Unit 1

Question 1

What is a good

Answer 1

Tangible products

Question 2

What is a service

Answer 2

Intangible products

Question 3

Examples of goods

Answer 3

Phone, toothpaste, food, chocolate,water, car etc

Question 4

Examples of services

Answer 4

Window cleaner, dentist, plumber, haircut etc

Question 5

Transformation process

Answer 5

Input - transformation process - output

Question 6

Transformation process definition

Answer 6

What happens inside the business where value is added to inputs to create outputs

Question 7

Primary sector

Answer 7

Businesses that make direct use of natural resources

Question 8

Secondary sector

Answer 8

Manufacturing products using raw materials

Question 9

Tertiary sector

Answer 9

Businesses that provides a service to customers

Question 10

Mission

Answer 10

A qualitative statement of the business’s aims - the reason the business exists

Question 11

Aims

Answer 11

A long term plan from which business objectives are derived

Question 12

Objectives (2)

Answer 12

A target which must be achieved in order to realise the stated aim.
A time assigned target derived from the goals and set in advance of strategy

Question 13

Main business objectives (7)

Answer 13

Profit
Growth
Survival
Cash flow
Shareholder value
Social/ ethical objectives
Diversification

Question 14

The value of revenue

Answer 14

Achieved in a given period is a function of the number of product sold multiplied by the price that customers paid

Question 15

How do business increase revenues? (6)

Answer 15

Reduce costs
Increase selling price
Have fewer employees
Increase number of sales
Reduce waste
Online presence

Question 16

Variable cost

Answer 16

Costs that changes with output

Question 17

Fixed costs

Answer 17

Costs that don’t change as output changes

Question 18

Semi fixed costs

Answer 18

Fixed costs in the short term, but then changes once a certain level of output is achieved. Eg. Salaries

Question 19

Total costs equation

Answer 19

Fixed costs + variable costs

Question 20

Profit

Answer 20

The reward or return for taking risks and making investments

Question 21

Profit equation

Answer 21

Revenue - total costs

Question 22

Why is profit important to a business? (5)

Answer 22

A return on investment
A reward for taking risks
A key source of finance
A measure of business success
A motivation factor and incentive

Question 23

Contribution per unit equation

Answer 23

Selling price - variable costs

Question 24

Unincorporated businesses

Answer 24

A business that doesn’t possess a separate legal identity from its owner e.g a window cleaner

Question 25

Incorporated businesses

Answer 25

A business that has its own separate legal identity separate from the owners e.g M&S

Question 26

Private limited company (ltd)

Answer 26

Incorporated Registered with government Owned by shareholders

Question 27

Ltd Advantages

Answer 27

Profits only shared between shareholders Able to raise money by borrowing and through the share issue of ordinary shares If the company failed, investors are protected by the rules of limited liability

Question 28

Ltd disadvantages

Answer 28

Must be registered by government Legal set ups are expensive Hard to control and motivate workers as profit only goes to shareholders

Question 29

Public corporation

Answer 29

Incorporated State owned enterprises

Question 30

Public corporations advantages

Answer 30

Easy planning and coordination Raising funds through private sources Protection of public interest

Question 31

Public corporations disadvantages

Answer 31

Misuse of power Consumer interest ignored Financial burden Often difficult to manage

Question 32

Public Limited Company (PLC)

Answer 32

Incorporated Legallly allowed to offer its shares for sale to to the public Needs two shareholders, two directors and company secretary

Question 33

PLC advantages

Answer 33

Visible on stock market Can offer investors liquidity in that investors can sell quickly

Question 34

PLC disadvantages

Answer 34

Less flexibility Financial position disclosed to public

Question 35

Sole trader

Answer 35

Unincorporated Self employed

Question 36

Sole trader advantages

Answer 36

Flexible Independent Financially rewarding if is a success Doing what you like

Question 37

Sole trader disadvantages

Answer 37

Financial risk if not successful Uncertainty Stress

Question 38

Charity

Answer 38

Incorporated Non profit organisation

Question 39

Charity advantages

Answer 39

Exempt from tax Increase public trust Locked assets- no private benefit

Question 40

Charity disadvantages

Answer 40

Can’t make profit Trade can be limited

Question 41

Partnership

Answer 41

Two or more owners that set up a business

Question 42

Partnership advantages

Answer 42

Spreads risk Helps decision making More skills and ideas Increased credibility

Question 43

Partnership disadvantages

Answer 43

Share profit between them Less control Problem when partners disagree

Question 44

Stakeholder

Answer 44

An individual or group that has vested interest in the business. They can affect the business and/or be affected by it

Question 45

Shareholders

Answer 45

Owners of a company

Question 46

Dividends

Answer 46

Payments made to the shareholders by the company from earned profits

Question 47

Capital growth

Answer 47

Arises from an increase in the value of the business

Question 48

Share

Answer 48

An individual part of the issued share capital of a company

Question 49

Share price

Answer 49

Determined by the interaction of supply and demand

Question 50

What is liquidity?

Answer 50

Business liquidity is your ability to cover any short-term liabilities such as loans, staff wages, bills and taxes. Strong liquidity means there's enough cash to pay off any debts that may arise.

Question 51

What is limited liability

Answer 51

Limited Liability is a legal structure whereby shareholders or directors are legally responsible for their company's debts only up to the value of their share. The owner and the business have separate legal identities e.g. PLC or LTD

Question 52

What is unlimited liability?

Answer 52

each business owner is equally responsible for whatever debt accrued within a business if the company is unable to repay or defaults on its debt. An owner's personal wealth can be seized to cover the balance owed.