3.1.1- Understanding the nature and the purpose of business

Question 1

What is a business?

Answer 1

Any organisation that makes goods or provides services to consumers.

Question 2

What are the advantages to owning a business?

Answer 2

• People can make a profit
• Some own a business to be their own boss
• Gives people the opportunity to do a job their interested in

Question 3

What is a private sector business?

Answer 3

Privately owned- if doesnt make money it can go bankrupt

Question 4

What is a public sector?

Answer 4

Government owned- they dont make money and are usually a service for the community.

Question 5

Other than profit, what are some aims for a business?

Answer 5

• To give highest quality of goods and services
• To offer diverse range of goods or services
• To develop new products ahead of competitors

Question 6

What is a mission statement?

Answer 6

A businesses aim that is expressed to make it seem purposefully upbeat and motivating.

Question 7

What are mission statement for?

Answer 7

To make all stakeholders aware of what the business does and why, and encourage employees to work towards its aims.

Question 8

What are business objectives?

Answer 8

They are set to enable business to achieve their mission. Turning aims into specific goals to be met.

Question 9

What are corporate objectives?

Answer 9

The goals of a business as a whole. E.g. growing bigger.

Question 10

What are functional goals?

Answer 10

Objectives of each department. More detailed and specific to each department.

Question 11

Why do businesses set objectives?

Answer 11

To make sure everyone is working towards a goal, and coordination between departments improve.

Question 12

What are different types of objectives?

Answer 12

• Profit
• Growth
• Survival
• Cash flow

Question 13

What are profit objectives?

Answer 13

• Businesses aim to become profitable
• Established businesses might want to increase their profits. E.g. by 10% in three years

Question 14

What are growth objectives?

Answer 14

• Businesses aim to grow, the larger they are, the more profit made
• Growth objectives can be based on increasing revenue, market share, or expanding a business

Question 15

What are survival objectives?

Answer 15

• Businesses can continue to trade, rather than running out of money
• This is usually the main objective for new businesses.

Question 16

What are cash flow objectives?

Answer 16

• This helps improve their cash flow
• Increase in cash flow results in an increase in survival

Question 17

What are the social objectives?

Answer 17

Benefiting society or people in need

Question 18

What are ethical objectives?

Answer 18

They are based on moral principles about how businesses treat others and the environment

Question 19

What are some short-term objectives?

Answer 19

• Making short-term profit
• Having short-term survival

Question 20

What are long-term objectives?

Answer 20

Long term growth, they tend to set direction for the business.

Question 21

What is revenue?

Answer 21

The money generated by sales of a product before deductions are made

Question 22

What are fixed costs? Give some examples.

Answer 22

Costs that dont change based on output. E.g.

• Rent
• Salaries
• Utility Bills
• Loan repayments

Question 23

What are variable costs? Give some examples.

Answer 23

Costs that rise and fall as output changes. E.g.
* Wages
* Raw material costs
* Packaging costs

Question 24

What is profit?

Answer 24

The amount you have when you deducts the total cost from the total revenue.