Business Terms

Question 1

What is a Sole Trader?

Answer 1

A business owned and run by one person with unlimited liability.

Question 2

What is a Partnership?

Answer 2

A business owned by 2–20 people who share profits and have unlimited liability.

Question 3

What is a Private Limited Company (Ltd)?

Answer 3

A company with limited liability, owned by shareholders (usually family/friends), and can’t sell shares to the public.

Question 4

What is a Public Limited Company (Plc)?

Answer 4

A company with limited liability that can sell shares to the public via the stock market.

Question 5

What is a Franchise?

Answer 5

A business that uses another company’s brand and model; the franchisee runs it under a franchisor’s system.

Question 6

What is a Not-For-Profit Organisation?

Answer 6

A business that aims to help society; profits are reinvested instead of taken by owners.

Question 7

What is limited liability?

Answer 7

When the owner’s personal assets are protected—only the money invested in the business can be lost.

Question 8

What is unlimited liability?

Answer 8

When the owner is personally responsible for all business debts, even if it means using personal assets.

Question 9

What is an internal source of finance?

Answer 9

Finance that comes from inside the business.

Question 10

What is retained profit (internal)?

Answer 10

Profit kept in the business and used to fund operations or growth.

Question 11

What is sale of assets (internal)?

Answer 11

Selling business-owned items (e.g., machines, vehicles) to raise cash.

Question 12

What is an external source of finance?

Answer 12

Finance that comes from outside the business.

Question 13

What is a bank loan (external)?

Answer 13

Borrowed money from a bank, repaid over time with interest.

Question 14

What is an overdraft (external)?

Answer 14

A short-term option allowing a business to spend more than its bank balance.

Question 15

What is trade credit (external)?

Answer 15

Buying goods/services now and paying later.

Question 16

What is venture capital (external)?

Answer 16

Investment from an individual or firm in exchange for part ownership.

Question 17

What is market research?

Answer 17

The process of gathering information about customers, competitors, and the market.

Question 18

What is primary research?

Answer 18

New data collected first-hand by the business (e.g., surveys, interviews).

Question 19

What is secondary research?

Answer 19

Using existing data collected by others (e.g., internet, reports, newspapers).

Question 20

What is risk in business?

Answer 20

The chance of loss or failure when making business decisions.

Question 21

What is reward in business?

Answer 21

The benefits gained from taking a risk, like profit or business growth.

Question 22

What are customer needs?

Answer 22

The wants and expectations that customers have when buying a product or service.

Question 23

What are four key customer needs?

Answer 23

Price, quality, choice, convenience.

Question 24

Give three common business aims.

Answer 24

Survival, profit, growth.

Question 25

How do aims and objectives change as a business grows?

Answer 25

New businesses may aim to survive; larger ones may aim for growth or social goals.

Question 26

What is the marketing mix?

Answer 26

The four key decisions a business makes to meet customer needs: Product, Price, Place, Promotion.

Question 27

Why is the economy important for businesses?

Answer 27

It affects how much customers spend, business costs, and confidence in investing or growing.

Question 28

What is interest rate?

Answer 28

The cost of borrowing money or the reward for saving money.

Question 29

How does unemployment affect businesses?

Answer 29

May reduce customer spending but makes it easier to hire workers.

Question 30

What is globalisation?

Answer 30

The growing interconnection of countries through trade, communication, and business.

Question 31

How does globalisation affect businesses?

Answer 31

It creates more competition, new markets, and access to cheaper resources.

Question 32

How can acting ethically affect a business?

Answer 32

It can increase costs but improve reputation and customer loyalty.

Question 33

What is an ethical trade-off?

Answer 33

When doing the right thing increases business costs.

Question 34

What is sustainability?

Answer 34

Running a business without harming the environment or future generations.

Question 35

What is legislation in business?

Answer 35

Laws that businesses must follow to protect workers, consumers, and the environment.

Question 36

What does employment law cover?

Answer 36

Workers’ rights like fair pay, health and safety, and protection from discrimination.

Question 37

How does employment law affect businesses?

Answer 37

Increases responsibilities and costs, like paying minimum wage and providing safe working conditions.

Question 38

What does consumer law cover?

Answer 38

The rights of customers when buying goods and services.

Question 39

What are fixed costs?

Answer 39

Costs that stay the same no matter how much is produced (e.g., rent).

Question 40

What are variable costs?

Answer 40

Costs that change depending on how much is produced (e.g., raw materials).

Question 41

What is a cash flow forecast?

Answer 41

A prediction of future cash inflows and outflows.

Question 42

Why is a cash flow forecast useful?

Answer 42

Helps plan for shortages, avoid running out of money, and support decision-making.

Question 43

What is the difference between profit and cash?

Answer 43

Profit is earnings after costs; cash is the actual money available to spend.