1.1 Understanding the Nature and Purpose of business

Question 1

Tangible products

Answer 1

Goods - physically held

Question 2

Intangible products

Answer 2

Services

Question 3

The impact on the country and its residents

Answer 3

• Provides employment
• Creates new goods and services enhancing the lives of others
• Allows a country to improve and develop the country’s reputation

Question 4

The transformation process

Answer 4

Converts inputs (raw materials) into outputs (finished goods) to satisfy the needs and wants of other consumers and businesses
It adds value to their goods and services throughout the process

Question 5

B2C

Answer 5

Business to consumer, selling directly to consumer
e.g Spotify music streaming

Question 6

B2B

Answer 6

Selling to other businesses, business to business

Question 7

Primary sector

Answer 7

Businesses extract or grow raw materials including fishing, mining and forestry

Question 8

Secondary sector

Answer 8

Businesses manufacture goods using raw materials e.g clothing and mobile phones

Question 9

Tertiary sector

Answer 9

Provide services such as hotels and cinemas

Question 10

Mission statement

Answer 10

Sets out the business’s beliefs and values - it is used to create corporate aims which are the long-term goals of the entire business

Question 11

How to achieve corporate aims

Answer 11

Corporate objectives that contain the specific tasks and activities a business must accomplish in order to satisfy its corporate aims are written down

Question 12

Corporate objectives

Answer 12

Can be broken down further into functional (departmental), team and individual objectives

Question 13

What does the business apply when setting objectives

Answer 13

SMART:
Specific (know exactly what they are working for)
Measurable (employees can actually work out whether they have met objectives)
Attainable or Achievable (employees are committed)
Realistic (employees may feel demotivated and overwhelmed)
Timely (employees know when they must achieve them by)

Question 14

Different business objectives

Answer 14

• Profit maximisation
• Survival
• Growth
• Social, ethical and environmental objectives

Question 15

Benefits of setting objectives

Answer 15

• Provide direction and can support planning and operations
• Allow a business to co-ordinate resources and ensure that all employees are working towards the same overall aim

Question 16

Revenue calculation

Answer 16

Number of sales X sales price

Question 17

Fixed costs

Answer 17

Don’t vary as the business changes output
However can increase as the business grows
e.g company insurance, rent, investment

Question 18

Variable costs

Answer 18

The costs that change directly with output e.g wages, raw materials and transport costs

Question 19

Profit calculation

Answer 19

Total Revenue - Total costs

Question 20

Average unit cost calculation

Answer 20

Total cost / output

Question 21

Interest calculate

Answer 21

Interest rate X the size of the loan