3.1 What is A Business?

Question 1

Private sector of business (sole trader,Ltd company)

Answer 1

Limited liability 
Set up costs
Only sell share by invitation
Pay dividend to shareholders
Access to finance
Mission=family,reputation 
Objective=financial stability

Question 2

Private sector (Plc)

Answer 2

Limited liability 
Large costs to set up 
Sell shares to public-share capital 
Public need accounting info
Pay dividends
Access to more finance
Mission=company image,customers and shareholders
Objectives=market share,financial perfomance

Question 3

Public sector(public corporation)

Answer 3

Owned by state
Sell to private and state
E.g airports

Question 4

Public sector (public services)

Answer 4

Provide national services

E.g NHS

Question 5

Public sector (municipal services)

Answer 5

Locally funded services

E.g library

Question 6

Not for profit (charities, clubs)

Answer 6

Organisations set up not to make profit
Mission=ethos, ethics
Objectives= benefiting society or environment

Question 7

Shareholders

Answer 7

Invest in business
Want to earn dividend( share of profit)
Want share price to rise

Question 8

External environment (interest rates)

Answer 8

Price of borrowed money
Rising interest:consumers will save/business costs increase
Reducing: consumers buy more on credit/business costs reduce and may invest more

Question 9

External environment (demographic)

Answer 9

Change in population
UK population is growing
And getting older
(Grey pound is important)

Question 10

External environment (fair trade)

Answer 10

Social movement to promote improved trading terms
Also improves living conditions for the workers/producers of the goods
Could increases costs but let business charge higher prices

Question 11

External environment (environmental)
(Government legislation)

Answer 11

Environmental act 1995
Environmental protection act 1991
Stakeholder pressure groups
Customers more aware of environmental issues

Question 12

External environment (environmental)
(Private costs)

Answer 12

Business production costs

Being environmentally friendly=more expensive but could improve reputation

Question 13

External environment (environmental)
(External costs of production)

Answer 13

Costs to society

Noise,congestion,pollution

Question 14

External environment (market conditions)

Answer 14

Features of the market e.g competitors strength
GDP: country’s output
Demand:consumers want,what they can afford or buy,expected sales
Real wages: income adjusted for inflation
NB if GDP levels rise then wages rise, it is difficult to stay competitive
IF income rises, demand rises but so do costs

Question 15

Inputs———>outputs

Answer 15

Goods (physical products)
Raw material->transformation->goods

Services (intangible items)
People->knowledge->service

Sectors
Primary———->secondary——->tertiary
(Raw material) (manufacture) (sell products or services)

Question 16

Costs

Answer 16

Variable= change with output
Fixed=constant cost
Total costs= variable+ fixed
Unit cost= total costs/number of units produced
Revenue= quantity sold x average selling price
Profit= revenue-total costs