Unit 1 What is Business

Question 1

Primary Sector of the Economy

Answer 1

The extraction of raw materials from the earth e.g. farming, fishing, mining

Question 2

Secondary Sector of the Economy

Answer 2

Transforming of refining the raw materials e.g. manufacturing and construction

Question 3

Tertiary Sector of the Economy

Answer 3

The service industry e.g. retail, hotels, and financial services

Question 4

Mission Statement

Answer 4

A statement of an organisation’s general purpose and reason for existance

Question 5

Corporate Aims

Answer 5

Long - term targets set to allow a business to develop and achieve its mission

Question 6

Corporate Objectives

Answer 6

Goals of the whole organisation rather than different elements of the organisation

Question 7

Functional Objectives

Answer 7

Goals of each of the functional areas of a business they are designed to ensure that the business achieves its corporate objective and thus its mission

Question 8

Diversification

Answer 8

Establishing a USP, launching new products in new markets

Question 9

Break - Even

Answer 9

Ensuring all costs are covered by the firm’s revenue

Question 10

Strategy

Answer 10

The medium to long term plans through which an organisation intends to achieve its objectives

Question 11

Cash Flow

Answer 11

The amount of money flowing into and out of a business over a period of time

Question 12

Price

Answer 12

The amount paid by a consumer to purchase one unit of a product

Question 13

Total Revenue

Answer 13

The income received from an organisations activities

Question 14

Fixed Costs

Answer 14

Costs that do not vary with output in the short term for example rent

Question 15

Variable Costs

Answer 15

Costs that vary directly with output in the short term for example raw materials

Question 16

Semi - Variable Costs

Answer 16

Costs that combine elements of fixed and variable costs

Question 17

Profit

Answer 17

The difference between the income of a business and its total costs

Question 18

Limited Liability

Answer 18

The liability of the owners of a business is limited to the fully paid - up value of its share capital (public and private limited companies)

Question 19

Private Sector Organisations

Answer 19

Organisations that are owned and run by private individuals.

Question 20

Public Sector Organisations

Answer 20

Organisations that are owned and operated by the government whether at national or local level.

Question 21

Unincorporated Business

Answer 21

There is no distinction in law between the individual owner and the business itself.

Question 22

Incorporated Business

Answer 22

This has a legal identity that is separate from the individual owners.

Question 23

Unlimited Liability

Answer 23

A situation in which the owners of a business are liable for all the debts that the business may incur

Question 24

Sole Trader

Answer 24

A business owned by one person. The owner may operate on their own or may employ other people

Question 25

Private Limited Company

Answer 25

A small to medium - sized business that is usually run by the family or the small group of individuals who own it.

Question 26

Public Limited Company

Answer 26

A business with limited liability, share capital of over £50,000, at least two shareholders, two directors, a qualified company secretary and, usually, a wide spread of shareholders. It has PLC after the company name.

Question 27

Ordinary Share Capital

Answer 27

Relates to private and public limited companies. Also known as risk capital or equity capital

Question 28

Market Capitalisation

Answer 28

Is the total value of the issued ordinary shares of a public limited company

Question 29

Dividend

Answer 29

A payment made by a company to its shareholders out of profits earned.

Question 30

Shareholder

Answer 30

The owner of a limited company; any person, company or other institution that owns at least one share in a company

Question 31

Share Price

Answer 31

The price of a single share in a company share prices are usually determined by the supply and demand for shares

Question 32

Demand

Answer 32

The amount of a product (ie. a good or a service) that consumers are willing and able to buy at any given price over a period of time

Question 33

Interest Rates

Answer 33

The cost of borrowing money and the return for lending money

Question 34

Demographics

Answer 34

The characteristics of human populations and population groups; it includes analyses of a range of elements including migration trends, birth and death rates, trend in age, ethnicity and gender, levels of education, marital status and size of family