3.1.1

Question 1

what is a business?

Answer 1

an organisation that transforms inputs (resources) into outputs (products/services) that are purchased by consumers and customers

Question 2

why does a business exist?

Answer 2

• meet the wants and needs of consumers
• support the economy by generating revenue from tax
• create employment opportunities

Question 3

what do business objectives mean?

Answer 3

a goal or aim that a business wants to achieve

Question 4

what are some common business objectives?

Answer 4

• profit
• profit maximisation
• growth
• survival
• cash-flow
• social
• ethical

Question 5

why do businesses set objectives?

Answer 5

as results can be measured against how well a business has met its set objectives

Question 6

what is the difference between a consumer and a customer?

Answer 6

• customer buys the product or service
• consumer uses the product or service

Question 7

what is the difference between a product and a service?

Answer 7

a product is tangible whilst a service is intangible

Question 8

what does economy mean?

Answer 8

the state of the country in relation to the production and consumption of goods and services

Question 9

what does profit mean?

Answer 9

the money you have left after paying for business expenses

Question 10

what is the formula for profit?

Answer 10

total revenue - total costs

Question 11

what is the formula for total costs?

Answer 11

fixed costs + total variable costs

Question 12

what is a fixed cost?

Answer 12

costs for a business that do not change, no matter the level of output

Question 13

how do you calculate fixed costs?

Answer 13

total revenue - total variable costs - profit

Question 14

what are examples of fixed costs?

Answer 14

• rent payments
• mortgage payments
• loan payments
• insurance
• lease of machinery or van (monthly fixed payments)
• salaries of managers who will be there no matter the level of output

Question 15

what is a variable cost?

Answer 15

costs that change with output, such as raw materials

Question 16

what is the formula for variable costs?

Answer 16

total revenue - fixed costs - profit

Question 17

what are examples of variable costs?

Answer 17

• raw materials
• fuel
• packaging
• wages of casual staff
• costs of the stock sold

Question 18

what does total revenue mean?

Answer 18

income into the business - can be through sales or investments

Question 19

what does revenue mean?

Answer 19

capital received in return for providing products or services

Question 20

how do you calculate total revenue?

Answer 20

price + total variable costs + fixed costs or price + total costs

Question 21

how can a business improve profit?

Answer 21

• increase prices
• increase productivity
• improve marketing strategy
• increasing efficiency

Question 22

what is profit maximisation?

Answer 22

the act of achieving the highest revenue or profit

Question 23

why is profit maximisation the aim of most business?

Answer 23

• will give it the capital needed to expand and grow
• enables a business to replace any old machines or equipment

Question 24

why do business want to grow and expand?

Answer 24

to increase the amount of profit they are making or to increase their market share

Question 25

how can a business grow?

Answer 25

- organically - inorganically

Question 26

how can a business grow organically?

Answer 26

- by taking on more staff - opening more stores - producing more goods

Question 27

how can a business grow inorganically?

Answer 27

- with the help of another company, through a merger or takeover

Question 28

what does survival mean for a business?

Answer 28

to reach a sustainable level of sales that allows the business to reach it's break-even point

Question 29

what does cash flow mean?

Answer 29

the money that goes in and out of a business

Question 30

why would a business want a positive cash flow?

Answer 30

- to make sure that they have enough money in the business to pay their day-today expenses - a business would not have to borrow from a bank, which can be expensive

Question 31

what are social objectives?

Answer 31

- reducing impact on the environment - fair wages in developing countries - helping society - compliance to laws to minimise negative externalities

Question 32

what does ethical mean?

Answer 32

moral principles behind human behaviour, the idea that a business knows right from wrong

Question 33

what does aim mean?

Answer 33

what a business wants to achieve (long-term)

Question 34

what does objective mean?

Answer 34

how a business will achieve it's aim or aims (short term)

Question 35

what does SMART stand for?

Answer 35

Specific Measurable Achievable Relevant Time-bound

Question 36

why do business objectives have to be SMART?

Answer 36

in order to be meaningful and useful to a business

Question 37

what are categories of the aims an objectives that start-up businesses have?

Answer 37

- financial - non-financial

Question 38

what are financial aims and objectives?

Answer 38

- survival - profit maximisation - sales maximation - market share - cost efficiency

Question 39

what are non-financial aims and objectives?

Answer 39

- social objectives - employee welfare - customer satisfaction

Question 40

what is a mission statement?

Answer 40

- a formal phrase that sets out the aims and values of a business or organisation - used by company's to explain it's purpose and objectives

Question 41

what is obsolete?

Answer 41

over time a product or service no longer serve a purpose and therefore don't exist.

Question 42

why does a product or service become obsolete?

Answer 42

changes in technology, changes in customer wants and needs, low demand for product or service

Question 43

what are dynamic markets?

Answer 43

markets that are always changing due to: - social trends - changes in technology - competitive environments - demographics (stats of population and groups within it) -economy - ethics - consumer tastes

Question 44

why do businesses have to adapt to these changes? (dynamic markets)

Answer 44

businesses have to adapt to these changes otherwise they will fail to compete

Question 45

what is E-commerce?

Answer 45

the buying and selling of products or services via the internet

Question 46

what are the disadvantages of E-commerce?

Answer 46

- high running costs - reliant on technology - can be expensive e.g. shipping

Question 47

what are the advantages of E-commerce?

Answer 47

- available 24/7 - easy access - meets customers wants and needs

Question 48

what are the three business sectors?

Answer 48

primary, secondary, tertiary

Question 49

what does primary mean?

Answer 49

extracting raw materials e.g. oil mining or farming

Question 50

what does secondary mean?

Answer 50

buying and selling of goods

Question 51

what does tertiary mean?

Answer 51

services provided e.g. teachers

Question 52

what does innovation mean?

Answer 52

when a new idea or invention is launched in a market that can revolutionise an industry

Question 53

why do business have different aims and objectives?

Answer 53

- market position - to meet their target markets wants and needs - to survive their first year of trading - if more established they may wish diversify or enter markets

Question 54

what does sales volume mean?

Answer 54

the amount sold, expressed as a number of units sold

Question 55

how do you calculate sales volume?

Answer 55

sales revenue/selling price

Question 56

what does sales revenue/turnover mean?

Answer 56

the monetary outcome generated from selling products or services

Question 57

how to work out sales revenue/turnover?

Answer 57

selling price x quantity sold