Assignment questions Flashcards
Explain one reason for business to exist
Businesses exist to provide goods and services (1) to consumers or other businesses.
You can accept to provide employment (1) to workers (1)
What is a mission statement
A mission statement is the organisations aims or long term intentions (1) this is derived from the corporate aims (1)
(For the second mark please accept an example of a mission statements )
Why is survival an important business objective?
Survival is the main objective of any new or small business as they are just covering their costs (1). This means the revenue covers the fixed and variable costs they have to pay (1). This is done by achieving the minimal level of sales to gain revenue to keep the business operating(1). This is because due to the external environment and being in a competitive market can result in difficult trading conditions (1)
Analyse why social and ethical objectives may contribute to higher profits for a retail clothes business?
1.Can lead to higher profits because it enhances the brand image (1) which means that it has a better reputation (1) therefore consumers will be more willing to pay higher prices for the clothes (1) they buy as they are ethically sourced and Fair Trade material is used (1) leading to increased profits for the retailer.
Explain the difference between and variable cost and a fixed cost?
A fixed cost stays the same regardless of the output of the business (1) an example of this would be rent (1) however, a variable cost will increase/decrease dependant on the output of the business (1) such as raw materials (1).
(Accept other examples of fixed and variable costs in the answer)
Give one advantage and one disadvantage of unlimited liability?
An advantage is that the business does not have to disclose their annual accounts(1) therefore there is more freedom(1). A disadvantage is that if the business fails and goes into debt (1) the owner must sell their personal belongings to pay off the debt (1)
Distinguish between a private limited company and a public limited
company.
A private limited company can raise capital by selling shares to friends and family(1) this means that it will find it easier to raise money to invest in growth of the business (1) leading to higher market share from increased revenues (1). A public limited company can raise capital by selling shares on the stock exchange (1) this is means it can raise a significant amount of capital to invest in research and development (1) which can result in a competitive advantage (1)
Identify and describe two factors that influence the choice of a company’s legal structure?
Liability – a larger business will need to be incorporated and pay to become a limited company, whereas a small sole trader or partnership does not need limited liability
Control – when a business sells shares then it can lose some
control of the ownership which can go against the owners vision for the business
ordinary share capital
The ordinary share capital is the amount the business sells the shares for when they are issued
Explain factors that influence the price of shares?
Profit, interest rates, demand, supply, PR, media
Explain two demographic changes that might influence the demand for
goods and services and business costs. Use examples of a business in your answer
Income as incomes increase in a period of economic growth consumers will have more disposable income and be able to afford more luxury items .
Economic cycle - during a period of recession the demand for lower priced goods and services will reduce as lower priced goods and services will be purchased such as B& M and Poundland
Why might a business change to using just fair trade products?
Using Fair Trade products will give a business such as The Body Shop a
competitive advantage as they are differentiated from their competitors ,this would lead to the business appealing to a larger target market ,therefore increasing their sales resulting in higher market share.
Analyse why an increase in interest rates will affect the costs of a business?
An increase in interest rates will increase the cost of borrowing for business, which means those businesses that are highly geared will pay more in interest on their liabilities, therefore reducing the profit resulting in lower dividends for the shareholders.
Another affect would be an increase in interest paid on retained profit in the bank
(1) this should be fully developed like the first example above
