3.1.1 Understanding the nature and purpose of business

Question 1

1. why would you start a business

Answer 1

be your own boss
flexible hours
make money (company, dodge tax)
gap in the market
something people want

Question 2

1 what are the benefits of a business to society?

Answer 2

create employment
create wealth
create new products
can enhance a countries reputation

Question 3

2 what is a stakeholder

Answer 3

anyone affected by a business
employees, managers, shareholders, community, government, suppliers, etc

Question 4

2 what’s a mission

Answer 4

long term intentions, ultimate purpose

Question 5

2 what’s a mission statement

Answer 5

a statement of overall purpose

Question 6

2 what are aims

Answer 6

short term goals

Question 7

2 what are corporate objectives

Answer 7

whole company goals

Question 8

2 what are functional objectives

Answer 8

specific business areas/ department goals

Question 9

2 vague to detailed goal setting?

Answer 9

mission statement - vague
corporate aim - less vague
corporate objectives - less detailed
functional objectives - detailed

Question 10

2 advantages of mission statements

Answer 10

motivational
know what to expect
stakeholders know sense of direction

Question 11

2 disadvantages of mission statements

Answer 11

not a reflection of reality
open to interpretation
simply PR

Question 12

2 what makes a good objective

Answer 12

specific - state exact
measurable - capable of measures
achievable - realistic
realistic/relevant - to the company
timebound - time frame/ deadline inc.

Question 13

2 corporate aims of formula one?

Answer 13

net zero 2030

Question 14

2 corporate objectives of formula one?

Answer 14

Change how we operate to reduce carbon emissions by a minimum of 50% with remaining unavoidable emissions to be credibly offset
Deliver 100% advanced sustainable fuel by 2026

Question 15

3 what are some common objectives

Answer 15

profit/ market share maximisation
growth
cashflow
diversification
social and ethical concerns

Question 16

3 what determines objectives

Answer 16

corporate aims
size
legal format
age of business

Question 17

4 what is profit

Answer 17

total revenue - total costs = profit
the extra money left over after covering the costs

Question 18

4 what are components of profit

Answer 18

revenue - money in
fixed costs - salaries
variable costs - change with output
total costs - variable + fixed

Question 19

4 what is revenue

Answer 19

value of what a business sells
volume sold x average selling price
sales, revenue, income, turnover

Question 20

4 what are costs

Answer 20

amounts incurred to make goods and provide services
drain profits
good or poor profit margin
main cause of cash flow problems

Question 21

4 what are variable costs

Answer 21

change as output varies
raw materials
wages per hour
marketing costs

Question 22

4 what are fixed costs

Answer 22

increase break even output
salaries
advertising
software/rent

Question 23

4 what are economies of scale

Answer 23

more produced = less unit cost

Question 24

4 why is profit important

Answer 24

reflects risk of entrepreneurs
measures success of an investment
signal to providers of finance
source of finance for a business