business mocks

Question 1

what is positive cash flow?

Answer 1

When there is more money coming into the business then out

Question 2

What is negative cash flow?

Answer 2

when there is more business going out of the business then into it

Question 3

When can businesses experience cash flow problems and why ?

Answer 3

• at start up - large amounts of money need to be invested to get the business started
• During rapid growth-the business is not able to keep up with cash outflows

Question 4

Define the term ‘overdraft’

Answer 4

These let a firm take out more money out of its bank account than it has paid into it.

Question 5

Give 2 advantages of using an overdraft

Answer 5

• allows a business to make payments on time

- interest is only paid on what you use

Question 6

Give two disadvantages of using an overdraft

Answer 6

• higher interest rates( may need to pay back more later)

- the bank can demand full payment at any time

Question 7

What is trade credit?

Answer 7

The arrangement of the delay or rescheduling of payments to a later date.

Question 8

Give two advantages of using trade credit.

Answer 8

• gives a small business time to earn the money needed

- no interest charges if terms are met - costs are lower

Question 9

Give two disadvantages of using trade credit.

Answer 9

• can accumulate interest rates if terms are not met

- can damage relationships with supplier if not paid back on time

Question 10

What is venture capital?

Answer 10

Money raised through investors willing to take a risk on small businesses

Question 11

What is share capital?

Answer 11

Share capital is money raised by shareholders through the sale of ordinary shares

Question 12

Name 2 advantages of share capital.

Answer 12

Share capital is a source of permanent capital (refunds are not allowed).
- There are no dividends to be paid if the business has a poor year

Question 13

Name 2 disadvantages of share capital

Answer 13

• the business’ founders will slowly lose control

- business is vulnerable to takeover

Question 14

What is retained profit?

Answer 14

A portion of the companies’ profit that is kept in the business after paying dividends

Question 15

Give 3 advantages of retained profit

Answer 15

• no repayment needed
• easy access
• does not incur interest charges

Question 16

Give 2 disadvantages of retained profit

Answer 16

• may upset shareholders that prefer receiving dividends

- not available for future use

Question 17

what is crowdfunding?

Answer 17

when a large number of people contribute to funding a business idea.

Question 18

Give 2 advantages and disadvantages of crowdfunding

Answer 18

• It acts as a form of market research
• Provides opportunities for individuals to start a business
  dis:
• It is difficult to reach the funding target
• The business must interest people and make them want to invest.

Question 19

Give 3 advantages of market segmentation

Answer 19

• can tailor and offer product ranges that will appeal to a specific demographic
• makes it easier to produce products that meet customer needs
• allows a business to increase market share

Question 20

Give 2 disadvantages of using market segmentation

Answer 20

• markets and customer needs are always changing

- does not guarantee customers

Question 21

What is the National Minimum Wage Act? year+ pay

Answer 21

NMW 1998
The lowest hourly rate permitted by the government that an employer can pay to employees 22 and over
- £8.91

Question 22

Give 3 advantages of increasing NMW

Answer 22

• higher disposable income
• more motivated staff
• better work environment

Question 23

Give 3 disadvantages to increasing NMW- including not paying it

Answer 23

• increases firms fixed cost and total cost
• if business is unable to they may have to make employees redundant
• paying less than NMW can lead to fines and bad publicity

Question 24

What year was the consumer rights act established ?

Answer 24

• 2015

Question 25

What year was the Trade Descriptions Act established and what does it do?

Answer 25

- 1968 | - ensures that a business accurately describes their goods and services.

Question 26

How does the consumer rights act protect its customers?

Answer 26

goods and services should be: - as described - of satisfactory quality - fit for its purpose

Question 27

What year was the Health and Safety Act established and what does it do ?

Answer 27

- 1974 | - makes sure the working environment was safe

Question 28

Give 3 impacts of following the health and safety legislation

Answer 28

- more productive workforce - expensive to train staff - if not followed, firms can be prosecuted or fined and may have to pay compensation

Question 29

What year was the Equality Act established and what does it do?

Answer 29

- 2010 | - prevents discrimination based on gender, age, race etc

Question 30

Give 3 benefits of meeting legal obligations

Answer 30

- staff are more efficient - staff more likely to stay working for the business reducing recruitment cost - the business gains a good reputation

Question 31

Give 3 impacts of not meeting legal obligations

Answer 31

- pay compensation - stakeholders and suppliers may be reluctant to be associated with the business - business' reputation is damaged

Question 32

How does levels of interest impact loans?

Answer 32

- high level of interest: more expensive loan: difficult pay back - low level of interest: cheaper loan: easy pay back

Question 33

Give three impacts of low interest rates.

Answer 33

- firms and consumers borrow more and save less - consumers have more money leading to an increase of demand - more profit - firms may increase output to compensate for higher consumer spending

Question 34

Give three impacts of high interest rates

Answer 34

- Borrowing money becomes more expensive - consumers will save more ( TIB ) in order to take advantage of higher returns - reduced demand for products, less sales

Question 35

How do levels of interest impact those who save?

Answer 35

high interest rates: better returns - higher reward | low interest rate- lower returns

Question 36

Give two disadvantages and advantages on focus groups.

Answer 36

adv: - inexpensive and quick - see facial expression and body language dis: - potential bias due to group influence - not representative of market ( small group)

Question 37

define ' ethics'

Answer 37

ethics are the moral principles of right and wrong

Question 38

Discuss the importance of cash to the survival of a small business.

Answer 38

- pay supplier on times - if not loss of trust - not allowed to purchase via trade credit - prevents insolvency - pay debts - maintain relationships

Question 39

give three ways a business can act more ethically

Answer 39

- providing good working conditions - pay a fair wage - honest advertisement

Question 40

give three advantages to acting ethically

Answer 40

- can charge higher prices as consumers place high value on ethical products - shareholders may be likely to invest - good relationship with supplier if treated fairly

Question 41

Give three disadvantages to acting ethically

Answer 41

- higher labour costs due to paying fair wages - ethically sourced materials are more costly and difficult to find - increased costs leads to less profit - higher price- deters customers

Question 42

Give two advantages to acting environmentally friendly

Answer 42

- improve corporate image- attract customers - increase sales - competitive advantage

Question 43

Give two disadvantages to acting in an environmentally friendly way

Answer 43

- greenwashing can harm business reputation | - expensive to transition to a eco-friendly business.

Question 44

Give two ways pressure groups can influence businesses

Answer 44

- raise awareness on a business' unethical actions | - cause businesses to act more ethically

Question 45

Give 3 ways firms can be more sustainable and adapt their marketing mix

Answer 45

- use less packaging - use renewable energy resources - recycle more and less waste

Question 46

Give one advantage and disadvantage of having a good brand image.

Answer 46

- products are easily recognised and liked by customers | - can be expensive but can increase revenue

Question 47

List 3 different types of advertising

Answer 47

- television adverts - internet adverts - special offers

Question 48

Name 1 benefit and drawback to using television adverts as a form of advertising

Answer 48

benefit: - can be seen by a wide audience drawback - very expensive

Question 49

Name 1 benefit and drawback to using internet adverts as a form of advertising

Answer 49

benefit: - can be seen by a targeted audience drawback: - a lot of adverts online so people may choose to block them

Question 50

Give two types of sales promotion

Answer 50

- special offers ( discounts) | - product trials

Question 51

Give one advantage and disadvantage to using sales promotion to advertise

Answer 51

- it should encourage new customers to try a product, boosting sales - customers may get used to seeing products on promotion and be reluctant to purchase