1.4

Question 1

What are the 2 types of ownerships?

Answer 1

Sole trader, partnership.

Question 2

What are the advantages and disadvantages of being a sole trader?

Answer 2

Adv: Easy set up, be your own boss, keep profit
Disadv: unlimited liability, difficult to raise finance, harder to retain good employees

Question 3

What are the advantages and disadvantages of a partnership?

Answer 3

Adv: more experience and ideas, easier to raise finance, good employees can be promoted so it is easier to retain good employees

Disadv: shared profits, disagreement on business decisions, each partner is liable for the actions of other partners.

Question 4

What is a limited company?

Answer 4

A company with limited liability (owned by shareholders)

Question 5

What is a Ltd?

Answer 5

Private limited company

Question 6

Advantages and disadvantages of Ltds?

Answer 6

Adv: limited liability, owners keep a lot of control over how the business is managed, easier to be financed

Disadv: expensive,

Question 7

What is a PLC?

Answer 7

Public limited company

Question 8

Advantages and disadvantages of a PLC?

Answer 8

Adv: limited liability, selling shores on a stock exchange to raise money for investment, easier raise capital

Disadv: owners have little say over how the business is run, con be taken over, accounts are public

Question 9

What is flotation?

Answer 9

When firms become PLCs to raise finance by selling shares on the stock exchange

Question 10

What is franchising?

Answer 10

When an established company gives someone the right to sell its products and use its trademarks

Question 11

Advantages and disadvantages to franchising?

Answer 11

Adv: less risky than setting up a new business, increases brand awareness

Disadv: don’t have complete control over now the business is run, don’t get keep all the profit.

Question 12

What influences business location?

Answer 12

Availability of raw materials, labour nationally, labour internationally, competition, rent, location of the market.

Question 13

What is the marketing mix?

Answer 13

Ways for the business to be more competitive
Product
Place
Price
Promotion

Question 14

Why do businesses create business plans?

Answer 14

Gives the business an understanding on how to achieve its aims and objectives

Question 15

Why are business plans important?

Answer 15

• Banks and investors use them to decide wether the business is liable for a loan and wether their money will be repaid.
• sets objectives
• keeps the business organised and provides a safety net

Question 16

Advantages and disadvantages of a business plan?

Answer 16

Adv: provide parameters for setting targets, can compare competitors, benchmark for cash flow, checks staffing income product range etc

Disadv: businesses need to be flexible, can be costly and time consuming, forecasts of revenue and profit may be misleading and cause bad business decisions

Question 17

What is e-commerce?

Answer 17

Buying and selling online
Allows businesses to sell to larger markets
Increases competition

Question 18

How does technology change business activity?

Answer 18

Lower costs
Easily sell products an over the world
Reduce production costs due to no labour costs and new automated machinery

Question 19

What does the employment law consist of?

Answer 19

National minimum wage/ living wage
Equality act 2010 - protects from discrimination in the workplace
Health and safety law

Question 20

What does the health and safety law consist of?

Answer 20

Risk assessments
Health and safety conditions
High costs are involved with meeting health and safely laws

Question 21

What does the consumer law consist of?

Answer 21

Fit for purpose
Trade descriptions - how a business describes a product and its benefits
Satisfactory quality
Consumer law (legislation)

Question 22

What is the impact of legislation on businesses?

Answer 22

• A business may have to introduce new practices or change their operations in response to new legislation
• A business may experience increased costs due to new legislation

Question 23

What is meant by economy?

Answer 23

The economy is the state of a countries production and consumption of goods and services

Question 24

What are 2 factors that indicate the state of the economy?

Answer 24

Unemployment - less disposable income to spend so customers will choose lower prices endless less luxury goods.
Consumer spending - more saving less spending

Question 25

How do changes in income affect businesses?

Answer 25

Fall in income = less spending on luxuries, more saving
Increase in income = more spending on luxuries

Question 26

What are interest rates?

Answer 26

The percentage of the loan that is charged as the price for borrowing

Question 27

What does a higher interest rate mean?

Answer 27

High interest rates = more expensive to borrow so consumers save

Question 28

What does a lower interest rate mean?

Answer 28

Low interest rates = more borrowing because its cheaper, more spending

Question 29

What is the business environment characterised by?

Answer 29

Technology
The economy
Legislation
Environmental expectations