Business

Question 0

What are the 3 sectors of business activity? Give examples.

Answer 0

Primary - farming, drilling for oil, mines
Secondary - car factory, washing machine manufacturer
Tertiary - football club, bank, repair centre, call centre

Question 1

What is the chain of production?

Answer 1

The steps that a good or service goes through before being sold.

Question 2

What is unlimited liability?

Answer 2

The business can be sued for more than the value of the business. All debts must be paid even if this means having your house reclaimed.

Question 3

What is limited liability?

Answer 3

(Companies) can only be liable for the value of your business. Personal possessions cannot be touched.

Question 4

What is a dividend?

Answer 4

A share of the profits at the end of the year.

Question 5

What is a sole trader?

Answer 5

A business owned and run by just one person. The owner must employ other people to work in the business.

Question 6

What are the benefits of operating as a sole trader?

Answer 6

The owner gets to keep all profits.
The owner gets to make all decisions.
The business is easy to set up (no paperwork).
The business’ affairs can be kept private.

Question 7

What are the disadvantages of operating as a sole trader?

Answer 7

There is nobody to ask for help or advice.
It is difficult to take time off for holidays or illness.
Often have to charge higher prices than larger businesses.
The owner has unlimited liability for all debts.

Question 8

What is a partnership?

Answer 8

A business owned jointly by 2 to 20 people. The partners own and run the business together.

Question 9

What are the advantages of partnerships?

Answer 9

The partners can share the workload, and it is easier to get time off.
There is more than one investor in the business.
Partners can share the decision making.
Partners may have expertise in different areas.

Question 10

What are the disadvantages of partnerships?

Answer 10

Partners must share the profits.
Partners may disagree on how to run the business.
Partners have unlimited liability (unless there are ‘sleeping’ partners).

Question 11

What is a Public Limited Company (plc)?

Answer 11

A company that sells shares in their business openly on the stock market. Any person can purchase shares in the business.

Question 12

What is a Private Limited Company (ltd)?

Answer 12

A company where shares are owned by a private set of individuals.

Question 13

What is the meaning of ‘overdraft’?

Answer 13

When you spend more than the amount of money in your bank account and the bank provides additional funds.

Question 14

Why is it easier for a sole trader to obtain a bank loan than a limited company?

Answer 14

There is a higher risk that a limited company will not pay back the loan as they are only liable for the value of their business.

Question 15

What is a multinational company?

Answer 15

A business that operates or produces in at least two countries.

Question 16

What are the advantages of MNCs?

Answer 16

Larger, so consumers can get better discounts.
More countries an MNC operates in, the more sales they can benefit from.
Moving international can get you cheaper costs and get you closer to your markets.

Question 17

What are the disadvantages of MNCs?

Answer 17

Due to the size of the business, it may have problems from being too big.
Business may come under international scrutiny for exploiting labour laws.
High transport costs.
Different legal requirements.

Question 18

What are the advantages of globalisation for developing countries?

Answer 18

New jobs are created.
People can earn higher wages.
Living standards rise.
People live longer.

Question 19

What are the possible disadvantages of globalisation for developing countries?

Answer 19

Children are used as workers.
There may be poor health and safety conditions.
Workers work long hours for low wages.
Production may harm the environment.

Question 20

What are the three main aims of a business?

Answer 20

To expand (growth)
To survive
To produce a profit

Question 21

What are the ideas behind co-operatives?

Answer 21

To bring about the most good for their members. People join together to make decisions and work and share profits together.

Question 22

What is a retail cooperative?

Answer 22

The customers become the members and ‘own’ the business. This ensures that members pay fair prices when buying services/goods.

Question 23

What is a worker/producer cooperative?

Answer 23

Owned by the workers. A group of producers join together to get fairer prices. They may share machines.

Question 24

What does a business go through in order to become a limited company?

Answer 24

Incorporation

Question 25

What is a stakeholder?

Answer 25

A person who has an interest on a business, e.g. Customers, employees, shareholders.

Question 26

What is a franchise?

Answer 26

The right given by one business (franchisor) to another (franchisee) to sell goods or services using its name.

Question 27

Why are some stakeholders more important than others?

Answer 27

Degree of influence of stakeholders will vary depending on nature of business activities and who holds power.
E.g. customers, banks and investors may have great influence if business is dependent on them Shareholders (as stakeholders) typically exert high influence - voting on key company decisions
Government / regulators often important - particularly in industries subject to greater legislation

Question 28

What is a ‘sleeping’/limited partner?

Answer 28

Someone who invests capital into a business, but plays no part in the running of it.

Question 29

What items might be included in a deed of partnership?

Answer 29

Name of the firm and Its Address, Name and Address of Partners, Nature of Firm’s Business, Duration of Partnership, Partners’ Capitals, Interest on Capital, Drawing and Interest on Them, Division of Profit, Partners’ Salary and Commission, Rights and Duties of Partners, Admission and Retirement of Partners, Death of a Partner, Valuation of Goodwill, Revaluation of Assets and Liabilities, Accounts and Audit, Dissolution of Partnership, Arbitration Clause.

Question 30

What are the advantages of cooperatives?

Answer 30

Finance can be raised from members
Buying in bulk reduces costs
Members have limited liability
Members are likely to work hard since they get a share of the profits
It encourages to get involved in the local community.

Question 31

What are the disadvantages of cooperatives?

Answer 31

It can take a long time to make decisions
More members means profits have to be shared with more people
Not all members can be involved if the coop becomes large the value of the share decreases.