exam 3

Question 1

internal growth

Answer 1

, expansion of a business by means of opening new branches, shops or factories (also known as organic growth)

Question 2

external growth,

Answer 2

business expansion achieved by means of merging with or taking over another business, from either the same or a different industry

Question 3

merger,

Answer 3

A form of external growth where two businesses combine to form a new business; the new business replaces the two that existed before the merger.

Question 4

acquisition,

Answer 4

A form of external growth where one company purchases another company; it is usually friendly or desired by the company being taken over.

Question 5

takeovers,

Answer 5

A form of external growth where one company purchases another company; typically hostile, or not wanted by the company being taken over.

Question 6

joint venture,

Answer 6

A form of external growth where two businesses create, own and operate a third organisation.

Question 7

strategic alliance,

Answer 7

A form of external growth where two or more businesses work together to achieve common objectives but do not create a new enterprise.

Question 8

Franchising,

Answer 8

A form of external growth where a franchisee buys the rights to use the name and business model of a franchisor.

Question 9

Small businesses

Potential advantages

Answer 9

• Can be managed and controlled by the owner(s)
• Often able to adapt quickly to meet changing customer needs
• Offer personal service to customers
• Find it easier to know each worker, and many staff prefer to work for a smaller, more ‘human’ business
• Easier communication with workers and customers

Question 10

Large businesses

Potential advantages

Answer 10

• Can afford to employ specialist professional managers
• Benefit from cost reductions associated with large-scale production
• May be able to set prices that other firms have to follow
• Have access to several different sources of finance

Question 11

small business
Potential disadvantages

Answer 11

• May have limited access to sources of finance
• May find the owner(s) has to carry a large burden of

responsibility if unable to afford to employ specialist

managers

• Unlikely to benefit from economies of scale

Question 12

large business
potenial disadvantages

Answer 12

• May be difficult to manage, especially if geographically

spread

• May have potential cost increases associated with large-scale

production

• May suffer from slow decision-making and poor

communication due to the structure of the large organisation

Question 13

Market Penetration

Answer 13

Definition: Increasing sales of existing products in existing markets.

Question 14

Market Development

Answer 14

Definition: Selling existing products in new markets.

Question 15

Product Development

Answer 15

Definition: Developing new products to sell in existing markets.

Question 16

Diversification

Answer 16

Definition: Introducing new products in new markets.

Question 17

host countries,

Answer 17

A country that allows a multinational company to operate within its borders.

Question 18

multinational companies (MNCs),

Answer 18

A company that operates in at least two countries, one of which is not the company’s home country.

Question 19

capital expenditure,

Answer 19

Capital expenditure refers to spending on the non-current (fixed) assets of a business. Is also known as investment.

Question 20

revenue expenditure,

Answer 20

is spending on a company’s general operational costs.

Question 21

internal sources of finance

Answer 21

Money for a business that is raised from the business’s or owner’s existing assets.

Question 22

personal funds,

Answer 22

refer to money invested by the owner or owners of a business

Question 23

asset,

Answer 23

items of property that have value and are owned by a person or business, which the business plans on holding or using for longer than one year.

Question 24

retained profits,

Answer 24

are business’ savings. It is the money that a business has left after paying all its costs (expenses, dividen

Question 25

external sources of finance,

Answer 25

Money for a business that is raised from outside the business, such a bank loan.

Question 26

equity finance,

Answer 26

A type of funding whereby the provider receives part ownership of the business in exchange for the finance.

Question 27

business angel,

Answer 27

A wealthy business person who invests their money into new businesses.

Question 28

share capital,

Answer 28

Finance for a business that is raised through the issue of shares to new investors on a stock market.

Question 29

debt finance,

Answer 29

Money that is borrowed from a bank or other financial institution, usually to fund investments.

Question 30

loan capital,

Answer 30

money required to run a business which is raised from loans rather than shares.

Question 31

overdraft,

Answer 31

A high-cost, short-term loan attached to a bank account; allows the account holder to withdraw an amount of money that is greater than the amount they currently hold.

Question 32

microfinance,

Answer 32

Financial services provided to individuals who have very limited income and assets and are not able to get services from traditional banks

Question 33

trade credit,

Answer 33

A type of external finance whereby a business receives products from a supplier immediately, but pays for them at a later date.

Question 34

leasing,

Answer 34

A business renting (hiring) a fixed asset over a period of time, rather than buying it.

Question 35

Crowdfunding,

Answer 35

A form of finance where many people, perhaps thousands, invest small amounts of money to fund a business or project.

Question 36

Personal funds

Answer 36

Personal funds refer to money invested by the owner or owners of a business

Question 36

retained profits

Answer 36

Money that a company has left at the end of the trading year after paying all costs, expenses, dividends and taxes.

Question 37

Sale of assets

Answer 37

An asset is something a business owns. Fixed assets are items of property that have value and are owned by a person or business, which the business plans on holding or using for longer than one year