GCSE Business Studies 2015-2016
UNIT 3
Production, Finance and the
External Environment
The Exam - Knowledge and Key Words
The Exam – A293: Production, Finance and the External Environment
What will the exam be like?
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This is a pre-release case study examination, the teacher will give candidates a copy of the
case study at the start of the unit
It will last 1 hour and 30 minutes
The paper is out of 90 marks
The marks count for 50% of the overall grade
There will be 3 main questions, each separated into a number of parts
Every question will be based on the case study
What will the exam test?
AO1 Apply and Knowledge
How well candidates can define business
terms and explain business ideas.
Example
Testing subject knowledge and understanding.
You might be asked to define the term
‘globalisation’ or explain the advantages of a
competitive market.
AO2 Application and Analysis
How well candidates can use their subject
knowledge to explain a business situation.
Example
Testing their ability to apply knowledge to a
business context and situation.
You might be asked to explain how a rise in
costs may affect the break-even output of a
business.
AO3 Evaluation and Recommendation
Using analysis to make a judgement and
provide a suitable justification.
Example
Testing their ability to analyse a situation,
identifying and explaining the advantages and
disadvantages. Then making a suitable
recommendation, in context, and giving
reasons why you think it’s the right thing to do.
You could be asked to recommend whether a
business should move its production facility to
another country. You might be asked to
recommend if immigration has been good for a
particular business.
THIS EXAMINATION IS GOING TO TEST CANDIDATES ON
THEIR ABILITY TO ANALYSE AND EVALUATE BASED ON THEIR
SUBJECT KNOWLEDGE.
Checklist of Subject Knowledge
Topic
Using and managing resources
Types of production methods
Management and control of production
Production costs
Economies and diseconomies of scale
Calculating, plotting and interpreting break even
Financial information and decision making
Sources of finance
Financial forecasting and analysis
Cash flow forecasting
Calculate, interpret and make use of revenue, cost and profit
data
External influences on business activity
The competitive environment
Competitive and monopoly markets
External influences and business ethics
Social costs and benefits
Sustainability and business
Ethical business behaviour
Government and the UK
Spending and taxation
Rate of interest
Consumer incomes effecting business
Changes to population affect business
Globalisation and UK business
European Union and effect on trade
International competition
Effect of exchange rates
Happy 
Themes of Questions
This list is designed to give an idea of the main question themes that come up on the examination
paper. It is not a comprehensive list, the comprehensive list will be given in class during April 2016.
All of the Business Studies lessons on Unit 3 are about the subject knowledge and the issues
discussed in the pre-release case study. We also do a lot of work preparing candidates for the types
of questions they will get on the examination paper. When students have attended all the lessons
they should feel confident that they can attempt to answer all of these questions.
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Which method of production should a business use to produce a particular good or service?
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How can a business increase its efficiency?
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What are economies of scale? Why do firms get them? What benefits do they bring?
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What are break-even charts? Why do businesses use them? What are their limitations?
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When will businesses use the different sources of finance?
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What are cash flow forecasts? Why are they useful to business? What are their limitations?
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What are profits? Why are they important to business? What determines how much profit
you make? How do you calculate profit?
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What are the advantages and disadvantages of competitive markets and monopolies? How
can the government control monopolies?
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How can businesses respond to the pressures on the environment? Why should they
respond to these pressures? How can the government influence business to protect the
environment more?
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Using examples what are ethical and unethical business practices?
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How are businesses affected by changes in government spending and taxation?
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How are businesses affected by the changes in employment and the incomes of consumers?
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What is economic growth and recession?
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How do changes in interest rates affect businesses?
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Is foreign competition a problem? What can UK businesses do to improve how well they
compete against foreign firms?
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Why are education and training so important for UK business?
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Is immigration good or bad for UK businesses?
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What is globalisation? Is globalisation helping UK businesses or is it causing them problems?
How can UK businesses compete better? What help can government give to businesses to
improve their competitiveness?
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How do changes in the exchange rate of the pound sterling affect UK business?
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Should the UK join the Eurozone?
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What are the benefits and problems for UK businesses of the country’s membership of the
European Union?
Unit 3 Keyword List – Language for learning
Added Value
The process of increasing in value raw materials
so that sales revenue is greater than the costs
of production.
Job Production
The method of production where individual
items are made.
Batch Production
The method of production where one type of
product is made and then production is
switched to another product.
Process Production
Usually an automated process suited to t h e
large scale manufacture of products.
Flow Production
Production of one product takes place
continuously using a production or assembly
line. Often called mass production.
Division of Labour
Organisation of production into specialist tasks
that are simple repetitive processes.
Specialisation
Occurs in production where workers specialise
in carrying out one or related tasks.
Mechanisation
Machines controlled by workers, are
introduced into t h e production process.
A measure of efficiency which measures the
number of products made.
Productivity
Lean Production
A production system which ensures waste is
kept to a minimum.
Quality Assurance
A system of ensuring quality standards are met
throughout the production process.
Just In Time (JIT)
Stocks of materials and components are not
stored but are used as they arrive at the
production facility.
Quality Control
A system of checking the quality of finished
goods.
The process where all workers are
responsible for quality throughout the entire
production process.
Total Quality Management (TQM)
Sales Revenue or Sales Income
Price Elasticity of Demand
Fixed Costs
The money a business receives from selling
what it produces or provides.
A measure of change in demand cause by a
change in price.
Costs that do not change as business changes
the amount they produce.
Variable Costs
Costs that change as the amount the
produces goes up or down.
Total Costs
Fixed and variable costs added together to
calculate the total cost of production.
Average Cost
Total costs divided by the number of goods
produced, so this calculates the cost to make
one.
Short Run
A period of time, approximately 12 months in
length.
Fixed Assets
Items owned by a business that tend to have a
high value, the value will not usually change
on a daily basis and will be an item the business
owns for a long time.
Long Run
A period of time usually longer than two years.
Capacity
The total number of products a production
facility has been set up and resourced to
produce.
Above Capacity
A business is said to be working above capacity
when it is producing more than it has been set
up to do.
Excess Capacity
This is when a business is producing less than
it is designed to.
Economies of Large Scale
Production
These occur when a business increases its scale
of production which then leads to falling
average cost of production.
Diseconomies of Scale
When the average cost of production rises when
the number of products being produced has also
increased.
Break-Even Level of Output
The level of output by a business when it is not
making any loss nor is it making any profit. It is
just breaking even.
Break-Even Forecast
A prediction about the break-even level of output
based on estimated sales and estimate costs.
Margin of Safety
The amount by which a business’ actual output
is greater than its break-even output.
Business Sponsor
A business that pays money to another
business.
Opportunity Cost
The cost of missing out on something else. This
may not always be financially related. This is
when the business has to compromise on
options.
Internal Finance
Finance obtained from within the business.
External Finance
Finance obtained from outside the business.
Interest
Asset
Security
Time Period
Income
Expenditure
Cash-flow
The cost of borrowing, the amount of money you
have to pay back on top of any borrowed money.
This is the financier’s charge for lending you the
money.
An item of value owned by a business.
Something of value which is offered to a lender
to form a guarantee against a loan. If you do not
repay your loan the lender can take the item of
security.
The length of time your finance is required for.
Money which the business receives from selling
its goods.
The money a business will pay out.
The flow of money into and out of a business.
Cash-flow Forecast
A statement showing the expected flow of
money into and out of a business over a period
of money.
Balance Carried Forward
The amount of cash left over at the end of a
trading month. It is carried forward and used as
the opening balance for the next trading month.
It is sometimes called the closing balance or the
balance brought forward.
Balance Brought Forward
The amount of cash available at the start of a
trading month, it was the amount left over at the
end of the previous month. It is sometimes
called the opening balance.
Positive Cash Flow
In a trading month there has been more money
flowing into the business than out. It is
sometimes called a cash-flow surplus.
Negative Cash Flow
In a trading month there has been more money
flow out of the business than in. It is sometimes
called a cash-flow deficit and may mean a
source of finance is needed to help with the
overall cash-flow of the business.
Perfect Competition
A market in which there are a large number of
sellers all competing against each other.
Monopoly
A market dominated by one seller.
Patents
The right to use an invention for a number of
years.
Copyright
One of the main types of intellectual property others include designs, patents and trademarks.
It is the right to prevent others copying or
reproducing someone's work.
The percentage of total sales in a market
accounted for by one business.
Market Share
Monopolist
A firm that accounts for at least 25% of the total
sales in a market.
Privatisation
When an organisation owned by the
government is sold off to the private sector.
Cartel
A group of businesses that work together to fix
prices.
Child Labour
The use of young children in order to achieve
low cost production.
Ethics
This is about what is morally correct and what is
morally wrong.
Social Responsibility
An ethical framework which suggests
businesses and customers have an obligation to
act for the benefit of all society, the economy
and the planet.
Fair Trade
Trade between companies in developed
countries and producers in developing countries
in which fair prices are paid to the producers.
Human Rights
This is the idea that all people should have basic
rights and freedoms such as liberty, freedom of
speech, equality in law, the rights to food,
education and to work.
Sweat Shops
These are factories where people are worked
very hard, often in very poor conditions and paid
a low wage.
Pirating
Illegally copying films and music.
Ethical Businesses
Businesses that behave in a morally correct
way.
Non-renewable Resources
Resources that can only be used once, such as
oil.
Carbon Emissions
Carbon dioxide that is put into the atmosphere.
Global Warming
The rise in average temperatures that scientists
believe is taking place.
Green
An adjective that describes consumers and
businesses that act and make decision hat
consider the effect on the environment and
planet.
Green businesses act to make
production sustainable.
Renewable Resources
Resources that can be used more than once,
such as wind power, or can be recreated such
as crops.
Sustainable Production
Production that involves the use of renewable
resources and recycled resources. It also
minimises waste and the use of energy.
Carbon Permits
Permits granted under the EU Emission Trading
Scheme, which allow businesses to produce a
certain amount of carbon in their production
process.
Recycling
When resources
something else.
are
reused
to
produce
Economic Growth
A period of rising consumer incomes, demand
and output. Consumers will usually spend
more in this period as they have more
disposable income.
Demand
The amount of goods and services that all
customers want to buy.
Recession
A period of falling consumer incomes, demand
and output. Customers will often limit
spending as they have less disposable
income. Unemployment may rise and the
government may put in place measures to
try and ease its affects.
Unemployment
Interest R ate
Bank of England
The number of people who are out of work.
The charge made to people and businesses
for borrowing money from lenders, often
referred to as the cost of borrowing.
The organisation that sets basic rate of interest
in the UK, this influences the interest rate banks
and other financial institutions charge. The BoE
will change interest rates to try and control
inflation.
Inflation
A sustained increase in the general price level
of goods and services in an economy over a
period of time.
Multiplier effect
The amount by which an increase or decrease
in spending on a specific product is multiplied in
its effect on total spending in an economy.
Taxation
Charges made to people and businesses by the
government. Taxes will be paid on income and
spending.
Take-home pay
The amount of income a person receives after
deductions from their gross pay for Income Tax
and National Insurance Contributions.
Disposable Income
The amount of income left after all essential
expenses have been paid for, people have the
choice with what to do with this money.
Business Rates
The charge made to businesses by the local
council.
Globalisation
The process by which business activities in
different countries are becoming more and more
connected to each other.
Outsourcing
When a business pays another business to
carry out an activity of work for them. Such as
production, accounting, marketing or cleaning.
Multi-national corporations
Companies that operate in different countries
around the world.
Global Branding
When a product becomes a brand name and is
sold and recognised worldwide.
Inward Investment
This is when a foreign business sets up factories
and office in the UK. Bringing with it job
opportunities and contributing to the UK
economy.
Protectionism
The name given to methods used to protect
business from the problems that international
trade might bring.
Exchange Rates
The amount of one currency that you can buy
for another currency.
Stable Exchange Rate
An exchange rate that does not change greatly
over a period of time.
Developed Countries
Counties that have strong economies where
most workers earn high wages and living
standards are high. They usually have large
tertiary (service) sector businesses.
Developing Economies
Poorer countries that are starting to grow,
usually expanding primary and secondary
businesses. Also possibly tertiary service
sectors.
Exports
The goods and services that a country sells to
another country.
Imports
The good and services a country buys from
another country.
Gross Domestic Product
The total amount of goods and services a
country produces. Can be used to measure the
size of an economy.
Innovation
Developing new products and services and new
ways of making products.
Productivity
The amount that one person can produce.
Increasing productivity makes workers more
efficient and can save costs.
Value Added
The difference between the cost of the raw
materials and the value of the item when it has
been produced.
Value Added Tax
An indirect tax on the amount by which the value
of a product has been increased at each stage
of its production.
Infrastructure
The provision of roads, railways airports, in an
area or country.
Immigration
The movement of people from abroad to live in
the UK.
Ageing Population
The increase in the population of those people
aged over 65 years old.
European Union (EU)
The collection of 27 countries in Europe which
trade together and aim for closer co-operation.
Tariffs
Taxes paid on imports that rias eth total costs of
imports so that it will be harder for a foreign
business to sell its goods.
Quotas
A limit on the amount of goods or services that
can be imported. This restricts competition from
foreign businesses.
Social Charter
Measures to protect workers in the EU from
unfair working practices.
Minimum Wage
Part of the Social Charter, which guarantees a
minimum wage kevel for workers.
Eurozone
A name given to the countries in the EU which
have chosen to use The Euro as its currency.
The Euro
The currency used by 15 on the EU countries.
How to answer the questions – A2E
APPLY - INTRODUCTION
Briefly explain the problem – Showing understanding of the terms.
ANALYSE –
ANALYSE –
ADVANTAGES/FOR/PROS
DISADVANTAGES/AGAINST/CONS
Write down the advantages of the situation
or reasons for doing something.
Write down the disadvantages of the
situation or reasons against doing
something.
EVALUATION – CONCLUSION/RECOMMENDATION/JUSTIFICATION
Make your decision and explain how you have come to that decision. Or you can say
what information is needed and what the recommendation will be dependent upon. Make
sure you have fully justified why you have chosen that option.
The Pre-Release Case Study June 2016 – Aaron Furniture Ltd
 This is the actual Case Study the exam will be based on. It is imperative
students know this Case Study material implicitly.
 They must familiarise themselves with the Case Study as without it they
cannot answer the questions on the Examination Paper.
 Students cannot take notes into the examination.
 A clean copy of the Case Study will be given to students with the
Question Paper during the examination.