Predicted Paper 2
90 marks • 2 hours • June 2026
Personal and Business Finance
Pearson Retail Ltd • Ashworth Manufacturing • Elite Care Services • Westbridge Properties
| Question | 1 | 2 | 3 | 4 | Total |
|---|
| Marks Available | 18 | 28 | 22 | 22 | 90 |
| Marks Awarded | | | | | |
Instructions to Candidates
- Answer ALL questions
- Show working in calculations
- Use black ink or pen
Information for Candidates
- Marks are shown in brackets
- Total marks: 90
- Time allowed: 2 hours
Ashworth Manufacturing — Choosing Business Finance Sources
Ashworth Manufacturing is a traditional engineering firm that has been operating for 25 years. The Managing Director wants to expand production capacity by investing £500,000 in new machinery. The business currently has retained profit of £200,000 and operating profit of £150,000 annually. They are exploring both internal and external sources of finance.
(a)Identify two internal sources of finance that Ashworth Manufacturing could use.(2)
(b)Explain one advantage of using retained profit for this investment.(2)
(c)Compare taking out a bank loan versus issuing debentures as sources of external finance for this expansion.(6)
(d)Evaluate which source of finance would be most suitable for Ashworth Manufacturing. Justify your answer.(8)
Question 1 Total: 18 marks
Elite Care Services — Income Statement Analysis
Elite Care Services is a residential care home operator. Below is their financial data for the year ending 31 December 2025: Revenue £2,400,000; Cost of sales £840,000; Administration expenses £420,000; Staff training costs £180,000; Depreciation £120,000; Interest on loans £60,000. In 2026, they expect a 5% increase in cost of sales and a 10% increase in staff training costs.
(a)Calculate the gross profit for Elite Care Services. Show your workings.(2)
(b)Calculate the profit for the year (net profit) for Elite Care Services. Show your workings.(3)
(c)Calculate the gross profit margin percentage. Show your workings.(3)
(d)If cost of sales increases by 5% and staff training costs increase by 10% in 2026, what will be the new net profit? Show your workings.(4)
(e)Analyse the profitability of Elite Care Services using the calculated ratios and profit figures.(7)
(f)Suggest one way Elite Care Services could improve its net profit margin. Justify your answer.(3)
Question 2 Total: 28 marks
(d)Analyse the profitability of Elite Care Services using the calculated ratios and profit figures.(9)
(e)Suggest two ways Elite Care Services could improve its net profit margin.(8)
Question 2 Total: 26 marks
Pearson Retail Ltd — Ratio Analysis and Financial Health
Pearson Retail Ltd operates 45 stores across the UK. For the year ended 31 March 2026: Revenue £18,500,000; Profit for year £1,850,000; Capital employed £9,250,000; Current assets £4,200,000; Current liabilities £2,800,000; Inventories £1,500,000.
(a)Calculate the ROCE (Return on Capital Employed) for Pearson Retail Ltd.(3)
(b)Calculate the current ratio and acid test ratio for Pearson Retail Ltd.(6)
(c)Interpret what these ratios tell you about Pearson Retail Ltd's financial health.(9)
(d)Compare Pearson Retail Ltd's profitability if revenue remained £18,500,000 but profit increased to £2,775,000.(6)
Question 3 Total: 24 marks
Westbridge Properties — Statement of Financial Position
Westbridge Properties is a property management company. Their statement of financial position for 31 December 2025 shows: Property (cost £2,000,000, depreciation £400,000); Equipment (cost £600,000, depreciation £180,000); Cash £320,000; Debtors £450,000; Stock £100,000; Creditors £280,000; Bank loan (non-current) £800,000; Equity (capital + retained earnings) £1,610,000.
(a)Prepare a statement of financial position for Westbridge Properties, showing all sections clearly.(12)
(b)Calculate the net book value of the property and equipment.(4)
(c)Explain why showing depreciation separately is important in a statement of financial position.(4)
Question 4 Total: 20 marks
END OF PAPER
Total marks available: 90
For revision purposes. Not an official Pearson paper.