1 - Introduction to business

Question 1

What is an ‘enterprise’?

Answer 1

a business

Question 2

What is an ‘entrepreneur’?

Answer 2

a risk taker who sets up a business (not the same as being self employed)

Question 3

Characteristics of an entrepreneur?

Answer 3

• energetic and enthusiastic
• comfortable with risk
• has self belief and confidence
• leadership skills
• drive and determination

Question 4

What are the 4 factors of production?

Answer 4

• land
• labour
• capital
• enterprise

Question 5

Land?

Answer 5

natural resources from the land itself

Question 6

Labour?

Answer 6

employees

Question 7

Capital?

Answer 7

technology and machinery

Question 8

Enterprise?

Answer 8

bright new ideas and the person who organises the factors

Question 9

Factors of production

Answer 9

inputs used in the production itself

Question 10

Added value?

Answer 10

what a business achieves by ensuring that the price of a good is in excess of the cost of inputs
leads to increased profits

Question 11

What are the 4 functions within the business

Answer 11

• accounting and finance
• operations management and production
• marketing
• human resource management

Question 12

What are the 3 business sectors?

Answer 12

Primary - extracting; farming, mining, fishing
Secondary - manufacturing; building, factory work
Tertiary - services; retail, banking, teaching

Question 13

How much does the tertiary sector contribute to the UK?

Answer 13

80%

Question 14

How much does the secondary sector contribute? and why has this declined?

Answer 14

14% - due to deindustrialisation

Question 15

How much does the primary sector contribute?

Answer 15

6%

Question 16

What businesses make up the private sector?

Answer 16

soletrader
partnership
companies; private and public

Question 17

What businesses make up the public sector?

Answer 17

local government owned
central government owned
these provide a service, not there to make profit

Question 18

What is the third sector?

Answer 18

charities, community groups etc

motivated by the desire to achieve social goals - any profits are reinvested in order to improve services

Question 19

Private sector vs Public sector?

Answer 19

businesses owned and run by private individuals vs businesses owned and run by central or local government to provide service, not to make profit

Question 20

Sole trader

Answer 20

owns and runs their own business

Question 21

advantages of a sole trader

Answer 21

• keep all profits
• financial state is private
• you are the boss

Question 22

disadvantages of a sole trader

Answer 22

• fully responsible for all debts (unlimited liability)
• can easily be overworked
• hard to grow and often businesses don’t have the money to invest in expansion

Question 23

Partnership

Answer 23

two or more people own and run a business

Question 24

advantages of a partnership

Answer 24

• easy to establish
• losses and wins are shared
• more skills

Question 25

disadvantages of a partnership

Answer 25

- unlimited liability | - decision making can be slower and disagreements may arise

Question 26

What are limited liability partnerships? LLPs

Answer 26

combine features of partnerships with limited companies - owners therefore have limited liability and are called members rather than partners - accounts are however, viewed publicly

Question 27

Private limited company vs Public limited companies

Answer 27

Private: often a family business, shares are sold to family and friends only Public: large business who sells shares on the stock exchange

Question 28

What is a cooperative?

Answer 28

a business owned and run by its members (employees and customers) - profits are shared between these people

Question 29

advantages of a franchise (in the eyes of the franchiser)

Answer 29

- no cost of expansion | - under their control

Question 30

advantages of a franchise (in the eyes of the franchisee)

Answer 30

- tried and tested brand names, no risk/ greater opportunity for success - specialist advice and training provided

Question 31

disadvantages of a franchise (in the eyes of the franchiser)

Answer 31

- control issues and if things go wrong then bad publicity may result, for the whole brand - possibility of conflict

Question 32

disadvantages of a franchise (in the eyes of the franchisee)

Answer 32

- continuing royalty payments (percentage of profits) | - less/no control over what is sold and at what prices

Question 33

advantages of a cooperative

Answer 33

- legally straight forward - all work towards common goals - limited liability for members

Question 34

disadvantages of a cooperative?

Answer 34

- weak management | - slow decision making

Question 35

When deciding on a businesses size, what two main factors are accounted for? (EU standardised way of deciding a businesses size)

Answer 35

number of employees and turnover/balance sheet value

Question 36

other than number of employees and turnover.. what other factors are taking into account when deciding a businesses size?

Answer 36

capital employed (total of the businesses assets) number of shops/offices etc stock market value

Question 37

how is share market value calculated?

Answer 37

current share price x the number of shares issued

Question 38

What factors can effect the size of a business?

Answer 38

- market size - nature of the product - personal preference - ability to expand

Question 39

a business may want to grow for what type of reasons?

Answer 39

- entrepreneur wants a greater challenge - owners want a higher return on their investment - a bigger business, better adapted to fight any economic decline

Question 40

Organic growth?

Answer 40

growth achieved through increasing sales by selling more to existing customers and finding new customers

Question 41

Mergers and Acquisitions?

Answer 41

two companies join together to form a bigger company

Question 42

Joint ventures?

Answer 42

a formal business arrangement in which two businesses agree to work together on a particular project. both invest time and money into it.

Question 43

Strategic allience?

Answer 43

allience means 'cooperation' - similar to a joint venture but less involved an agreement between two or more parties to pursue a set of agreed upon objectives, while remaining independent organisations. this occurs when two or more organisations join together to pursue mutual benefits.

Question 44

limited company advantages?

Answer 44

-

Question 45

limited company advantages?

Answer 45

- access to larger amounts of capital through the ability to issue shares - limited liability.. and for all shareholders, which encourages people to invest - continuity - a company is a separate legal entity and so does not come to an end when the original owners die

Question 46

limited company disadvantages?

Answer 46

- setting up a company can be very expensive - company accounts are not private so its difficult to keep financial accounts out of the public eye. - more vulnerable to take over