unit1. What is business

Question 1

what does biz creates

Answer 1

1: employment
2: new incomee
3: enhauncee reputation of the country
4: new products

Question 2

products:
goods:
services

Answer 2

general term which includs goods/servicees
physical product
intangiable item

Question 3

what are thee thre sectors of a biz

Answer 3

Primary: extraction of raw materials: oil extraction
Secondary: trandforming raw materials into goods: manufacturing
Teritary: supply of survices: trandoportaion/healthcare

Question 4

B2C
B2B
B2G

Question 5

What is misssion statement

Answer 5

business overall purpose to direct the org

Question 6

what mission statement commonly focus on

Answer 6

:the firms value
:non-finanical goal it may pursue
:benefit it brings to the community

Question 7

pros and cons of mission statement

Answer 7

➕motivate workers
may bring belongings and direction of the biz
➕easier DM
manageres can pick from the options of DM and make decisions related to the mission statemeent
➖may demotivate workeres if its set unrealistically

Question 8

what is aim

Answer 8

long term plans which biz obj get dervied from:
known as coroporate aim.

Question 9

pros of aim

Answer 9

provides guidance for setting other obj
guide and assist more junnior managers

Question 10

hierachy of decision

Answer 10

1:mission statement
2:corporate aim
3:corporate obj
4:functional obj

Question 11

what are objectives

Answer 11

medium- long termtarget established to coordinate the biz

Question 12

what is key charctreisitc of the obj

Answer 12

should be quanitified and have a stated time scale

:SMART
Speecific
Measurable
Agreed
Realistic
Time specific

Question 13

what are the common biz objectives

Answer 13

1: profit maximisation
2: growth
many firm pursue growth because: able to exploit market position and earn high profits, and benefit shareholderes
(in long term)-increease salary for workers
3: Survivial- important when recession and times of crisis
4: cashflow
5: social and ethical obj
6: Diversitification spread of risk

Question 14

why biz set obj

Answer 14

:manageers can cooridinate workers by having clear obj

:employees may feel motivated because workers know what biz wants to achieve, and workers precisely knows what to do

:managers can review thir objectives and discuss with their subordinates

Question 15

profit formula

Answer 15

total revenue-total cost

Question 16

why is profit important?

Answer 16

-high profitable biz may be easier to gain finance from banks from the achievement

-more likely to nagotiate with the payment to suppliers ffrom gained trust-delay the paymnt

-high profit biz may attract customers: thy may believe they are providing desirable product which could increase even more customers purchasing

Question 17

what is private sector biz

Answer 17

biz owned by shareholders or by private individuals

Question 18

what is sole trader

Answer 18

biz that is owned and managed by one peerson, but could employ other people

Question 19

pros and cons of sole trader

Answer 19

➕easy to start up than companies, do not have to fill forms or registere with goverenment agency
➕profit do not have to be shared
➖difficult to rais finance( banks may trat them as high risk
➖unlimited liabillity-wheen a group or individual is responsible for all the action. could lose thier personal assets.

Question 20

what is a company

Answer 20

biz org that has its own legal identity and that has limited liabilitis

Question 21

what is inorporation

Answer 21

IPO
chaning into a company

Question 22

shareholders benefit from owning shares

Answer 22

-the values of the firm could increse which could increas share prices which could be sold and gain profit (vice versa)

-shareholders get dividends which could be high if the firm is making high profit.
Dividends are part of the firms profit that gets paid to shareholders in proportion of # of share they own

Question 23

what is Private limited company
and pros and cons

Answer 23

Ltd
➖not in the stock exchange:smaller finance

pros:
1:able to control over company than plc
2: taking decisions in firms LT interest
3: could enjoy profit generated by the company

Question 24

pros and cons of plc

Answer 24

1: access to capital
2: publicity
3: ability to take over the companiees

➖could be taken over
➖usually decision in ST to increease profit-dividends. may cause problem in LT( ethical, envrionmental)

Question 25

what is public sector biz

Answer 25

organisations that are owned by (and sometimes funded by) national or local government

Question 26

what are three major elements of public sector biz

Answer 26

Public corporations.ex)channel 4
Public services. ex) NHS
:owned by state

Municipal services. ex) liabries
ownded by local goveernment and councils

Question 27

who buys shares

Answer 27

banks, pension funds and insurance companies own most company shares.

Question 28

reasons and risk of buying shares

Answer 28

Shareholders invest in business primarily for financial reasons.

risks:
dividends and price could fall easily depending on the perdormance of the firmm

Question 29

the role of shareholders

Answer 29

hares grant their owners voting rights
influences firms DM

Question 30

reasons to operate non profit org

Answer 30

may have a strong belief in a particular issue, such as protecting the environment or caring for animals and therefore establish a charitable business to raise funds for their particular cause.

may be established to provide a hobby or
to replace employment.

Question 31

Co-operatives must reflect four ethical values:

Answer 31

honesty, openness, social responsibility and caring for others.

Question 32

influences on share price

Answer 32

:company’s performance
If a company is performing well, and is expected to continue to do well, its share price should benefit.

:the external environment
if economic conditions are good
and expected to continue that way, investors tend
to feel confident.

Question 33

effect of rising shareprice

Answer 33

a business may find it easier to raise capital when share prices are rising.
Potential shareholders will be more willing to buy an asset that is rising in price; similarly banks may be more willing to offer loans to such companies, especially if they believe that the rising share price is the result of the business performing well.

Question 34

effect of falling share price

Answer 34

may make it difficult for it to raise capital. It may also make the company vulnerable to a takeover as the cost of buying a controlling interest in the company is reduced. This is more likely to be the case if the company’s share price is considered to be too low, making it undervalued.

Question 35

effects of ownership on mission

Answer 35

The type of ownership may have a considerable impact on the organisation’s overall direction. Thus, for example, a public limited company is likely to have a mission
that will allow it to provide sufficient financial rewards to its shareholders.

Question 36

effects of ownership on objectives

Answer 36

A business’s mission naturally gives rise to the objectives that it follows. Nike may seek to achieve its mission by setting objectives relating to achieving a certain level of sales, producing innovative products regularly or being the leading company in its market.

Question 37

Market conditions
(Impact of having bad market condition due to change in the level of demand and sales)
(Impact on product due to Competitors innovation)

Answer 37

refers ti a bomber of features of a market such as level of sales the are at which they are changing and the number and strength of competitors.

good market condition includes rising sales figures and possibly rising prices.

customers may feel price consicoius
decrease in sales
may decrease price to stay competitive
low profit margin-
low revenue-shareholders mad

competitors innovation - may make existing products obsolete-losing sales and having to invest in developing their own updated products in response.

Question 38

income

Answer 38

high increase in GDP- increase in wages, price level- This can result in businesses facing sharp increases in costs, especially if they rely heavily on labour in their production processes. This may result in difficulties in maintaining competitiveness in terms of prices.

depends on if they inelastic or not
luxury or necessity

rising incomes could mean more cost of production for firms as wages rises due to an increase in GDP

Question 39

interest rate

Answer 39

High interest rate- people save more
low interest rate- low cost to borrow people spend more

Question 40

impacts on cash when high interest rate

Answer 40

Costs of servicing existing loans may increase
Cost of imported products may fall
Demand for products (especially bought on credit) may fall

Question 41

impact on cost when falling IR

Answer 41

Costs of servicing existing loans may decrease
Cost of imported products may rise
Demand for products (especially those bought on credit)
may rise

Question 42

biz that could b effected hugely on interest rate

Answer 42

biz with high levels of borrowing could benefit from a fall or be penalised
by an increase in interest rates if the rates charged on their loans are variable.

Some businesses can protect themselves by arranging fixed-rate loans, meaning that the interest charged will remain constant throughout the duration of the loan.

Question 43

Demographic Factors

Answer 43

pop represent customres and workers
high pop high demand and cheap labour

Question 44

Environmntal issues

Answer 44

for highly effective and distinctive promotion
and can lead to increased recognition of thebrand and possibly the opportunity to charge higher prices.

BUT may increase cost to be. less ad for competitors

Question 45

fair trade

Answer 45

pros: Selling fair trade products has the potential to allow businesses to charge higher prices without an unacceptable loss.

cons: It is also likely to increase costs as paying a ‘fair’ price is a cornerstone of the movement.

Question 46

reasons for changing business forms

Answer 46

-growth
if sole traders business becomes larger-requires more access to capital and the protection of limited liability -private-desire to access more capital and high profile-may go public.

Question 47

risk and reasons for buying shares

Answer 47

reasons:
-gain benefit from an rising share prices
-receive share of the profits in the form of dividends.

risks:
-price of shares can easily fall (even easier if economy is not performing well
-companies may make lower profits than expected-lower dividend payments-share price may fall in short term

depends on type of share
ordinary shares-most risky-only revive dividend after many other stakeholders in the company have received payments. ordinary shareholders will only be paid after those who have lent the company money in the form of long term loans or debentures .