Business In The Real World

Question 1

What is an Entrepreneur?

Answer 1

Someone who is willing to take the risks involved in starting a new business.

Question 2

What is an enterprise?

Answer 2

Another word for business. Also refers to the skills of the people to identify business opportunities.

Question 3

What are the Characteristics of Entrepreneurs?

Answer 3

Innovative
Risk taker
Hardworking
Organised

Question 4

What is the primary sector?

Answer 4

Made up of organisations that are at the first stage of production and use raw materials.

Question 5

What is the secondary sector?

Answer 5

Made up of organisations that are at the second stage of production. Converting primary resources and converting these into products.

Question 6

What is the tertiary sector?

Answer 6

The final stage of production and is made up of Organisations which provide a service.

Question 7

What is a sole trader?

Answer 7

Is someone who sets up in business on his or her own and has unlimited liability.

Question 8

What are the advantages of being a sole trader?

Answer 8

It is quick and easy to set up.
Make all the decision yourself so you do not need to consult lots of other people which can make decision making faster.
Keep all the profits yourself.

Question 9

What are the disadvantages of being a sole trader?

Answer 9

• stressful making all decisions yourself
• you can lose everything as you have unlimited liability.
• have to handle all aspects of the business eg marketing and finances
• difficult to raise monet

Question 10

What is unlimited liability?

Answer 10

Means that the personal possesions of the owners of a business are at risk if there are any problems.

Question 11

What is a partnership?

Answer 11

Whne two or more people join together in a business enterprise to pursue profit.

Question 12

What is the deeds of partnership?

Answer 12

An agreement between partners that sets outthe rules of the parntership such as how profit will be divided.

Question 13

What are the advantages of a partnership?

Answer 13

• share workload
• more sources of finances
• share skils

Question 14

What are the disadvantages of a partnership?

Answer 14

• may disagree with the other partners
• unlimited liability
• liable for the actions of the other partners and have to share profits

Question 15

What is a private limited company(ltd)?

Answer 15

Cannot publicly advertise its shares for sale. They can choise who shares can be sold to.

Question 16

What is a public limited company(plc)?

Answer 16

Can advertise its shares and can be listed on the stock exchange. Must have a share capital of over £50,000. Not possible to place restrictions on who shares are sold to.

Question 17

What are the factors of production?

Answer 17

Enterprise-people who take risks and create a business
Capital-equipment,factories and offices
Labour - people that contribute to the process
Land - natural resources available for production

Question 18

What is opportunity cost?

Answer 18

Opportunity cost is when business spends time or money doing something when they could have spent the time or money doing something else.

Question 19

What are the advantages of being an LTD?

Answer 19

• limited liability
• ownership is restricted means that all shareholders must agree to sell shares which means owners retain a lot of control over how the business is managed.
• easier to get a loan

Question 20

What are the disadvantages of LTDs?

Answer 20

• finance is needed to incorporate a business. There is an upfront fee as well as costs associated with paperwork.
• legally obliged to publish their accounts each year and competitors may use these to be more competitive.

Question 21

What are the advantages of a PLC?

Answer 21

• Selling shares on a stock exchange allows companies to raise money for investment.
• limited liability

Question 22

What are the disadvantages of a PLC?

Answer 22

• owners have very little to say over how the business is run.
• anybody can take over the company if they are able to buy enough shares. When shareholders own more than half the shares.
• company’s accounts must be made public

Question 23

What are Not-For-Profit organisations?

Answer 23

Any profit made by not for profit organisations is reinvested in the business.

Question 24

What are unincorporated associations?

Answer 24

Companies with unlimited liability?

Question 25

What are social enterprises?

Answer 25

Similar to for-profit businesses but profit is reinvested to support the social enterprises aim

Question 26

What is an aim?

Answer 26

An ultimate purpose

Question 27

What is an objective?

Answer 27

A goal that is sought in order to achieve an aim

Question 28

Why might companies have different objectives?

Answer 28

- the size of a business - level of competition - type of business

Question 29

Why might business objectives change over time?

Answer 29

- stage of business life - new legislation - changes in the economy - changes in society - changes in technology

Question 30

What is a stakeholder?

Answer 30

Any individual, group or organisation that is affected by a business and its operations.

Question 31

What are the 5 main stake holders of a business?

Answer 31

- owner - suppliers - customers - local community - employee

Question 32

What factor affect where a firm should choose to locate?

Answer 32

``` The availability of raw materials Labour Competition Rent Proximity to suppliers and customers ```

Question 33

What are fixed costs?

Answer 33

Don't vary with the companies output

Question 34

What are variable costs?

Answer 34

Costs that change directly with output.

Question 35

Why is it important for a business to create plans?

Answer 35

- important for a new business to have a plan for the owner to clarify their thoughts and for a potential investor. - raising finance as banks need in depth finance - a plan lets a business clearly set out what the business objectives are and how they are going to go about achieving them - keep organised

Question 36

What are the main parts of a business plan?

Answer 36

Executive summary - conicse overview of the entire business plan Mission statement - what the company wants to achieve Products or services - describe the product or service the company sells and why customers will beenfit from this(usp) market anaylsis- in depth analysis of different aspects of the business environment. Organisation and management team Production details Finance

Question 37

What are the advantages of a business plan?

Answer 37

- provide parameters for setting targets - can be used as a benchmark against outcomes - can be compared to past business performance and competitors

Question 38

What are the disadvantages of a business plan?

Answer 38

- need to be flexible and able to adapt to a changing environment. - costly and time consuming

Question 39

What is economies of scale?

Answer 39

Describes a business benefiting from a reduction in the average unit cost because of increasing production.