1. Business In The Real World

Question 1

Why someone would like to be an entrepenuer

Answer 1

Flexible working hours

Be their own boss

Question 2

Primary sector

Answer 2

Extracting raw materials from the Earth

Question 3

Primary sector examples

Answer 3

Farming

Mining

Question 4

Secondary sector examples

Answer 4

Construction companies

Car manufacturer

Question 5

Tertiary sector examples

Answer 5

Retailers - tesco

Cafes - starbucks

Question 6

External changes of a business

Answer 6

Legislation

Changes in economy

Question 7

Sole trader

Answer 7

Individual who has sole ownership of a business

Question 8

Sole trader examples

Answer 8

Electrician

Gardener

Question 9

Drawbacks of sole trader

Answer 9

Difficult to raise finance - banks see sole traders as riskier

Heavy workload - sole traders do everything themselves

Unlimited liability

Question 10

Partnership examples

Answer 10

Doctors

Vets

Question 11

Partnership agreements

Answer 11

How profits are divided

Roles and responsibilities

Question 12

Partnership advantages

Answer 12

Easier to set up - partners easily agree on roles

Shared responsibility - shared workload

Easy to raise finance

Question 13

Drawbacks of partnership

Answer 13

Profits have to be shared

Disagreements slow decision making

Unlimited liability

Question 14

Limited liability

Answer 14

Shareholders are not personally responsible for company’s debt

Question 15

Unlimited liability

Answer 15

Business owners are personally responsible for all debts of the business

Question 16

Private limited company

Answer 16

Business structure where company shares are not available to the general public

Question 17

Examples or private limited companies

Answer 17

Plumber

Dentist

Question 18

Benefits of private limited company

Answer 18

Limited liability - assets protected

Easy to raise finance

Question 19

Drawbacks of private limited company (ltd)

Answer 19

High set up costs

Shared profits

Question 20

Not-for-profit examples

Answer 20

Greenpeace, cancer research

Question 21

Business objectives examples

Answer 21

Survival

Ethics

Question 22

Business objectives advantages

Answer 22

Clear direction

Allows planning

Improves decision making

Question 23

Business objectives disadvantages

Answer 23

External factors can affect them (new competitors)

If targets too high - demotivate staff

Too focused on one goal

Question 24

Stakeholder

Answer 24

Anyone affected by decisions made by a business

Question 25

Shareholder

Answer 25

Individual who owns shares in a limited company

Question 26

Factors affecting local decisions

Answer 26

Competition Labour

Question 27

Why would a business be close to competition

Answer 27

Observe competition Attracts customers Ideas from competition

Question 28

Business plan

Answer 28

Written document describes a business, its objectives, strategies and fincances

Question 29

Why would a business have a business plan

Answer 29

Identify potential risks Set clear goals Attract investors

Question 30

Information in a business plan

Answer 30

Market overview Finance required

Question 31

Disadvantages of business plan

Answer 31

Requires time and effort Can be expensive Outdated quickly due to changing market conditions

Question 32

Economies of scale

Answer 32

When average cost per unit falls as scale of production increases

Question 33

Purchasing economies of scale

Answer 33

When big businesses negotiate discounts for bulk buying

Question 34

Technical economies of scale

Answer 34

As a business grows it can invest in more advanced machinery and technology, allows it to produce more goods efficiently and at lower costs per uniti

Question 35

Diseconomies of scale

Answer 35

When average cost per unit increases as scale of production increases

Question 36

Possible diseconomies of scale example

Answer 36

Communication more difficult in big businesses as tall structure

Question 37

Average cost per unit

Answer 37

Total costs ➗ Output (units)

Question 38

Factors affecting method of growth

Answer 38

Size of business Position in market

Question 39

External growth advantages

Answer 39

Faster growth Increased market share Economies of scale

Question 40

External growth disadvantages

Answer 40

Expensive Loss of control High risk (merging takeover can fail)

Question 41

Internal growth advantages

Answer 41

Less risk Easier to manage Funded from retained profit

Question 42

Disadvantages of internal growth

Answer 42

Slower Market saturation Hard to attract investors (slow growth)