3.1 Business in the Real World

Question 1

Why start a business?

Answer 1

To make profit 
Help society (social enterprise)
Need a job 
Become successful 
Escape from a boring job 
Flexibility from a working hours

Question 2

Reasons to not become a sole trader

Answer 2

Unlimited liability
Can be quite stressful making so many decisions
Illness/holidays may effect the running of the business

Question 3

Reasons to be a sole trader

Answer 3

No special paperwork
Don’t have to share the profits
Can cater for local people’s needs

Question 4

Identify 4 factors of production

Answer 4

Land
Labour
Capital
Enterprise

Question 5

Identify 3 different business sectors

Answer 5

Primary
Secondary
Tertiary

Question 6

What is opportunity cost?

Answer 6

It is the benefit lost of the next best alternative

Question 7

What is an entrepreneur?

Answer 7

It is someone who takes the risk starting a business

Question 8

What are the skills to become an entrepreneur?

Answer 8

Creative 
Brave 
Resilient 
Confident 
Determined 
Good at negotiating

Question 9

What is a dynamic market?

Answer 9

This means that the business environment is constantly changing, to stay successful a business needs to continuously adapt

Question 10

What is a sole trader?

Answer 10

A business that is owned and run by a single individual

Question 11

What is unlimited liability?

Answer 11

Owners are personally for debts of the business

May have to sell own possessions

Question 12

What is limited liability?

Answer 12

Shareholders are only liable for the debts of the company up to the value of what they originally invested

Question 13

What is a partnership?

Answer 13

Partners are joint owners of a business. There must be between 2 and 20 partners

Question 14

What is limited companies?

Answer 14

A company that has limited liability and whose shares are traded publicly on the stock exchange e.g Tesco, Morrisons

Question 15

What are private limited companies?

Answer 15

A company whose shares are sold privately often to friends and family

Question 16

PLC =

Answer 16

Limited Companies

Question 17

LTD

Answer 17

Private Limited Companies

Question 18

Positives of PLC

Answer 18

Limited liability 
Wide range of shareholders 
Expertise/skills 
Larger status 
Able to raise larger amounts of capital through shares

Question 19

Negatives of PLC

Answer 19

At risk of hostile takeover
Have to display information publicly
Shareholders disagreement on objectives more likely
May not know shareholders

Question 20

Positives of LTD

Answer 20

Limited liability
Continues if business founders dies
Only have to have £2 capital to setup

Question 21

Negatives of LTD

Answer 21

Can’t sell to the public

Shareholder have to agree when inviting new shareholders, that might many disagreements

Question 22

What is a Not for Profit organisation?

Answer 22

A business that is set up to achieve other objectives than make a profit

Question 23

Positives of Not for Profit

Answer 23

Provides added value on goods and services

Benefiting society

Question 24

Negatives of Not for Profit

Answer 24

Difficult to trust

Difficult to raise finance

Question 25

What is location?

Answer 25

Where a business is geographically situated

Question 26

Factors to consider when deciding on location

Answer 26

Local Community
Competitors 
Employees 
Cost 
Access to infrastructure

Question 27

What is a stakeholder?

Answer 27

An individual, group or organisation that effects or is affected by a business’ action

Question 28

Name some common business stakeholders

Answer 28

Customers 
Local Community 
Shareholders 
Owners 
Competition 
Suppliers

Question 29

What is an aim?

Answer 29

An overall or target a business hopes to reach

Question 30

What is an objective?

Answer 30

It is a specific, measurable target that outlines how a business will achieve that aim

Question 31

SMART =

Answer 31

Specific 
Measurable 
Achievable
Realistic 
Time

Question 32

Purpose of objectives

Answer 32

Give business a clearly defined target
Specific plans can be made to achieve these targets
Helps investors understand the direction of the business
Helps monitor and control the employees
Can help motivate employees
Enables business to measure progress towards goals