Topic 1 What Is Business

Question 1

What are business objectives

Answer 1

Specific intended outcomes of business strategy and activity
Targets which a business sets to help it achieve its aims

Question 2

What are the main functions of business objectives

Answer 2

State what needs to be achieved
A focus for all activity
Targets for individual and group achievement
A way to measure performance

Question 3

What are the typical corporate objectives

Answer 3

Sales revenue
Profit
Return on investment
Growth
Market share
Cash flow
Value of the business
Corporate image and reputation

Question 4

What should all business objectives be ?

Answer 4

SMART ::::
Specific
Measurable
Achievable
Relevant
Time bound

Question 5

What is a mission statement

Answer 5

The overriding purpose of the business
The reason for its existence
A strategic perspective
Supports the stated ‘vision’ for the future

Question 6

What is a mission statement not intended to be

Answer 6

Statement of goals or objectives
Statement of core values
A statement of how the business intends to compete or position itself in the market

Question 7

What are the key audiences for a mission statement

Answer 7

Employees
Customers
Investors
Society

Question 8

Example of what would make a good mission

Answer 8

A clear sense of business purpose
Excites, the Napier’s and motivates and guides
Easy to understand and remember

Question 9

An example of a mission statements

Answer 9

Our vision is to Create a better everyday life for the many people

IKEA

Question 10

What are common criticisms of mission statement

Answer 10

Not always supported by actions of the business
Often too vague and general

Question 11

What are costs

Answer 11

Costs are amounts that a business incurs in order to make good and or provide service

Question 12

Why are costs important

Answer 12

It’s the thing that drains away the profits made by a business
Show a the difference between making a good and poor profit margins
They are the main cause of cash flow problems

Question 13

What are variable costs

Answer 13

Cost which change as output varies

Question 14

What are fixed costs

Answer 14

Costs which do not change when output varies

Question 15

What are some examples of variable costs

Answer 15

Raw material
Bought in stock
Wages based on hours worked or amount produced

Question 16

Examples of fixed costs

Answer 16

Rent and rates
Salaries
Advertising
Insurance

Question 17

How do you calculate total costs

Answer 17

Total costs(TC) = fixed costs FC + variable costs VC

Question 18

What are the different forms of business
The over view

Answer 18

Private sector
Unincorporated. Incorporated
Sole trader and Private LC
Partnership AND public LIMED

Question 19

What is unincorporated

Answer 19

The owner is the business
Owner had unlimited liability for business actions including debts
More business operate as sole trader

Question 20

What is incorporated

Answer 20

Legal difference between the business company and the owner
Owners (shareholders) have limited liability
Most incorporated businesses operate as private limited companies.

Question 21

What is unlimited liability

Answer 21

A characteristic of unincorporated businesses
Business owner/s are personally responsible for the debts and liabilities of the business
If the unincorporated business fails the owners are liable for the amounts owed
Unlimited liability adds to the risk of operating as a sole trader or partnership.

Question 22

What is the importance of limited liability

Answer 22

An important protection for shareholders in a company
Shareholders can only lose the value of their investment
They are not liable for the debts of the company

Question 23

What is a sole trader

Answer 23

Most common type of business form
A sole trader is an individual owning the business on his/her own
A sole trader is an individual owning the business on his her own
Sole trader owns all the business assets personally and is personally responsible for the business debts. Aisle trader has unlimited liability

Question 24

What are the advantages of sole trader

Answer 24

Quick and easy to set up business can always be transferred to a limited company once launched
Simple to run-owner has complete control over decision-making
Minimal paperwork

Question 25

What are the disadvantages of sole trader

Answer 25

Full personal liability- unlimited liability Harder to raise finance The business is the owner-the business suffers if the owner becomes I’ll loses interest Can pay a higher tax rate than a company

Question 26

What is parterships

Answer 26

Where a business is started and owned by more than me person The legal partnership agreement sets out how the partnership is run,covering areas such as how profit are to be shared The patterns between them own all the business asserts and owe all business liabilities

Question 27

What are the benefits of partership

Answer 27

Quite simple it’s the simplest way for two or more people to form a business Minimal paperwork once Partnership agreement set up Business benefits from the expertise and effects of more than one owner

Question 28

What are the drawbacks of partnership

Answer 28

Full personal liability - unlimited liability A poor decision by one parter damages the interest of the other parter Harder to raise finance than a company

Question 29

What is a limited companies

Answer 29

They are separate legal entities to the founders Companies are owned by their shareholders and run by directors. The shareholders appoint the directors(often the same people) who run the company in the intersection of the shareholders

Question 30

What are the advantages of limited company

Answer 30

Limited liability-protects the shareholders Easier to raise finance - sale of shares and also easier to raise debt Stable form of structure-business continues to exist even when shareholders change

Question 31

What are the disadvantages limited company

Answer 31

Greater admin costs Public disclosure of company information Directs legal duties

Question 32

What is a private sector

Answer 32

In the private sector businesses are operated and owned by private individuals and companies Private sector businesses are generally run ‘for profit’ to earn returns for the business owners

Question 33

What is public sector

Answer 33

In the public sector, businesses and other organizations are owned and run on behalf of the public either by the government itself or by organizations who are funded and report to government Public sector business are not generally run for profit but exit to provide goods and services to the public using public funds

Question 34

What is a company

Answer 34

A Company is a separate legal entity. The owners of a company are shareholders

Question 35

What is private limited companies

Answer 35

Most popular form of incorporated business Privately-owned Shares cannot be traded publicly Usually just 1 or a few shareholders

Question 36

What is public limited companies

Answer 36

Minimum share capital 50,000 Shares may be traded on public stock market Usually many shareholders Costly to administer

Question 37

What is a share

Answer 37

An individual part of the issues share capital of company

Question 38

What are dividends

Answer 38

Payments made to shareholders by the company from earned profits

Question 39

What is capital growth (capital gain)

Answer 39

Arises from an increase in the value of the business Reflected in an increase in a share price

Question 40

What is share price

Answer 40

Like any other price a share price is determined by the interaction of supply and demand

Question 41

What are factors within the company’s control

Answer 41

Financial performance Dividend policy Management reputation

Question 42

Factors outside the company control

Answer 42

State of the economy General market sentiment Industry developments potential for takeover

Question 43

What is market capitalization formula

Answer 43

Share price(per share) x number of shares in issues

Question 44

What is revenue formula

Answer 44

Revenue = volume sold (units) x selling price per unit

Question 45

What does demand mean

Answer 45

Demand is the quantity that consumers are willing and able to purchase at various prices during a given period of time

Question 46

What is revenue

Answer 46

The sales value of what a business actually sell