1.4 - making the business effective

Question 1

limited liability

Answer 1

• owner’s personal assets are kept separate from business
• don’t have to use own finances to pay off any company debts/losses
• less risk

Question 2

unlimited liability

Answer 2

• owner is legally responsible for any debts of business
• may have to sell personal assets to cover costs
• increased risk/loss if business fails

Question 3

sole trader

Answer 3

business owned by one person

Question 4

partnership

Answer 4

business owned by 2 - 20 people

Question 5

advantages of sole trader

Answer 5

• makes all decisions
• quick and easy to set up
• keeps all profits
• financial info kept private

Question 6

disadvantages of sole trader

Answer 6

• unlimited liability
• harder to raise finances/grow business
• pressure
• no one to cover for them when they’re ill

Question 7

advantage of partnership

Answer 7

• wider expertise, share ideas
• share risk
• easier to raise finance and grow business

Question 8

disadvantage of partnership

Answer 8

• one decision affects all
• no longer exists if one leaves
• shared profits
• conflict

Question 9

advantages of Ltd

Answer 9

• limited liability
• can trade even if shareholders change
• easier to raise finances and grow business

Question 10

disadvantages of Ltd

Answer 10

• more complex to set up
• conflict between shareholders
• financial info published and can be accessed by anyone
• more info reported to gov

Question 11

factors affecting business location

Answer 11

• proximity to market (where customers are)/labour/materials/competitors
• nature of business activity (e.g. manufacturing, exporting, retailing, tourism)

Question 12

marketing mix (4 Ps)

Answer 12

price product promotion place

Question 13

what does a business plan do

Answer 13

helps identify:
- business idea
- aims and objectives
- target market (market research)
- forecast revenue (estimate revenue over specific time period)
- cost and profit
- location
- marketing mix
- cash flow forecast
- sources of finance

Question 14

impact of technology on marketing mix

Answer 14

• product: new products always innovated e.g. phones, computers
• price: customers compare price easily online
• promotion: traditional advertising to social media platforms
• place: e-commerce

Question 15

advantages of franchise

Answer 15

• brand image and reputation already established
• marketing costs covered by franchise
• established customer base
• higher chance of survival
• support and training provided

Question 16

disadvantages of franchise

Answer 16

• high setup costs
• owner has little freedom to make decisions
• franchisee must pay fee/royalty (% of sales revenue) to franchisor
• restrictions on where franchise can set up