1 Business in the Real World

Question 1

What is a business?

Answer 1

An organisation that exists to produce goods and services on a commercial basis to customers

Question 2

What are goods?

Answer 2

They’re actual objects. They can be touched, felt and held

Question 3

What are services?

Answer 3

They’re activities. They are provided for you by other people or businesses

Question 4

What are needs?

Answer 4

They’re goods and services that we have to consume if we are to live

Question 5

What are wants?

Answer 5

They’re goods and services that we would like, but do not have to consume in order to survive

Question 6

What is oppurtunity cost?

Answer 6

Measuring the cost of what you purchase in terms of the alternative that you have given up

Question 7

What is making a profit?

Answer 7

Selling goods or services for more than what it took to make or provide

Question 8

What is a primary business?

Answer 8

These business provide raw materials extracted from nature

Question 9

What is a secondary business?

Answer 9

These businesses manufacture goods which are made from raw materials and turned into finished goods

Question 10

What is a tertiary business?

Answer 10

These businesses provide goods and services

Question 11

What is enterprise?

Answer 11

Another name for a business. Describes the actions of someone who takes a risk by setting up, investing in and running a business (entrepreneur)

Question 12

What is an entrepreneur?

Answer 12

Someone who takes a calculated risk through starting a business

Question 13

What are 2 financial objectives?

Answer 13

Making profit. Investing money

Question 14

What are 3 non-financial investments?

Answer 14

Work-life balance. Skills and interest. Being their own boss

Question 15

Name 3 qualities that make a good entrepreneur

Answer 15

Innovative. Risk takers. Hard working. Organized. Determined. Persuasive. Leadership. Lucky

Question 16

What is a sole trader?

Answer 16

They’re a small business owned and operated by 1 person

Question 17

What is a partnership?

Answer 17

Where a business is formed where a business is started and owned by more than 1 person

Question 18

What is a private limited company(ltd)?

Answer 18

It’s when a business is set up to have a separate legal identity from its owners

Question 19

What is a public limited company (plc)?

Answer 19

Most larger businesses in a country will be public limited companies

Question 20

What is unlimited liability?

Answer 20

The sole trader or the partners are, therefore, liable for any debts that the business incurs

Question 21

What is limited liability?

Answer 21

The liability of shareholders is limited to the value of their investment into the company’s shares

Question 22

Give 1 advanatge of being a sole trader

Answer 22

Minimal paperwork

Question 23

Give 1 disadvantage of being a sole trader?

Answer 23

Full personal liability (unlimited liability)

Question 24

Give 1 advantage of being a partnership

Answer 24

All losses will be shared

Question 25

Give 1 disadvantage of being a partnership

Answer 25

Profits have to be shared

Question 26

Give 1 disadvantage of being a private limited company

Answer 26

Directors’ legal duties are more strict

Question 27

Give 1 advantage of being a private limited company

Answer 27

Original owners are likely to remain in control

Question 28

Give 1 disadvantage of being a public limited company

Answer 28

Seperation of owner ship and control

Question 29

Give 1 advantage of being a public limited company

Answer 29

The firm is more prestigious

Question 30

Give an example of a non profit organisation

Answer 30

Charities

Question 31

Name 3 business aims and/or objectives

Answer 31

Survival, profit maximisation, share value, sales maximisation, quality, growth, social responsibilities

Question 32

What is direction?

Answer 32

Clear objectives

Question 33

What is focus for employees in terms of aim?

Answer 33

Awareness of objectives and aims

Question 34

What is measurement of success?

Answer 34

Having objectives allows a business to measure it’s success

Question 35

Why would a business chnage it’s objectives?

Answer 35

Internal reasons (achieved original objective and now needs to get a new one), external reasons (new competitors)

Question 36

What are the factors that affect a business’ location?

Answer 36

Raw materials, labour, market, gov assistance, communication, competition

Question 37

What is a business plan?

Answer 37

It’s a written document that describes a business, its objectives, its strategies etc

Question 38

Name 1 advantage of business planning

Answer 38

It will help to ensure finance is available, for example getting a bank loan, as lenders will see a business is organised

Question 39

Name 1 disadvantage of business planning

Answer 39

Can cause new opportunities to be missed, if they are not in the plan

Question 40

What is organic growth?

Answer 40

It’s expansion from within a business by expanding the number and/or range of products and/or locations

Question 41

Name 1 advantage of organic growth

Answer 41

Less risky than taking over a business

Question 42

Name 1 disadvantage of organic growth

Answer 42

Harder to build market share if the business is already a leader

Question 43

Give 1 advantage of being a franchisor

Answer 43

Less finance is required to expand as the franchisee provides most of the capital needed

Question 44

Give 1 disadvantage of being a franchisor

Answer 44

There is some loss of control, as the franchisee runs the business on a day-to-day basis

Question 45

Give 1 advantage of external growth

Answer 45

Economies of scale which will decrease the cost of producing each unit

Question 46

Give 1 disadvantage of external growth

Answer 46

The cost savings may not be easy to achieve, as staff will need to be made redundant and premises and equipment sold

Question 47

What is external growth?

Answer 47

It’s when a business grows by taking over other business’