B1 (Revision)

Question 1

what is a mission statement?

Answer 1

what a firm is trying to acheive, why it exists

Question 2

what are objectives?

Answer 2

medium to long term targets established to coordinate the business

Question 3

for objectives to work they should be…

Answer 3

specific, measurable, agreed, realistic, time specific

Question 4

what are some common business objectives?

Answer 4

profits, growth, survival, cash flow, social and ethical objectives

Question 5

examples of profit objectives

Answer 5

earn the greatest possible profits to satisfy shareholders desire for high dividends, long term financial benefits

Question 6

1. why do businesses set objectives?

Answer 6

managers can ensure that everyone is working towards the same overall target (so that people dont get confused), helps encourage employees to seek ways to increase the businesses sales

Question 7

2. why do businesses set objectives?

Answer 7

employees may be motivated bc they know what the business wants them to acheive, success of a business’s plans can be reviewed - managers can measure how much has been acheived compared to the target set

Question 8

sole traders

Answer 8

business that is owned and managed by one person, may employ others

Question 9

benefits of being a sole trader

Answer 9

easy to start up (not necessary to register the business with a government agency), freedom to make own decisions e.g. when are where to work, decisions made quickly, profits dont have to be shared

Question 10

disadvatages of being a sole trader

Answer 10

pressure of holdiing all of the responsibility, lonely, hours are demanding, not as much time off due to the risk of losing customers, diffuculties in raising finance - mainly come from own money (or a bank loan but they can charge high interest rates due to worries of failure), unlimited liability

Question 11

limited liabilty

Answer 11

responsible for all actions of the business, lose personal assets if there are financial problems

Question 12

dividends

Answer 12

part of the companies profits that are paid to shareholders depending on how many shares they have

Question 13

why is a business a private limited company?

Answer 13

desire to retain control over the company, taking decisions for the interest of the company’s long term interests, enjoying the profits generated by the comapny (going public means dividends shared between shareholders - results in the dilution of profits)

Question 14

why is a business a public limited company (PLC)?

Answer 14

access to capital (through shares enables the business to generate large sums of capital), publicity, ability to take over others companies

Question 15

why might a sole trader turn into a private limited company?

Answer 15

growth, the business might become larger and so the company needs to access more capital - protection of limited liability is vital and the business’s potential to incur debt increases

Question 16

why might a private limited company become a public limited company?

Answer 16

desire to access more capital and attain a higher profile

Question 17

public sector businesses

Answer 17

organisations that are owned and sometimes funded by a national or local government

Question 18

public sector businesses examples

Answer 18

public cooperations (e.g. channel 4 or airports), public services (e.g. NHS), municipal services (e.g. libraries)

Question 19

non profit businesses

Answer 19

made not for making profit to benefit the owners or the company, but for helping others, social and ethical aims, e.g. charities, mutuals

Question 20

why do shareholders invest

Answer 20

financial reasons - increase in share price and from recieving a share of the profits in the form of dividends

Question 21

influences share prices

Answer 21

good business enviroment (make investors more confident - favourable enviroments make sales and prices more likely to rise - generate a higher profit and pay rising dividends), if the company is performing well, economic climate is troubled may lead to lower prices

Question 22

factors that shape the external enviroment for businesses are…

Answer 22

market factors (growth in sales within a market, changes in the power of competitors), enviromental + social factors (enviromentally friendly products), economic factors (consumers incomes, level of interest rates), demographic factors (migration, birth + death rates)