1 - What is business?❓

Question 1

Define a business start-up

Answer 1

a new firm operating in a market for the first time

Question 2

Define a market

Answer 2

any place where buyers and sellers meet to trade

Question 3

Define added value

Answer 3

the process of making the product more valuable to the purchaser

Question 4

Methods of adding value

Answer 4

• convenience
• branding
• quality/design
• USP
• speed and excellent service
• product features and benefits

Question 5

How does a business add value?

Answer 5

when the selling price of an item produced is higher than the cost of all the resources used to make it

Question 6

Why do businesses exist?

Answer 6

they are formed by entrepreneurs and are subsequently developed if they manage to survive

Question 7

Why are businesses good for the economy?

Answer 7

• create wealth by returns on investments
• pay taxes
• contribute to the infrastructure
• drive innovation through research & development
• create employment

Question 8

What is the role of entrepreneurs?

Answer 8

• spot business opportunities
• take calculated risk
• act as a catalyst for creation & growth

Question 9

Define business objectives

Answer 9

statements of specific outcomes that are to be achieved

Question 10

What is the hierarchy of objectives?

Answer 10

Mission
Corporate
Functional / Departmental
Unit / Team
Individual

Question 11

What are some examples of objectives?

Answer 11

• desired sales / profits
• rates of growth
• innovative player in the market
• leading in the quality of customer service

Question 12

What is profit?

Answer 12

• source of finance
• measure of business success
• return on investment
• reward for taking risks
• motivating factor & incentive

Question 13

Formula for profit

Answer 13

Profit = TR - TC

Question 14

Why is profit important?

Answer 14

keeps the business surviving

Question 15

Define public sector

Answer 15

Owned and run by the government - aim to provide for the public than a profit

Question 16

Define private sector

Answer 16

Owned by private individuals - non-profit organisations included

Question 17

What is a sole trader?

Answer 17

Most common type of business structure where an individual owns the company

Question 18

Pros to sole trader

Answer 18

• quick and easy to set up
• simple to run
• easy to shit down
• entitled to all profits
• independence

Question 19

Cons to sole trader

Answer 19

• unlimited liability
• harder to raise finance
• long hours
• limited expertise
• business suffers if owner ill/uninterested

Question 20

Define a partnership

Answer 20

Owned by 2 or more people with a legal partnership agreement covering areas such as profit shares / decision making

Question 21

Pros of a partnership

Answer 21

• different skills
• different and more experience
• less risk as an individual
• easier to raise finance

Question 22

Cons of partnerships

Answer 22

• splitting profits
• unlimited liability
• harder to shut down as more people involved
• long hours
• poor decision by partner affects others

Question 23

Define a Private Limited Company Ltd

Answer 23

Can only sell privately to fam/friends not on the stick exchange

Question 24

Pros to Ltd

Answer 24

• limited liability
• family business = supportive
• seen as prestigious

Question 25

Cons to Ltd

Answer 25

- shareholders must all agree - long hours - more paperwork to set up - harder to shut down - splitting profits - publish financial documents

Question 26

Define a PLC

Answer 26

A larger organisation that sells shares in the stock exchange

Question 27

Pros to PLC

Answer 27

- limited liability - easier to raise finance - stable form of structure = business continues to exist even if shareholders change - less tax

Question 28

Cons to a PLC

Answer 28

- admin costs - public disclosure of company info - must give away a % of business

Question 29

How much of share capital does a PLC need to be listed on the stock market and how much must be available?

Answer 29

Need over £50,000 of share capital and must have atleast 25% of shares available

Question 30

Define a not-for-profit organisation (social enterprise)

Answer 30

- benefit the community - has social aims

Question 31

Give examples of not-for-profit organisations

Answer 31

Charities, housing associations, community development trusts

Question 32

Define ordinary share capital

Answer 32

Money raised by selling shares for long-term investment

Question 33

Define dividends

Answer 33

A proportion of the profits earned which are split and paid out to shareholders as a fixed amount per sharw

Question 34

Define market capitalisation

Answer 34

The total value of all the ordinary shares issued by a company

Question 35

Market capitalisation formula

Answer 35

Number of issued shares X current share price

Question 36

Why would shareholders invest?

Answer 36

- as a venture capitalist - you like a business - to support family/friends - paid a dividend in return - retirement - to hide money fraudulently - be involved in decision making - as a source of finance

Question 37

What influences share prices?

Answer 37

- scandal - supply and demand - exchange rates - multinationals - ethics - taking risk - lack of consumer demand - inflation - the economy

Question 38

What happens to share prices if more people want to buy shares?

Answer 38

Share price rises

Question 39

How can the performance of a business cause share prices to increase/decrease?

Answer 39

business is doing well = share prices increase as company has more revenue

Question 40

How can rumours of a new product launch affect share prices?

Answer 40

- Increase share prices as more people will buy new product - decrease share prices if it seems too risky

Question 41

How can interest rates affect share prices?

Answer 41

- low interest increases share prices as it costs less to borrow and so demand will increase

Question 42

How can the state of the economy impact share prices?

Answer 42

Economy is bad then the pound will be weaker so more expensive and riskier to invest in shares

Question 43

Define share rights issued

Answer 43

When a company issues existing shareholders a right to buy additional shares in the business, offering a specific number of shares at a discounted price in a time limit

Question 44

What happens if shares right issued aren’t bought?

Answer 44

The shares go on the stock market for the public as ordinary shares

Question 45

What does PESTLE stand for?

Answer 45

Political, economic, social, technological, legal, environmental

Question 46

What does PESTLE help identify?

Answer 46

External influences a business can’t control, but can accommodate to limit impact

Question 47

Define the voluntary sector

Answer 47

Includes charities and societies that exist to help people eg. Oxfam, Cancer Research

Question 48

What are some objectives of a voluntary sector business?

Answer 48

Make profit for donations, social and ethics

Question 49

What is it called when a business is just about surviving

Answer 49

Satisficing

Question 50

Define privatisation

Answer 50

Moving from a public sector to a private sector

Question 51

Define business environment

Answer 51

Incorporates all of the internal and external factors that affect how a company runs

Question 52

What can business environment include?

Answer 52

- safety - culture - happiness - political factors - confidence

Question 53

How does the government have a big influence on business environment?

Answer 53

Eg some governments might make too many regulations that a business can’t follow

Question 54

What factors affect costs and demand?

Answer 54

- competition - market conditions - incomes - interest rates - demographics - environmental issues and fair trade

Question 55

Define a mission statement

Answer 55

It’s overall purpose or main corperate aims, giving you a clue on the company’s beliefs and goals

Question 56

What may affect a business’s legal structure?

Answer 56

- number of entrepreneurs - mission statement - want for unlimited/limited liability