

Table 1: Fusion Fabrics

Income statement for year ending 31 December
$ (000)
Revenue 120
Cost of sales 70
Gross profit 50
Overheads 32
Profit ?

(a) Calculate the profit margin for Fusion Fabrics.

[2]

(b) Identify two ways Fusion Fabrics could increase its gross profit.

[2]

(c) Identify and explain one ratio other than the profit margin that could be used to judge the
financial success of her business.

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 Business studies paper 1 (option 1)

[4]

(d) Identify and explain three reasons why profit will be important to an entrepreneur such as
Shahana.

[6]

(e) Shahana is planning to change the business into a limited company. Would you advise her
to do this? Justify your answer.

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 Business studies paper 1 (option 1)

[6]

4 Drillex is a global oil and gas business. It has recently discovered large, profitable oil reserves in
country D and plans to start drilling in the next few months. However, some pressure groups
in country D think the company is only concerned with the financial benefits of its plans and is
ignoring their external costs.

(a) Explain what is meant by a ‘financial benefit’?

[2]

(b) Identify two examples of external costs that drilling for oil might create.

[2]

(c) Identify and explain two ways in which pressure groups could influence the decisions of
Drillex.

[4]

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 Business studies paper 1 (option 1)

(d) Identify and explain three factors that Drillex should consider before deciding whether to
invest in drilling operations in country D.

[6]

(e) Do you think governments should encourage multinational companies to locate in their
countries? Justify your answer.

[6]

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