3.1 What is business

Question 1

Methods of adding value

Answer 1

Convenience
Branding
Quality/Design
USP
Speed x Excellent service
Product features and benefits

Question 2

Business Objectives

Answer 2

Profit maximisation
Growth
Survival
Maximise quality
Society
Satisfy
Market share

Question 3

Mission

Answer 3

The overall vision of a business

Question 4

Profit

Answer 4

Financial gain
Total revenue - Total costs
The return for risk
Retain or take it out for personal use

Question 5

Sole trader

Answer 5

Most common
Owned by an individual
Unlimited liability

Question 6

Partnership

Answer 6

Owned by more than one person
Legal agreement covering how profits are shared, how much they own etc…
Unlimited liability

Question 7

Public limited company

Answer 7

PLC
Sells shares to public
On the stock exchange
Shares are freely transferable
Need over 50K share capital and 25% Public available

Question 8

Private limited company

Answer 8

Can’t sell shares to the public
Not on the stock exchange
No minimum share capital required
In order to sell you may need an agreement off the other shareholders

Question 9

Not for profit organisation

Answer 9

Have social aims
Benefit the community
Includes charities, housing associations and community development trusts

Question 10

Unlimited liability

Answer 10

Defined as the owner of the business being legally responsible for all debts of the business

Question 11

Limited liability

Answer 11

Owners of the business only having part responsibility for all debt of the business
Only business assets can be taken to pay for debt, any personal assets are safe

Question 12

Market capitalisation

Answer 12

Number of issued shares X Current share price

Question 13

Ordinary share capital

Answer 13

Number of issued shares X Original share price

Question 14

Shareholder

Answer 14

Someone who has at least one share of the company

Can have influence if owns enough shares

Question 15

Stock

Answer 15

A type of security that represents ownership in a business

Question 16

Why do shareholders invest?

Answer 16

Make profit - by share price increasing
Dividends
Enjoyment
To help and influence the business
Venture capitalist
Belief in the business aims

Question 17

Influences on share prices

Answer 17

Supply and demand
Performance of the company
New products
Interest rates
State of the economy

Question 18

Dividend

Answer 18

Proportion of the profits paid out to the shareholders

Question 19

Rights issued to the shareholders

Answer 19

When current shareholders have a right to buy additional shares
The company will offer a specific amount for a specific price and will set a time limit
Often discounted prices to encourage shareholders to buy

Question 20

Sectors of the UK economy

Answer 20

Public - 19%
Private - 80%
Voluntary - 1%

Question 21

Public and Private businesses

Answer 21

Public = Owned by the government to provide
Private = Private individuals, aim to make profits, charities and brands

Question 22

Privatisation

Answer 22

Changing from the public sector to the private sector

When an individual buys a government business

Question 23

Business environment

Answer 23

Incorporates all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand and business regulations

Question 24

PESTLE

Answer 24

An effective way to analyse key features of the business environment
Political
Economic
Social
Technological
Legal
Environmental