Unit 1- What Is A Business?

Question 1

Business

Answer 1

Any organisation that makes goods or provides services

Question 2

Suppliers

Answer 2

Firms selling products to other businesses and sell to customers

Question 3

Consumer

Answer 3

Individual who uses the product

Question 4

Adding value

Answer 4

Process of making a product more valuable to the purchaser

Question 5

Ways of adding value:

Answer 5

•product features and benefits
•convience
•branding
•quality/design
•USP
•speed and excellent service

Question 6

Mission statement

Answer 6

What the business wants to achieve
(The overall purpose of the business)

Question 7

Corporate/strategic objectives

Answer 7

Goals of the business as a whole

Question 8

Functional objectives

Answer 8

Objectives specific to a department

Question 9

Define SMART objectives

Answer 9

S- specific
M- measurable
A- achievable
R- realistic
T- time specific

Question 10

Public business

Answer 10

Owned and run by the government

(Aim is to provide for the public rather than making a profit)

Question 11

Private business

Answer 11

Owned by private individuals
(Includes charities)

Question 12

5 types of business ownership

Answer 12

• Sole trader
• Partnership
• Private limited companies (Ltds)
• Public limited companies (Plcs)
• social enterprise

Question 13

Unlimited liability

Answer 13

The owner of the business being legally responsible for all the debts of the business

Question 14

Limited liability

Answer 14

The owners of the business only having part responsibility for the debts of the business

Question 15

Advantages and disadvantages of a sole trader

Answer 15

Individual owns the business
+quick easy set up
+simple to run
+easy to close
-unlimited liability
-harder to raise finance
-limited expertise

Question 16

Advantages and disadvantages of a partnership

Answer 16

Started and owned by more than one person
+more expertise
+shared risk
+more ideas
-unlimited liability
-arguments
-share profit
-to close the business everyone must agree to shut down

Question 17

Private limited company(Ltd)

Answer 17

•can’t sell shares to the public
•can sell shares to friends and family
•often family businesses

Question 18

Public limited company (plc)

Answer 18

•can sell shares to the public
•shares are freely transferable and can be bought and sold through stockbrokers, banks and share shops

Question 19

Advantages and disadvantages of public limited company

Answer 19

+limited liability
+generate capital
+potentially less tax
-disagreements between shareholders
-greater admin costs
-Must disclose company info

Question 20

Ordinary share capital

Answer 20

Shares are sold by companies to raise money (this money is ordinary share capital)

Question 21

Market capitalisation is the total of al the ordinary

Answer 21

The total of all the ordinary shares issued by a company

Market capitalisation= no. Issued shares x current share price

Question 22

Shareholders

Answer 22

Owners of the company
(Must own at least one share)

Question 23

Stock

Answer 23

•type of security that represents ownership in a corporation
•sold on the stock exchange

Question 24

Roles of shareholders

Answer 24

•provide funds
•more shares = more power
•most shareholders are not involved in the running of the business

Question 25

Dividends

Answer 25

•a payment from accumulated profits earned by a company to shareholders who qualify for payment •can only be paid if the business makes a profit •the payment of a dividend per share is authorised by the shareholders

Question 26

Capital gain

Answer 26

Buying shares low and selling at a greater price

Question 27

Causes for increase and decrease in share prices

Answer 27

•performance of the company •speculation and rumours of new products •current share price •interest rates (if bank offering low interest rates could increase demand of shares) •state of the economy/external factors

Question 28

Rights issued

Answer 28

When a company issues existing shareholders a right to buy additional shares often at a discounted price

Question 29

What does PESTLE stand for?

Answer 29

Political Economical Social Technological Legal Environmental

Question 30

3 types of sectors

Answer 30

•public •private •voluntary

Question 31

Private sector

Answer 31

Businesses set up by entrepreneurs

Question 32

Public sector

Answer 32

Goods and services produced by government owned organisations

Question 33

Voluntary sector

Answer 33

Includes charities and societies that exist to help people

Question 34

Privatisation

Answer 34

The government sells off some of what it owns to the private investors moving from the public to private sector

Question 35

Satisfycing

Answer 35

Surviving comfortably

Question 36

Business environment

Answer 36

Incorporates all the internal and external factors that affect how the company functions

Question 37

Areas of business environment | Think about the factors of PESTLE

Answer 37

-physical environment -culture -safety -happiness -political factors -business confidence

Question 38

Reasons for a public business

Answer 38

1) private business may not be able to make profit Eg. Street lights 2) Too important to allow private firms to run Eg. Army

Question 39

Ethics

Answer 39

Moral principles or standards that guide the behaviour of a person or business