3.1.1

Question 1

The more value a business can add to its products the

Answer 1

more competitive it is

Question 2

How is added value achieved

Answer 2

branding, quality, convenience and service

Question 3

Inputs

Answer 3

labour, capital, land

Question 4

Outputs

Answer 4

goods and services

Question 5

The role of business

Answer 5

1. business creates goods and services
2. meet needs of customer
3. business sells products to generate revenue
4. if revenue is greater than total costs
5. profit
6. reinvested for business growth

Question 6

Why are businesses important?

Answer 6

create wealth
create jobs
develop new products to benefit society
support other businesses in the country, such as purchasing materials
provide a source of tax revenue for the government

Question 7

What is a mission statement

Answer 7

sets out a business’s overall purpose to direct and stimulate the entire organisation

Question 8

A mission statement will focus on

Answer 8

the organisations values
non financial goals
the benefits of the business to the community or stakeholder
how consumers are to be satisfied

Question 9

How is the mission statement used for customers

Answer 9

many organisations use their mission statement as a promise to their customers. It lays down what they can expect from the goods and services they consume

Question 10

How is the mission statement used for investors

Answer 10

many shareholders will want assurances that their money is being invested in an ethical business with strong values
A mission will also communicate the ambition of the business to potential stakeholders and its desire to grow

Question 11

How is the mission statement used for employees

Answer 11

the mission statement acts as a set of guiding principles for employees. It brings employees together with a shared purpose and communicates the values that underpin the business. A mission statement can have a significant influence on corporate culture

Question 12

How is the mission statement used for owners/directors

Answer 12

directors need to see the bigger picture and think strategically.
The mission statement helps the directors form and align the business strategy.

Question 13

Objectives hierarchy

Answer 13

1. aims
2. mission statement
3. corporate objectives
4. functional objectives

Question 14

What is the relationship between missions and objectives

Answer 14

The objectives of a business will flow from the mission and aims. Whereas a mission outlines the vision of the business in broad terms, the objectives will be SMART. Whereas a mission statement will be communicated to all stakeholders, some objectives may only be shared with managers and employees.

Question 15

SMART

Answer 15

Specific
Measurable
Agreed
Realistic
Time-related

Question 16

Why do businesses set objectives

Answer 16

• provide quantifiable steps to achieve aims
• clarify direction of the business
• measure success against targets
• provide targets to motivate and reward employees
• influence potential lenders/investors.

Question 17

Financial objectives

Answer 17

survival
profitability
growth
market share
shareholder value

Question 18

Non-financial objectives

Answer 18

personal satisfaction
brand recognition
sustainability
customer satisfaction

Question 19

Factors which influence business objectives

Answer 19

Size - objectives may change as a business grows and becomes more successful. Most businesses when starting up will aim to survive.
* Sector - unlike most private sector businesses, public sector organisations are driven by meeting customer needs, not profit.
* Market - some markets are more competitive than others and this will determine objectives, such as targeting market share.
* Ownership - a Plc must satisfy shareholders, therefore will set objectives around shareholder value.
* Owner - the owner may simply run the business for love of the job.

Question 20

Profit allows for

Answer 20

reinvestment into new projects and stimulate economic activity
long-term success secured
help the business grow and keep up with demands of ever-changing business environment

Question 21

profit is what is

Answer 21

left after all costs have been deducted from revenue

Question 22

What is revenue and how can you increase it

Answer 22

Revenue is the value of sales made during a trading period. It also includes products sold on
credit as well as those sold for cash.
A business can increase revenue by increasing the price of its products and by stimulating more demand.

Question 23

what are variable costs

Answer 23

Variable costs are those that change directly with the level of output or sales, such as the
materials used to make a product.

Question 24

what are fixed costs

Answer 24

those that do not change with the level of output or sales, such as rent

Question 25

calculating fixed and variable costs can help when

Answer 25

making decisions about profit margins. average costs and pricing decisions
improve profit by reducing either fixed or variable costs whilst maintaining value in their products

Question 26

revenue =

Answer 26

price x quantity sold

Question 27

total cost =

Answer 27

fixed + variable cost

Question 28

profit =

Answer 28

total revenue - total costs