Unit 1- What Is Business?

Question 1

What is a service?

Answer 1

An intangible item

Question 2

What do businesses do?

Answer 2

Transform inputs or resources into goods or services

Question 3

Gross Domestic Product (GDP)

Answer 3

Measures the total value of the production of an economy over a period of time, usually a year

Question 4

Primary business

Answer 4

Extraction of natural resources

Question 5

Secondary business

Answer 5

Production of finished goods or components

Question 6

Tertiary business

Answer 6

Providing services to consumers and businesses

Question 7

Inputs

Answer 7

Capital
Enterprise
Land
Labour

Question 8

Added value

Answer 8

The process of increasing the worth of products by modifying them

Question 9

Added value equation

Answer 9

Selling price - cost of bought in materials, components and services

Question 10

Mission statement

Answer 10

Sets out a businesses overall purpose to direct and stimulate the entire organisation

Question 11

Aims

Answer 11

Long-term plans of a business from which its corporate objectives are derived

Question 12

Objectives

Answer 12

Medium to long-term goals established to coordinate the business

Question 13

SMART objectives

Answer 13

To be effective, objectives should be SMART
Specific
Measurable
Agreed
Realistic
Time specific

Question 14

Common business objectives

Answer 14

Profits and Profit Maximisation
Growth
Survival 
Cash Flow
Social and Ethical
Diversification

Question 15

Profit

Answer 15

Measures the extent to which revenues from selling a product exceed the costs incurred from producing it over a time period

Question 16

Cash flow

Answer 16

The amount of money moving into and out of a business,mover a time period

Question 17

Stakeholders

Answer 17

Individuals or groups that have an interest in a business (eg, employees, shareholders, customers, local residents)

Question 18

Revenues

Answer 18

The earnings or income generated by a firm as a result of its trading activities

Question 19

Fixed costs

Answer 19

Costs that do not alter when the business alters it’s level of output (eg, rent, wages)

Question 20

Variable costs

Answer 20

Alter directly with the businesses level of outputs (eg, fuel costs, raw materials)

Question 21

Total costs

Answer 21

Fixed costs + variable costs

Question 22

Unit costs/Average costs

Answer 22

Total costs divided by level of production or output to give the cost of producing a single unit

Question 23

What is a good?

Answer 23

A physical product

Question 24

Private sector

Answer 24

When a business is owned by shareholders or by private individuals

Question 25

Sole trader

Answer 25

A business owned and managed by one person, but may employ other people

Question 26

Advantages of sole trader

Answer 26

Making key decisions can be motivating Decisions can be made quickly so can react rapidly to changes in market Have direct contact with market Straightforward to setup

Question 27

Disadvantages of sole trader

Answer 27

Sources of finance are limited Rely heavily on ability of making decisions Entail long hours, limited holiday and stress Unlimited liability

Question 28

Unlimited liability

Answer 28

An individual or group of individuals are personally responsible for the actions of their business. This means they could lose all their assets if the business had financial problems

Question 29

Company

Answer 29

A business or organisation that has its own identity and has limited liability

Question 30

Incorporation

Answer 30

The process of establishing a business as a separate legal identity that allows it to benefit from limited liability

Question 31

Shareholder

Answer 31

An investor in and one of the owners of a company

Question 32

Limited liability

Answer 32

Means in the event of financial difficulties the personal belongings of shareholders are safe

Question 33

Dividends

Answer 33

A share in the profits of a company that are distributed to the holders of certain types of company shares

Question 34

Public sector business

Answer 34

Organisations that are owned by national and local government

Question 35

Market capitalisation

Answer 35

Total value of issued shares of a PLC

Question 36

Takeover

Answer 36

When a company acquires control of another company by buying more than 50% of its shares

Question 37

Privatisation

Answer 37

The process under which the state sells businesses that are previously owned and managed to private individuals and businesses

Question 38

External factors influencing a business

Answer 38

Demographics Economic Ethics/environment Market conditions

Question 39

Fair trade

Answer 39

A social movement that exists to promote improved trading terms and living conditions for producers of products in less developed countries

Question 40

Sustainable production

Answer 40

When the supply of a product does not impose costs on a future generations by, for example, depleting non-renewable resources