2016-2020 Theme 2 Papers

Question 1

Limited Liability

Answer 1

A business owner is only liable for their original investment if the business were to experience a loss

Question 2

Fixed Cost

Answer 2

Costs that do not change depending on the business’ output

Question 3

Venture Capital

Answer 3

Investors providing loans and shares to a business in return for capital

Question 4

Advantages and Disadvantages of Venture Capital

Answer 4

ADVANTAGES: 
Large amounts of capital can be raised
No monthly payments required
Easy, flexible Payments
Helps with risk managing

DISADVANTAGES:
Founder ownership reduced
High risk = high interest rate
Loss of profits from venture capitalists

Question 5

Business Plan

Answer 5

A document which details how the business is going to develop overtime

Question 6

Current Liabilities

Answer 6

Money owed that needs to be paid in a year

Question 7

Examples of non current Liabilities

Answer 7

Property, Land, Machinery, Vehicles

Question 8

Working capital

Answer 8

Money needed to pay for business’ day to day tradings (Current Assets - Current Liabilities)

Question 9

Competitive Market

Answer 9

Many rivals selling similar products

Question 10

JIT (Just In Time)

Answer 10

Supplies arriving before they are required by stores

Question 11

Efficiency

Answer 11

The ability to minimise waste and reduce costs of production

Question 12

Capacity Utilisation

Answer 12

(Current Output / Maximum possible output) x 100

Question 13

Break Even

Answer 13

The level of output when total total revenue = total costs

Question 14

Advantages and Disadvantages of Break Even

Answer 14

DISADVANTAGES:
Break even can be unrealistic
They produce more than one product line, meaning their break evens will be different

ADVANTAGES:
Provides a target output
Can be used as a planning tool for the business

Question 15

Capital Intensive

Answer 15

Where output of a firm is made using capital goods

Question 16

Examples of Current Assets

Answer 16

Inventory/Stock, Cash, Trade receivables/Debtors

Question 17

Interest Rate

Answer 17

Cost of borrowing and reward for saving

Question 18

Lean Production

Answer 18

Using fewest resources possible in the production process

Question 19

Sales Revenue

Answer 19

Price x Quantity sold

Question 20

Total Costs

Answer 20

Fixed costs + Variable cost

Question 21

Batch Production

Answer 21

Business making more than one item at a time

Question 22

Crowd Funding

Answer 22

Large number of people providing direct funding to a business (for example, GoFundMe)

Question 23

Productivity

Answer 23

Output per person / machine per time period

Question 24

Quality Assurance

Answer 24

Where a product is checked at each stages of the production process

Question 25

Waste minimisation

Answer 25

Producing goods and services with as few resources as possible

Question 26

Stock

Answer 26

Items held by the business for future sales or processing (examples, unfinished projects, raw materials)

Question 27

Flow Production

Answer 27

The making of an item/product at a continuously moving process

Question 28

Margin Of Safety

Answer 28

Current or planned level of output - break even level of output

Question 29

Share Capital

Answer 29

Finance raised through shares

Question 30

Difference between Cash and Profit

Answer 30

Cash takes time to be recorded

Profit is recorded straight away

Question 31

Buffer Stock

Answer 31

Level of stock that is held for emergencies like surges in demand

Question 32

Competitive Pricing

Answer 32

Businesses setting prices similar to competitors

Question 33

Liquidity

Answer 33

How easy it is to turn assets into cash

Question 34

Internal Finance

Answer 34

Finance raised within a business

Question 35

Trade Credit

Answer 35

Firm receiving stock from a supplier which doesn’t need to be paid until later

Question 36

Employee Protection Legislation

Answer 36

Laws that give employees basic workers rights to prevent them from being exploited (for example, minimum wage)

Question 37

Advantages and Disadvantages of depreciating pound

Answer 37

DISADVANTAGES:
£ buys less foreign goods
Pay more
Consumers ability to purchase reduced due to increasing costs in necessities

ADVANTAGES:
Debenhams tend to target higher income consumers
Debenhams stock may not get a large % from overseas

Question 38

Reduce Break even

Answer 38

Use cheaper resources
Less ethically sourced items
Price skimming strategy / Increase prices for low PED