AQA GCSE Business 3.6 Finance: a complete overview

What topic 3.6 actually demands

Finance is the most calculation-heavy topic and carries many marks. It rewards accurate arithmetic, correct use of the formulae, and the ability to interpret a number rather than just produce it. It links to business in the real world (sources of finance and the business plan) and to marketing (pricing and revenue).

This guide walks through all four dot points of the topic in specification order, then sets out the exam patterns AQA repeats. Each dot point has a matching page with practice questions; this overview ties them together.

Sources of finance

Internal sources come from within (retained profit, selling assets, owners' savings); external sources come from outside (bank loans, overdrafts, share capital, trade credit, leasing, crowdfunding, grants). Short-term finance such as an overdraft covers daily needs, while long-term finance such as a loan or share capital funds lasting investment. Each has trade-offs of cost, control and risk.

Cash flow

Cash flow is the money moving in and out over time, and it differs from profit: a profitable business can still run out of cash. A cash-flow forecast predicts inflows and outflows. Net cash flow is inflows minus outflows, and the closing balance is the opening balance plus net cash flow. Problems can be eased with an overdraft, by chasing customers, by negotiating credit or by cutting costs.

Financial terms and calculations

Revenue is price times quantity. Total costs are fixed plus variable costs, and profit is revenue minus total costs. The break-even point is fixed costs divided by the contribution per unit (price minus variable cost per unit), and the margin of safety is actual sales minus break-even sales.

Analysing financial performance

The income statement shows revenue, costs and profit. Gross profit is revenue minus cost of sales; net profit is gross profit minus other expenses. The gross and net profit margins express profit as a percentage of revenue. Financial data guides decisions but has limits: it ignores non-financial factors, may be out of date and shows what but not why.

The exam patterns AQA repeats

AQA tests this topic with calculation questions (find net cash flow, break-even, a profit margin), interpretation questions asking what a figure means, and longer questions recommending a source of finance or judging financial performance. Always show your working and interpret the result for the case-study business.