Chapter 7- economic change affecting business

Question 1

Working Capital

Answer 1

refers to the finance needed by a business to cover production costs (ed, rent, wages) until payment is received.

Question 2

interest rates

Answer 2

specifies the amount which has to be paid by the borrower to the lender. Where there is risk is that the lender will not be repaid, the rate will be higher.

Question 3

income tax

Answer 3

is decided on the income of the individuals. There is a personal allowance which is tax free, which is generally increased by the rate of inflation in the budget each year.

Question 4

corporation tax

Answer 4

is paid by businesses; the level will be a percentage of the profits made.

Question 5

VAT

Answer 5

=value added tax
is collected by businesses and takes 20% of the value of the sales, less the cost of all the inputs bought from other businesses.

Question 6

Skill shortages

Answer 6

occur when the people available for work do not have the skills that employers are seeking. This is likely when the economy is growing, unemployment is low, and new technologies are being developed.