Unit 1- what is a biz

Question 1

what are some primary sector business examples?

Answer 1

agriculture, forestry, fishing, mining and quarrying, oil and gas

Question 2

what are some secondary sector business examples?

Answer 2

manufacturing, construction, the supply of electricity, gas and water

Question 3

what are some tertiary sector business examples?

Answer 3

the supply of services, eg: hotels, catering, transport, education and health

Question 4

what are some objectives a business might have?

Answer 4

-profit and profit maximisation: maximised when difference between sales and total costs is at its greatest
-growth: earn higher profits (higher dividends), expand
-survival: continue to trade, essential when periods of recession or intense comp, times of crisis: hostile takeover
-cash flow: movement of cash in and out of the business
-social and ethical objectives: employment, protecting the environment, make the business more attractive

Question 5

profit formula

Answer 5

total revenue/ total costs

Question 6

what is diversification?

Answer 6

increased range of unrelated goods and services

Question 7

what are fixed costs?

Answer 7

costs that do not change, they don’t alter when the business alters its level of output. eg: rent, salaries.

Question 8

what are variable costs

Answer 8

costs that change, they alter when the business alters its level of output. eg: raw materials, fuel costs

Question 9

total costs formula

Answer 9

fixed costs + variable costs

Question 10

avg. costs formula

Answer 10

total costs of production / the level of production or output to give the costs of producing a single unit of output

Question 11

revenue formula

Answer 11

quantity sold x avg selling price

Question 11

what is profit margin?

Answer 11

the amount or % of the final selling price that is profit

Question 12

who owns private sector businesses?

Answer 12

-owned by shareholders or private individuals not owned by the government

Question 13

what is a sole trader?

Answer 13

-a singular person who owns a business

Question 14

adv of being a sole trader

Answer 14

-be your own boss
-all profits go to them
-easy to start up
-choose when they work
-no orders/ freedom
-declare profits HMRC

Question 15

dis of being a sole trader

Answer 15

-unlimited liability
-hold all responsibilities
-demanding job
-1 set of skills and knowledge
-may not be able to go on holiday as they may risk loosing customers

Question 16

what are companies?

Answer 16

-owned by shareholders, the more shares, the more the company belongs to them
-limited liability
-shareholders get paid in dividends

Question 17

adv of private limited companies (ltd)

Answer 17

-cheap
-limited liability
-owned by shareholders
-many are owned by families: limits the sale of shares to family so no outsiders get involved

Question 18

why be an ltd and not a plc?

Answer 18

-desire to retain control of the business
-taking decisions in the company’s long-term interest
-enjoying the profits generated by the business

Question 19

what is a public limited company (plc)?

Answer 19

a business that anyone can buy shares into
-bigger than an ltd
-can measure the size using market capitalisation
-market capitalisation is the total value of the issued share of a plc

Question 20

market capitalisation formula

Answer 20

current share price x no. of shares outstanding

Question 21

adv of being a plc

Answer 21

• access to capital
  -publicity
  -takeovers

Question 22

what are the reasons for changing business forms?

Answer 22

-growth
-privatisation: raising large sums of money for the gouvernment

Question 23

what are public sector businesses?

Answer 23

owned (and sometimes funded by) the national or local gouvernemt

Question 24

what re the 3 major elements of the public sector?

Answer 24

-public corporations: channel 4 TV, airport -public services: NHS -municipal services: libraries, leisure centres

Question 25

what are not-for-profit businesses

Answer 25

-when profit is not the main objective -eg: charities, the eden project, the big issue

Question 26

who buys shares?

Answer 26

in the uk, financial institutions such as banks, pension funds and insurance companies own the most company shares

Question 26

why buy shares?

Answer 26

-mainly financial reasons -may benefit from an increase in share price and from receiving a share of the profits in the forms of dividends

Question 27

what are the risks of buying shares?

Answer 27

-price of shares can easily fall -can make lower profits than expected= lower dividends -reduction of share prices in the short-term

Question 28

what is the role of shareholders?

Answer 28

-can influence decision making -voting rights: 1 share= 1 vote -all shareholders receive a copy of 'the annual report' -shareholders are invited to AMGs (annual general meetings)

Question 29

what are some influences on share price?

Answer 29

-company's performance -environment in which the business trades -business doing well= share price should benefit -economic conditions are good= investors feel confident -demand for shares increases -troubled economic conditions=worried investors= demand for shares decreases

Question 30

what external factors might affect demand?

Answer 30

-market conditions and competition -incomes -interest rates -demographic factors -environmental issues and fair trade -inc in interest rates= pay moron loans= less income available for spending

Question 31

positive factors on demand

Answer 31

-rising demand-> product popularity -major competitor leaves -no. of customers increases

Question 32

negative factors on demand

Answer 32

-customers demand environmentally friendly products -> increasing the business's costs -new entrant to the market: more competition -market being over supplied with products- depressive prices

Question 33

what are the benefits of rising share prices?

Answer 33

-reflects well on the management team -may receive bonuses -easier to raise capital -more attractive shares -banks may be more willing to offer loans

Question 33

what are the effects of a falling share price?

Answer 33

-might be difficult to raise capital -vulnerable to take over -cost of buying a controlling interest in the business reduces -might be a response to a short term factor such as profits being bellow expectations - not long-term

Question 33

what are the effects of ownership on a business's mission, objectives, decisions and performance?

Answer 33

-mission: impact on the business's overall direction -objectives: follows on from the mission -decisions: impact on the complexity of decisions, affects the decisions of key stakeholders such as: employees, customers, shareholders, etc. -performance: influenced by things such as the state of the economy, as well as the form of the business, may be able to produce lower costs-> tech, potential to increase profits

Question 34

what suffers from a strong influence in demand based on incomes?

Answer 34

-jewellery -luxury electrical items -restaurant meals -long haul holidays -furniture

Question 34

what suffers from a weak influence in demand based on incomes?

Answer 34

-bread and milk + other basic foods -cigarettes and tobacco -petrol -water -lottery tickets

Question 34

what is the importance of interest rates?

Answer 34

-banks control this as well as the economy in the country -higher interest rates=lower demand -supermarkets such as lidl might benefit from this- cheaper -businesses with a high gearing might be impacted by this -rise in interest rates will increase the cost of production

Question 35

what are demographic factors?

Answer 35

factors relating to the population -age, gender, health, immigration, death/ birth rates

Question 36

what is the importance of environmental factors and fair trade?

Answer 36

businesses should not ignore environmental issues and this often determines customer's decisions -global warming- carbon emissions -fair trade for farmers and workers in less developed countries -more costs but enhanced reputation and increase in demand

Question 36

what is PESTLE?

Answer 36

-P olitical -E conomic -S ocial -T echnological -L egal -E nvironmental