Business and its environment

Question 1

Consumer goods?

Answer 1

the physical and tangible goods sold to the general public − they include durable consumer goods, such as cars and washing machines, and non-durable consumer goods, such as food, drinks and sweets, that can only be used once.

Question 2

Consumer service ?

Answer 2

the non-tangible products sold to the general public − they include hotel accommodation, insurance services and train journeys.

Question 3

Capital Goods?

Answer 3

the physical goods used by industry to aid in the production of other goods and services, such as machines and commercial vehicles.

Question 4

Added Value ?

Answer 4

is the difference between the cost of purchasing raw materials and the price the finished goods are sold for.

Question 5

entrepreneur?

Answer 5

someone who takes the financial risk of starting and managing a new venture.

Question 6

Social enterprise?

Answer 6

a business with mainly social objectives that reinvests most of its profi ts into benefi ting society rather than maximising returns to owners

Question 7

Triple bottom line?

Answer 7

the three objectives of social enterprises: economic, social and environmental.

Question 8

Opportunity costs?

Answer 8

the benefi t of the next most desired option that is given up.

Question 9

Private sector?

Answer 9

comprises businesses owned and controlled by individuals or groups of r individuals.

Question 10

Public sector?

Answer 10

comprises organisations accountable to and controlled by central or local r government (the state).

Question 11

Mixed economy?

Answer 11

economic resources are owned and controlled by both private and public sectors.

Question 12

free-market economy?

Answer 12

economic resources owned largely by the private sector with very little state intervention.

Question 13

Command economy?

Answer 13

economic resources owned, planned and controlled by the state.

Question 14

Sole trader?

Answer 14

a business in which one person provides the permanent fi nance and, in r return, has full control of the business and is able to keep all of the profi ts.

Question 15

Partnership?

Answer 15

a business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.

Question 16

Limited liability?

Answer 16

t he only liability – or potential loss – a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder.

Question 17

Private Limited company?

Answer 17

a small to medium-sized business that is owned by shareholders who are oft en members of the same family. Th is company cannot sell shares to the general public.

Question 18

Shareholder?

Answer 18

a person or institution owning shares in a limited company.

Question 19

Share?

Answer 19

a certifi cate confi rming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights.

Question 20

Public limited company?

Answer 20

a limited company, oft en a large business, with the legal right to sell shares to the general public – share prices are quoted on the national stock exchange.

Question 21

Memorandum of association?

Answer 21

this states the name of the company, the address of the head offi ce through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business.

Question 22

Articles of association?

Answer 22

his document covers the internal workings and control of the business – for example, the names of directors and the procedures to be followed at meetings will be detailed.

Question 23

Franchise?

Answer 23

a business that uses the name, logo and trading systems of an existing successful business.

Question 24

joint venture?

Answer 24

two or more businesses agree to work closely together on a particular project and create a separate business division to do so.

Question 25

Holding company?

Answer 25

a business organization that owns and controls a number of separate businesses, but does not unite them into one unifi ed company.

Question 26

Public corporation?

Answer 26

a business enterprise owned and controlled by the state – also known as nationalised industry.

Question 27

Sales turnover?

Answer 27

total value of sales made by a business in a given time period.

Question 28

Capital employed?

Answer 28

the total value of all long-term fi nance invested in the business. Th is = (non-current assets + current assets) – current liabilities or non-current liabilities + r shareholders’ equity

Question 29

Market capitalization?

Answer 29

the total value of a company’s issued shares.

Question 30

Market share?

Answer 30

sales of the business as a proportion of total market sales.

Question 31

Internal growth?

Answer 31

expansion of a business by means of opening new branches, shops or factories (also known as organic growth).

Question 32

SMART?

Answer 32

Specific 
Measurable 
Achievable 
Realistic and Relevant
Time specific

Question 33

Mission statement?

Answer 33

a statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups.

Question 34

Corporate social responsibility?

Answer 34

the concept that accepts that business should consider the interests of society in its activities and decisions, beyond the legal obligations that it has by taking responsibility for the impact of its decisions and activities on customers, employees, communities and the environment.

Question 35

Corporate aim?

Answer 35

Long term goal of the business

Question 36

Corporate objectives?

Answer 36

Specific goal set for the business to achieve

Question 37

Divisional/Departmental objectives?

Answer 37

the specific objectives of each division or department of the business, based on the corporate aims and objectives.

Question 38

Strategies?

Answer 38

Long term plans to achieve objectives.

Question 39

Management by Objectives?

Answer 39

a method of coordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager and employee.

Question 40

Ethics?

Answer 40

The moral guidelines that determine decision making

Question 41

Ethical code?

Answer 41

ethical code (Code of Conduct) a document detailing a company’s rules and guidelines on staff behavior that must be followed by all employees.

Question 42

Stake holders?

Answer 42

people or groups of people who can be affected by, and therefore have an interest in, any action by an organisation.

Question 43

Stake holder concept?

Answer 43

the view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders (see also corporate social responsibility).

Question 44

Social audit?

Answer 44

a report on the impact a business has on society. Th is can cover pollution levels, health and safety record, sources of supplies, customer satisfaction and contribution to the community