Business: Understanding Business Activity

Question 1

need

Answer 1

a good or service essential for living

Question 2

want

Answer 2

a good or service which people would like to have, but not essential for living

Question 3

economic problem

Answer 3

unlimited wants but limited resources to produce the goods and services to satisfy those wants

Question 4

factors of production

Answer 4

resources needed to produce goods or services (Capital, Enterprise, Land, Labour)

Question 5

scarcity

Answer 5

lack of sufficient products to fulfil the total wants of the population

Question 6

opportunity cost

Answer 6

the next best item given up by choosing another item

Question 7

specialisation

Answer 7

people and businesses focus on what they are good/best at

Question 8

division of labour

Answer 8

production process is split up into different tasks and each worker performs one of these tasks

Question 9

businesses

Answer 9

combine factors of production to make products (goods and services) which satisfy people’s wants

Question 10

added value

Answer 10

difference between selling price and cost of brought-in materials and components

Question 11

primary sector

Answer 11

industries that extracts and uses natural resources from the Earth to produce raw materials used by other businesses

Question 12

secondary sector

Answer 12

industries that manufactures goods using raw materials provided by the primary sector

Question 13

tertiary sector

Answer 13

industries that provides services to consumers and other sectors of the industry

Question 14

industrialisation

Answer 14

the decline in the importance of extracting raw materials and increase in the importance of manufacturing goods

Question 15

deindustrialisation

Answer 15

the decline in importance of the manufacturing sector of the industry and the increase in the importance of providing services to the consumer market

Question 16

mixed economy

Answer 16

has both a private sector and a public (state) sector

Question 17

capital

Answer 17

money invested into a business by the owners

Question 18

entrepreneur

Answer 18

a person who organises, operates and takes the risk for a new business venture

Question 19

business plan

Answer 19

a written document containing the business objectives and important details about the operations, finance and owners of the new business

Question 20

capital employed

Answer 20

the total value of capital used in a business

Question 21

internal growth

Answer 21

when a business expands its existing operations

Question 22

external growth

Answer 22

when a business takes over or merges with another business

Question 23

takeover

Answer 23

when one business buys out the owners of another business

Question 24

merger

Answer 24

when the owners of two businesses agree to join their businesses together to make one business

Question 25

horizontal integration

Answer 25

when one business merges or takeovers another one in the same industry at the same stage of production

Question 26

vertical integration

Answer 26

when one business merges or takeovers another one in the same industry at a different stage of production

Question 27

conglomerate integration/diversification

Answer 27

when one business takes over or mergers with a business in a completely different industry

Question 28

sole trader

Answer 28

a business that is owned by one person

Question 29

unlimited liability

Answer 29

the owners of the business can be held responsible for the debts of the business they own

Question 30

limited liability

Answer 30

the liability of shareholders in a company is limited to only the amount they invested

Question 31

no continuity

Answer 31

can't sell off the business, owners have to reregister

Question 32

partnership

Answer 32

a form of business in which two or more people agree to jointly own a business

Question 33

partnership agreement

Answer 33

the written and legal agreement between business partners-not essential but recommended

Question 34

deed of partnership

Answer 34

a legally binding document, drawn up by business partners

Question 35

unincorporated business

Answer 35

one that does not have a separate legal identity

Question 36

private limited company (LTD)

Answer 36

businesses owned by shareholders but they cannot sell shares to the public

Question 37

incorporated business

Answer 37

companies that have separate legal identity from their owners

Question 38

shareholders

Answer 38

wonders of a limited company- buy shares which represent part-ownership of the company

Question 39

public limited company (PLC)

Answer 39

businesses owned by shareholders but they can sell shares to the public and their shares are tradable on the Stock Exchange

Question 40

annual general meeting

Answer 40

a legal requirement for all companies- shareholders may attend and vote on. who they want to be on the Board of Directors for the coming year

Question 41

dividends

Answer 41

payments made to shareholders from the profits (after tax) of a company- the return to shareholders for investing in the company

Question 42

franchise

Answer 42

a business based upon the use of the brand names, promotional logos and trading methods pop an existing successful business- franchisee nits the license to operate this business from the franchisor

Question 43

joint venture

Answer 43

two or more businesses start a new project together, sharing capital, risks and profits

Question 44

public corporations

Answer 44

a business in the public sector that is owned and controlled by the government

Question 45

business objectives

Answer 45

aims or targets that a business works towards

Question 46

profit

Answer 46

total income of a business (revenue) minus total costs -aim for satisfactory level of profits which will avoid owners having to work too many hours or pay too much in tax to the government

Question 47

purpose of profit

Answer 47

-pay a return -provide finance

Question 48

survival

Answer 48

new competitors make a business feel less secure -owners of business may lower prices to survive, even though this would lower the profit on each item sold

Question 49

purpose return to shareholders

Answer 49

discourage shareholders from selling shares and helps managers keep their jobs

Question 50

how to increase return to shareholders

Answer 50

-increasing profit -increasing share price

Question 51

purpose of growth

Answer 51

-make jobs more secure if the business is larger -increase the salaries and status of managers as the business expands -open up new possibilities and help to spread the risks of the business by moving into new products and new markets -obtain a higher market share from increase in sales -economies of scales

Question 52

market share

Answer 52

the percentage of total market sales held by one brand or business

Question 53

what does increased market share give a business

Answer 53

-good publicity -increased influence over suppliers 0increased influence over customers

Question 54

social enterprise

Answer 54

includes social objectives as well as an aim to make profit to reinvest back into the business

Question 55

why do business objectives change

Answer 55

-working towards higher profit -earning higher returns for shareholders -short-term objective of survival

Question 56

stakeholder

Answer 56

any person or group with a direct interest in the performance and activities of a business

Question 57

internal stakeholders

Answer 57

direct relationship/interest with the company through employment ownership or investment

Question 58

external stakeholders

Answer 58

indirectly affected by the company's decisions and outcomes

Question 59

what do consumers want

Answer 59

low prices and high quality

Question 60

what do local community want

Answer 60

good environment and jobs

Question 61

what do workers want

Answer 61

jobs and stability

Question 62

what do directors want

Answer 62

growth of business