Unit 1

Question 1

Define Business

Answer 1

An organisation that produces goods and services

Question 2

Define organisation

Answer 2

A group, such as a club or business, that has formed for a particular purpose

Question 3

What is the difference between a good and a service?

Answer 3

A good is a physical product such as a mobile phone or packet of chips. A service is a non-physical product such as banking or a car wash

Question 4

What is the difference between a need and a want?

Answer 4

A need is a basic requirement for human survival. A want is a good or service people desire

Question 5

What is a private enterprise?

Answer 5

Business organisations owned by individuals or groups of individuals that aim to earn profit

Question 6

What is a public enterprise?

Answer 6

A business owned and operated by the government

Question 7

What is a social enterprise?

Answer 7

A non-profit business which aims to raise awareness or help a cause

Question 8

What is the difference between a stakeholder and a shareholder?

Answer 8

A shareholder is someone who owns a part of/stock of your company, while a stakeholder is anyone with an interest in your business

Question 9

Name 5 types of business stakeholders

Answer 9

Employees, customers, managers, financiers, pressure groups

Question 10

What are the 2 types of business objectives

Answer 10

Financial and non-financial

Question 11

Give 3 examples of financial objectives

Answer 11

Survival, making profit, financial security

Question 12

Give 3 examples of non - financial objectives

Answer 12

Personal satisfaction, challenge, independence and control

Question 13

What is the abbreviation for goals and what does it stand for?

Answer 13

SMART - Specific, Measurable, Achievable, Relevant, Time specific

Question 14

What is a sole trader?

Answer 14

A business owned and operated by one person

Question 15

Name 5 advantages of being a sole trader

Answer 15

-The owner keeps all the profit.
-They are independent - owner has complete control.
-It is simple to set up with no legal requirements.
-Flexibility - for example, can adapt to change quickly.
-Can offer a personal service because they are small.

Question 16

Name 5 disadvantages of being a sole trader

Answer 16

-Have unlimited liability.
-May struggle to raise finance- considered too risky by
those that lend money.
-Independence may be too much of a responsibility.
-Long hours and very hard work.
-Usually too small to exploit economies of scale.

Question 17

What is a partnership?

Answer 17

Business owned by between 2 and 20 people.

Question 18

Name 5 advantages of being a partnership

Answer 18

-Easy to set up and run- no legal formalities.
-Partners can specialise in their area of expertise.
-The job of running a business is shared.
-More capital can be raised with more owners.
-Financial information is not published.

Question 19

Name 5 disadvantages of being a partnership

Answer 19

-Partners have unlimited liability.
-Profit has to be shared.
-Partners may disagree and fall out.
-Any partners’ decision is legally binding on all
-Partnerships still tend to be small.

Question 20

Define unlimited liability

Answer 20

Means that the owners of a
business can be held responsible for the
debts of the business they own.

Question 21

What is a franchise?

Answer 21

Structure in which a business (franchisor) allows another operator (franchisee) to trade under their
name.

Question 22

Name 5 advantages of being a franchisor

Answer 22

-Fast method of growth.
-Cheaper method of growth.
-Franchisees take some of the risk.
-Franchisees more
-Motivated than employees.

Question 23

Name 5 disadvantages of being a franchisor

Answer 23

-Potential profit is shared with franchisee.
-Poor franchisees may damage brand’s reputation.
-Franchisees may get merchandise from elsewhere.
-Cost of support for franchisees may be high.

Question 23

Name 5 disadvantages of being a franchisee

Answer 23

• Profit is shared with the franchisor.
  -Strict contracts have to be signed.
  -Lack of independence - Strict operating rules apply.
  -Can be expensive way to start a business.

Question 24

Name 5 advantages of being a franchisee

Answer 24

-Less risk - a tried and tested idea is used. -Back-up support is given. -Set-up costs are predictable. -National marketing may be organised

Question 25

Define limited liability

Answer 25

Business owner is only liable for the original amount of money invested in the business.

Question 26

What is the difference between a private limited company and a public limited company?

Answer 26

A Public Limited Company (PLC) can offer shares to the general public and trade on a stock exchange, while a Private Limited Company (Ltd) does not publicly trade shares and typically has a limited number of shareholders

Question 26

Name 5 advantages of being a private limited company

Answer 26

-Shareholders have limited liability. -More capital can be raised. -Control cannot be lost to outsiders. -Business continues if a shareholder dies. -Has more status - for example, than a sole trader.

Question 26

Define market share

Answer 26

The percentage of an industry or markets total sales that it earned by a particular company over a specified time period.

Question 27

Name 5 disadvantages of being a private limited company

Answer 27

- Financial information has to be made public. -Costsmoney and takes time to set up. -Profits are shared between more members. -Takes time to transfer shares to new owner. -Cannot raise huge amounts of money, like PLCs

Question 28

Name 5 advantages of being a public limited company

Answer 28

-Large amounts of capital can be raised. -Shareholders have limited liability. -PLCs can exploit economies of scale. -May be able to dominate the market. -Shares can be bought and sold very easily. -May have a very high profile in the media

Question 29

Name 5 disadvantages of being a public limited company

Answer 29

- Setting up costs can be very expensive. -Outsiders can take control by buying shares. -More financial information has to be made public. -May be more remote from customers. -More regulatory control owing to Company Acts. -Managers may take control rather than owners.

Question 30

What is a multinational company

Answer 30

A large business with significant production or service operations in at least 2 different countries. (Ownership and control is centred in the host country)

Question 31

What is a public corporation?

Answer 31

A business owned by the government and run by Directors appointed by the government. They give the directors a set of objectives that they will have to follow

Question 32

Name 5 advantages of being a public corporation

Answer 32

-Avoid wasteful duplication -Maintain control of strategic industries -Potential decrease in unemployment rate -Fill the gaps left by the private sector -Serve unprofitable regions

Question 33

Name 5 disadvantages of being a public corporation

Answer 33

- Cost to government -Inefficiency (are often criticised for their low productivity) -Political interference -Difficult to control (very large)

Question 34

What factors affect the appropriateness of different forms of ownership?

Answer 34

Liability, size and scale, capital requirements, control and decision making

Question 35

Name 5 advantages of good location

Answer 35

Cost Efficiency, Market Access, Infrastructure Support, Regulatory Benefits, Competitive Advantage

Question 35

What factors influence business location?

Answer 35

Closeness to the market. Closeness to labour. Closeness to materials. Closeness to competitors. History and tradition. Cost of premises.

Question 36

Name 5 disadvantages of poor location

Answer 36

Increased costs, limited market access, infrastructure challenges, regulatory issues, competitive disadvantage

Question 37

Give examples of businesses in the primary sector

Answer 37

Farming, logging, fishing, forestry, mining, agriculture

Question 37

What is the primary sector?

Answer 37

Any industry involved in the extraction and production of raw materials

Question 37

What is the secondary sector?

Answer 37

the sector of the economy involving converting raw materials into finished and semi finished goods

Question 37

What is the tertiary sector?

Answer 37

The sector of the economy that encompasses industries that provide services rather than directly producing goods

Question 38

Give examples of businesses in the tertiary sector

Answer 38

Commercial, financial and household services

Question 38

Give examples of businesses in the secondary sector

Answer 38

Metal working, car production, energy utilities, ship building

Question 39

What is the quaternary sector?

Answer 39

Industries that focus on intellectual activities, including research and development, information technology, education, and consulting

Question 40

Define globalisation

Answer 40

Globalisation is the growing integration of world’s economies.

Question 41

What a

Question 41

Name some disadvantages of globalisation

Answer 41

-Competition country. economy. -International takeovers: a business in one country can take over a business in another -Increased risk of external shocks: events in one economy are likely to affect another

Question 41

Name some advantages of globalisation

Answer 41

-Access to larger markets -Lower costs -Access to labour since people are free to move around the world to find employment -Reduced taxation as the business can choose to locate their head office in a country with low corporation tax.