Cambridge International A‑Level Business (9609) – Complete Syllabus Notes (2026‑2028)
1. Overview of the Syllabus
The Cambridge Business syllabus is split into two qualifications:
- AS Level (Topics 1‑5) – Core business functions and introductory financial analysis.
- A Level (Topics 6‑10) – Advanced strategic analysis, decision‑making and detailed financial appraisal.
Each topic contains specific sub‑points that must be mastered for the examinations. The notes below give concise, exam‑ready coverage of every required sub‑point, with definitions, formulas, examples and quick‑checklists.
AS Level – Core Business Functions
Topic 1 – Business & Its Environment
1.1 Enterprise
- Nature of activity – production of goods/services to satisfy needs.
- Factors of production – land, labour, capital, entrepreneurship.
- Adding value – transformation, branding, service enhancement.
- Opportunity cost – the next best alternative foregone.
- Dynamic environment – constant change driven by technology, competition, regulation.
- Success & failure – profitability, market share, cash flow, strategic fit.
- Business scope – local, national, international, multinational.
1.2 Business Structure
| Sector | Typical Activities |
|---|
| Primary | Agriculture, mining, fishing |
| Secondary | Manufacturing, construction |
| Tertiary | Retail, services, finance |
| Quaternary | Information services, R&D |
Ownership types & liability
- Sole trader – owner bears unlimited liability.
- Partnership – two or more owners; unlimited liability (unless limited partnership).
- Private limited company (Ltd) – shareholders’ liability limited to share capital.
- Public limited company (PLC) – shares traded on a stock exchange; limited liability.
Why it matters: Ownership influences finance options, stakeholder relationships and risk exposure.
1.3 Size of Business & Growth
- Size criteria – turnover, number of employees, market share.
- Growth methods
- Organic growth – internal expansion (new products, new markets).
- Horizontal merger – two firms at the same stage combine (e.g., two coffee chains merging).
- Vertical merger – upstream or downstream integration (e.g., a bakery buying a flour mill).
- Conglomerate merger – unrelated businesses combine.
- Joint venture – two or more firms create a new entity for a specific project.
- Acquisition – one firm purchases another (friendly or hostile).
1.4 Stakeholders
| Stakeholder | Interest / Influence |
|---|
| Owners / Shareholders | Profit, return on investment, voting rights |
| Employees | Job security, wages, working conditions |
| Customers | Quality, price, service |
| Suppliers | Timely payment, long‑term contracts |
| Community | Employment, environmental impact, CSR |
| Government | Tax revenue, regulation compliance |
Internal vs. external – internal (owners, employees) have direct control; external (customers, community, government) influence through market or regulatory power.
Potential conflicts – e.g., shareholders may demand higher dividends while employees seek higher wages.
1.5 External Influences
- Political / Legal – regulation, taxation, trade barriers.
- Economic – inflation, exchange rates, interest rates, economic cycles.
- Social / Demographic – age structure, lifestyle trends, cultural values.
- Technological – automation, e‑commerce, R&D.
- Environmental – sustainability, carbon footprint, waste management.
- Ethical – corporate social responsibility, fair trade.
1.6 Strategic Tools (PESTLE, SWOT, Porter, Ansoff)
| Tool | Purpose | Typical Output |
|---|
| PESTLE | Analyse macro‑environmental forces | Bullet list of key trends |
| SWOT | Identify internal strengths & weaknesses and external opportunities & threats | 2×2 matrix |
| Porter’s Five Forces | Assess industry attractiveness | Ranking of each force (high/medium/low) |
| Ansoff Matrix | Choose growth strategy | Four‑quadrant diagram (market penetration, market development, product development, diversification) |
Example: A local coffee shop uses PESTLE to note rising consumer health consciousness (social) and a new city‑wide ban on single‑use plastics (environmental), then applies SWOT to turn its strong brand (strength) into a new line of biodegradable cups (opportunity).
Topic 2 – Human Resource Management (HRM)
2.1 Organisational Structure
- Functional – departments by expertise (marketing, finance).
- Divisional – separate profit centres (geographic or product lines).
- Matrix – dual reporting (function & product).
- Network – core firm plus outsourced partners.
- Centralisation vs. decentralisation – decision‑making authority.
2.2 Leadership & Motivation
- Leadership styles – autocratic, democratic, laissez‑faire, transformational.
- Motivation theories
- Maslow’s hierarchy of needs.
- Herzberg’s two‑factor theory (hygiene vs. motivators).
- McGregor’s Theory X & Y.
2.3 HRM Strategy & Practices
- Recruitment, selection, training, appraisal, reward.
- Hard HRM (cost‑focused) vs. Soft HRM (people‑focused).
- Impact of ICT/AI – e‑recruitment platforms, performance dashboards, predictive analytics.
Topic 3 – Marketing
3.1 Market Research & Segmentation
- Primary data – surveys, interviews, focus groups.
- Secondary data – published reports, government statistics.
- Segmentation bases – demographic, psychographic, geographic, behavioural.
3.2 The Marketing Mix (4 P’s)
- Product – features, quality, branding, life‑cycle.
- Price – pricing objectives, strategies, discounts.
- Place – distribution channels, logistics, coverage.
- Promotion – advertising, sales promotion, public relations, personal selling, digital media.
Extended mix for services: people, process, physical evidence.
3.3 Pricing & Elasticity
Price elasticity of demand (PED) formula:
\[
\text{PED} = \frac{\%\Delta Q_d}{\%\Delta P}
\]
- |PED| > 1 – elastic (price‑sensitive).
- |PED| < 1 – inelastic.
- |PED| = 1 – unit‑elastic.
3.4 Product Development & Life‑Cycle
- Introduction – low sales, high costs, heavy promotion.
- Growth – rapid sales increase, economies of scale.
- Maturity – sales peak, competition intense, price pressure.
- Decline – sales fall, possible harvesting or re‑positioning.
3.5 Sales Forecasting
- Qualitative – Delphi technique, market surveys, expert opinion.
- Quantitative – time‑series analysis, regression, moving averages.
3.6 International Marketing
- Standardisation vs. adaptation.
- Entry modes – exporting, licensing, franchising, joint venture, wholly‑owned subsidiary.
Topic 4 – Operations Management
4.1 Location & Scale Decisions
- Factors – market access, labour costs, transport, government incentives, proximity to suppliers/customers.
- Economies of scale – lower average cost as output rises.
- Diseconomies of scale – coordination problems, bureaucracy.
4.2 Quality Management
- TQM, ISO standards, benchmarking, Six Sigma.
- Cost of quality – prevention, appraisal, internal failure, external failure.
4.3 Operations Strategy & Improvement Tools
- Lean production – Kaizen, 5S, Just‑In‑Time (JIT).
- ERP systems – integration of finance, HR, supply chain.
- Critical Path Analysis (CPA) – network diagram, earliest/latest start/finish, float.
Topic 5 – Finance & Accounting (AS Level)
5.1 Sources of Finance
- Internal – retained earnings, sale of assets, owner’s capital.
- External – bank loans, equity (shares), leasing, venture capital, debentures.
5.2 Financial Statements
| Statement | Key Components |
|---|
| Income Statement | Revenue, cost of sales, gross profit, operating expenses, operating profit, interest, tax, net profit. |
| Balance Sheet | Current assets, non‑current assets, current liabilities, non‑current liabilities, shareholders’ equity. |
| Cash Flow Statement | Operating cash flow, investing cash flow, financing cash flow; reconciliation of profit to cash. |
5.3 Basic Ratio Analysis
| Ratio | Formula | Interpretation |
|---|
| Current Ratio | \(\displaystyle \frac{\text{Current Assets}}{\text{Current Liabilities}}\) | ≥ 1 shows ability to meet short‑term debts; higher = stronger liquidity. |
| Acid‑Test (Quick) Ratio | \(\displaystyle \frac{\text{Cash + Receivables + Marketable Securities}}{\text{Current Liabilities}}\) | Excludes inventory; > 1 is a stricter liquidity test. |
| Inventory Turnover | \(\displaystyle \frac{\text{Cost of Sales}}{\text{Average Inventory}}\) | Higher turnover = efficient stock management. |
| Receivables Days | \(\displaystyle \frac{\text{Trade Receivables}}{\text{Sales}} \times 365\) | Average days to collect cash from customers. |
| Payables Days | \(\displaystyle \frac{\text{Trade Payables}}{\text{Purchases}} \times 365\) | Average days the firm takes to pay suppliers. |
| Gross Profit % | \(\displaystyle \frac{\text{Gross Profit}}{\text{Sales}} \times 100\) | Measures core production efficiency. |
| Net Profit % | \(\displaystyle \frac{\text{Net Profit}}{\text{Sales}} \times 100\) | Overall profitability after all expenses. |
A Level – Advanced Business Topics
Topic 6 – Business & Its Environment (Advanced)
- In‑depth macro‑environmental analysis using PESTLE.
- Strategic planning tools – Porter’s Generic Strategies, Value Chain, Blue Ocean.
- Globalisation – offshoring, multinational enterprises, trade agreements, currency risk.
Topic 7 – Human Resource Management (Advanced)
- Strategic HRM – aligning HR policies with corporate objectives.
- Change management – Lewin’s three‑step model, Kotter’s 8‑step process.
- Employee relations – trade unions, collective bargaining, industrial action.
Topic 8 – Marketing (Advanced)
- Advanced pricing – price skimming, penetration, psychological pricing.
- Integrated marketing communications – advertising, PR, sales promotion, direct marketing, digital media.
- Brand management – brand equity, positioning, brand extensions.
Topic 9 – Operations Management (Advanced)
- Supply chain management – bullwhip effect, logistics, outsourcing.
- Project management – Gantt charts, Critical Path Method (CPM), risk analysis.
- Sustainable operations – green manufacturing, circular economy.
Topic 10 – Finance & Accounting (Advanced)
10.1 Financial Statements – Full Coverage
| Statement | Key Components |
|---|
| Income Statement | Revenue, cost of sales, gross profit, operating expenses, operating profit, interest, tax, net profit. |
| Balance Sheet | Current assets (cash, receivables, inventory), non‑current assets (plant, goodwill), current liabilities, non‑current liabilities, shareholders’ equity. |
| Cash Flow Statement | Operating cash flow, investing cash flow, financing cash flow; reconciliation of profit to cash. |
10.2 Ratio Analysis – Complete Set
| Ratio | Formula | Interpretation |
|---|
| Current Ratio | \(\displaystyle \frac{\text{Current Assets}}{\text{Current Liabilities}}\) | ≥ 1 indicates ability to meet short‑term debts; higher = stronger liquidity. |
| Acid‑Test (Quick) Ratio | \(\displaystyle \frac{\text{Cash + Receivables + Marketable Securities}}{\text{Current Liabilities}}\) | Excludes inventory; > 1 is a stricter liquidity test. |
| Inventory Turnover | \(\displaystyle \frac{\text{Cost of Sales}}{\text{Average Inventory}}\) | Higher turnover = efficient stock management. |
| Receivables Days | \(\displaystyle \frac{\text{Trade Receivables}}{\text{Sales}} \times 365\) | Average days to collect cash from customers. |
| Payables Days | \(\displaystyle \frac{\text{Trade Payables}}{\text{Purchases}} \times 365\) | Average days the firm takes to pay suppliers. |
| Gross Profit % | \(\displaystyle \frac{\text{Gross Profit}}{\text{Sales}} \times 100\) | Core production efficiency. |
| Net Profit % | \(\displaystyle \frac{\text{Net Profit}}{\text{Sales}} \times 100\) | Overall profitability. |
| ROCE | \(\displaystyle \frac{\text{Operating Profit}}{\text{Capital Employed}}\times100\) | Efficiency of capital utilisation. |
| Gearing Ratio | \(\displaystyle \frac{\text{Long‑term Debt}}{\text{Equity + Long‑term Debt}}\times100\) | Financial risk – higher = more reliance on borrowed funds. |
| Dividend Yield | \(\displaystyle \frac{\text{Dividend per Share}}{\text{Market Price per Share}}\times100\) | Return to shareholders from dividends. |
| Price‑Earnings (P/E) Ratio | \(\displaystyle \frac{\text{Market Price per Share}}{\text{Earnings per Share}}\) | Market expectations of future earnings. |
10.3 Detailed Focus – Acid‑Test (Quick) Ratio
Definition
The acid‑test ratio measures a company’s ability to meet its short‑term obligations using only its most liquid assets – assets that can be converted to cash quickly without selling inventory.
Formula
\[
\text{Acid‑Test Ratio} = \frac{\text{Cash \& Cash Equivalents} + \text{Trade Receivables} + \text{Short‑term Marketable Securities}}{\text{Current Liabilities}}
\]
Components
- Cash & cash equivalents – cash on hand, bank balances, Treasury bills, other highly liquid investments.
- Trade receivables – amounts owed by customers, usually collectible within 12 months.
- Short‑term marketable securities – readily tradable securities (e.g., government bonds) that can be sold at market price.
- Current liabilities – debts and obligations due within one year (trade payables, short‑term borrowings, tax payable, accrued expenses).
Step‑by‑Step Calculation
- Extract the relevant figures from the balance sheet.
- Add cash, receivables and marketable securities – this is the numerator.
- Identify total current liabilities – the denominator.
- Divide numerator by denominator and round to two decimal places.
Worked Example
ABC Manufacturing Ltd. (figures in £’000)
| Item | Amount (£'000) |
|---|
| Cash and cash equivalents | 30 |
| Trade receivables | 70 |
| Short‑term marketable securities | 20 |
| Total liquid assets (numerator) | 120 |
| Current liabilities | 100 |
Calculation:
\[
\text{Acid‑Test Ratio} = \frac{120}{100} = 1.20
\]
Interpretation
- Ratio > 1 – liquid assets exceed current liabilities; the firm can comfortably meet short‑term debts.
- Ratio = 1 – liquid assets just cover current liabilities; no margin for error.
- Ratio < 1 – potential liquidity problem; the firm may need to sell inventory or obtain external finance.
Industry norms matter: a retail business may consider 0.8 acceptable, whereas a services firm might aim for ≥ 1.2.
Comparison with the Current Ratio
The current ratio includes inventory:
\[
\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
\]
Because inventory can be slow to convert, the acid‑test ratio provides a stricter test of liquidity. A company with a healthy current ratio but a weak acid‑test ratio is likely holding excessive or slow‑moving stock.
Limitations
- Ignores the timing of cash inflows and outflows – a high ratio may mask cash‑flow mismatches.
- Marketable securities are valued at market price, which can fluctuate sharply.
- Does not consider seasonal variations; a snapshot may be misleading.
- Excludes inventory, which for some firms (e.g., retailers) can be sold quickly at a discount.
Quick‑Checklists for Examination Success
- Enterprise – remember the 5‑point checklist (activity, factors of production, adding value, opportunity cost, dynamic environment).
- Business Structure – compare at least two ownership types (liability, finance, control).
- Growth – be able to label and give a short example of organic, horizontal, vertical, conglomerate, joint venture, acquisition.
- Stakeholder matrix – internal vs. external, key interests, possible conflicts.
- Strategic tools – write a one‑sentence purpose for PESTLE, SWOT, Porter’s Five Forces, Ansoff Matrix.
- Acid‑Test Ratio – formula, components, interpretation thresholds, limitation.
Use these checklists when practising past‑paper questions to ensure full coverage of the syllabus.