BUSINESS STUDIES IGCSE

Question 1

What are the five types of organizations in private sector?

Answer 1

1. Sole trader
2. Partnership
3. Public limited company
4. Private limited company.
5. Cooperatives

Question 2

What are the advantages of being a sole trader? (write four points)

Answer 2

1- Owner does not need to share the profits at all. He can keep all the profits
2- This type of organization is easier to set up. There are not many legal requirements.
3- The owner is independent and can take all decisions himself. He does not have to take consent of other partners or people before making decisions.
4- The owner does not have to publish his accounts. H e can enjoy complete secrecy in business matters.

Question 3

What are four advantages of having business objectives?

Answer 3

1- It gives the employees a clear aim or target to work towards.
2–Decision making is better. Decisions are made thinking will the decision help to achieve the objectives.
3- It unites the entire business towards the aim
4- It allows performance to be assessed. Previous performance can be seen and analyzed whether business has been successful in achieving its objectives.

Question 4

Why businesses fail?

Answer 4

There are various reasons why a business may fail
1- Poor management and control- Young entrepreneurs are often inexperienced and make decisions which are very wrong. For example setting up a luxury car business in a poor city.
2- Lack of planning to change- The business environment is constantly changing and entrepreneurs should be ready to tackle the changes. in most cases the business fails as it cannot cope with the change.
3- Poor financial management- Yung entrepreneurs often do not manage the cash flow properly. This can leave the business without any cash and the business eventually fails.
4- Over-expansion- Some businesses expand to a extent that they become impossible to control and manage. Over-expansion can cause shortage of cash too.

Question 5

What are some business objectives?

Answer 5

1- Survival 
2-Growth
3- Profit maximization 
4-Return to shareholders
5-Market share 
6-Service to society

Question 6

What is the meaning of incorporated business?

Answer 6

Incorporated business is a business which has a separate legal identity. i.e. if one of the owners die the business shall continue and not close. Limited companies are incorporated businesses only.

Question 7

What is an unincorporated business?

Answer 7

Unincorporated business is a business that does not have a separate legal identity. i.e. the business shall close if one of the owners die. Partnerships and sole traders are unincorporated businesses.

Question 8

What are the disadvantages of being a sole trader?(Write 7 points).

Answer 8

1- There is unlimited liability.
2- It is an unincorporated business
3- the owner has to bear all the losses
4- Risk and responsibilities are not shared.
5- Owner has no one to care of the business in his absence
6- The owner has no no one to discuss business matters with.
7- The owner has to invest all the capital by himself.

Question 9

What is unlimited liability

Answer 9

Unlimited liability means that is the business goes bankrupt then the owner can be taken to the court and his personal assets can be sold to pay off the business debts. i.e. personal assets of owner can be used to settle business debts. There is unlimited liability in sole trader and partnership business.

Question 10

What is limited liability?

Answer 10

Limited liability means that is business goes bankrupt the assets of the owner cannot be used to settle the business debts. There is limited liability in limited companies.

Question 11

What are the advantages of being in a partnership ?(write 7 points)

Answer 11

1-More finance can be raised than a sole trader
2- The losses are shared
3- The risks are shared
4- The responsibilities are shared
5- The partners can discuss business matters with each other and take decisions more wisely.
6- The accounts do not need to be published
7- If one partner is at holiday or absent another partner/partners are available to take care of the business.

Question 12

What is the definition of opportunity cost?

Answer 12

The next best alternative foregone.

Question 13

What is meant by a franchise?

Answer 13

Franchise is a idea or product that a business does not want to sell directly to its customers.

Question 14

Who is a franchisor?

Answer 14

A business who sells franchises is called franchisor

Question 15

Who is a franchisee?

Answer 15

A person or business that buys a franchise is called a franchisor.

Question 16

What is added value?

Answer 16

Added value is the difference between the selling price and the cost of materials bought in.

Question 17

What are some ways of adding value?

Answer 17

1- Keep the selling price same but reduce the price of the materials bought in
2- Increase the selling price but keep the cost of materials bought in the same.
3- branding. i.e. make a brand or logo to make your product more recognizable and to add more value.
4- Add extra features to your product.

Question 18

Why is added value important?

Answer 18

1- To pay for the cost incurred in the production of the good.
2- To give a return to the owner on their investments.

Question 19

What is a joint venture?

Answer 19

A joint venture is when two or more companies decide to start a project together and they share the costs and risks and profits.

Question 20

What are benefits of a joint venture?

Answer 20

1-The costs are shared
2-There is more skills and experience available
3- The risks are shared
4- The local knowledge of the business can be useful.

Question 21

What is the meaning of division of labor?

Answer 21

A simple task is divided into sub-tasks. This is called division of labor.

Question 22

What is the meaning of specialization?

Answer 22

A simple task is divided into sub-tasks and each person does a particular task. this is called specialization.

Question 23

What are the benefits of specialization?(write two points)

Answer 23

1-Each person specializes in a task and can do it very efficiently.
2- Time is saved as there is no need to move from one workbench to another
.

Question 24

What are the drawbacks of specialization(write two points)

Answer 24

1- Workers can be tired of doing the same task over and over again. This can cause efficiency to fall.
2- Production process can be stopped if one worker is absent.

Question 25

What is a stakeholder?

Answer 25

Stakeholder is a person which is interested in the matters of the business. There are two types of stakeholders: internal and external.

Question 26

What are the disadvantages of partnerships?(write five points)

Answer 26

1- Capital limited to the amount 2 to 20 people can raies.
2- There is unlimited liability
3- It is an unincorporated business
4- There can be disagreements between the partners which can delay decisions.
5-Profits are to be shared amongst the partners.

Question 27

What are the advantages of public limited companies?

Write six points

Answer 27

1- The shares can be issued to general public.
2- Transfer of share is easier as there is no need to take consent of other shareholders.
3- Lots of capital can be generated. The capital generated is sufficient for the largest companies.
4-It is a incorporated business
5- There is limited liability
6- More status and prestige over sole trader and partnerships

Question 28

What are the disadvantages of a joint venture.(write 3 points)

Answer 28

1- Profits have to be shared
2- The both businesses may have different working and management styles.
3-Disagreements may occur between the both companies

Question 29

Write four ways of measuring business sizes and tell their limitations.

Answer 29

1-Value of employees- This method determines the size of the business according to the number of employees employed in the firm. Limitation- Some business are capital intensive therefore employ less people and some business are labor intensive employing more people. However, it is possible both the labor and capital intensive businesses have same output but one employs more people. Using this method in the aforementioned scenario could give misleading results.
2- Value of sales-This method determines the size of the business according to the value of its sales. Limitations- some businesses sale high priced products like expensive cars while others sale low value products like food and drinks.
3- Value of output- Some businesses produce expensive products like branded clothes while others produce low value items like bread.
4- Value of capital employed- Some businesses purchase big machinery and use a lot of capital. However, some businesses can produce the same output by hiring labor which requires less capital to be employed, comparatively.

Question 30

What are the disadvantages of a public limited company?( write five points)

Answer 30

1- There are costs in setting up such a business
2- There are many legal requirements in setting up such business
3- It is possible that the owners might loose control.
4- Accounts have to be published openly.
5- Money generated from selling shares can be used for expansion or can be invested into the business.

Question 31

What are the advantages of being a franchisor?(Write five points)

Answer 31

1- The franchisee purchases the license from him and pays him royalty or license fee.
2- The franchisee obtains all the supplies from him.
3- The franchisee controls and manages the franchise.
4- The franchisee works hard and his business gets recognition.
5- His business expands quicker than if he opened more outlets using his own money. i.e. growth would be slower if he financed and managed it

Question 32

What are the disadvantages of being a franchisor(Write five points)

Answer 32

1- The franchisee gets to keep the profits.
2- He has to give staff training
3- He has to pay for advertising
4- He has to give support and advice if necessary
5- The reputation of his business may be damaged if the franchisee does not perform well

Question 33

What are the advantages of being a franchisee(Write 6 points)

Answer 33

1- The franchisor pays for advertising
2- The franchisor gives staff training.
3- The franchisor gives advice and support
4- The supplies are obtained from the franchisor.
5- Less risk of failure as already well known product is being sold
6- Banks more willing to lend

Question 34

What are the disadvantages of being a franchisee(Write three points)

Answer 34

1- Royalty fee has to be paid
2- There is less independence. Franchisee has to do as ordered by franchisor
3- Franchisee cannot launch product if it is high in demand in the area or make ay major changes.

Question 35

what are the advantages of being a private limited company( write five points )

Answer 35

1- It allows more capital to be generated by selling shares to family and friends.
2-There is limited liability
3-It is a incorporated business
4-It has more reputation than sole trader or partnership.
5- Banks and suppliers more willing to lend to such companies

Question 36

What are the disadvantages of being a private limited company( write four points )

Answer 36

1- Shares cannot be sold to general public therefore capital is limited
2- It is hard to sale off the shares as the consent of all the shareholders is required
3-There are costs to set it up.
4- There are many legal requirements to set up such a business.

Question 37

Why do some businesses stay small?(write three reasons)

Answer 37

1-Type of business- Some business rely on one to one service to the customers. Therefore, these businesses stay small. For example hairdresser
2-The market size- If they market size is small i.e. there are very few number of customers in the market it would be useless to expand further.
3- Owner objectives- Some owners desire to operate a smaller business and avoid the workload and stress of a big business.

Question 38

why government supports business start ups? (write four points)

Answer 38

1- To reduce unemployment and crime. More businesses means that more people will be employed there thus reducing unemployment and crime associated with unemployment. living standards would rise too
2- To increase competition in the market and consumer choice. Increased competition means that customers have more choice.
3- Some businesses may turn into social enterprises which benefit the people.
4- More businesses mean that more products would be produced and the GDP would increase.

Question 39

Write the objectives of a social enterprise(write three points)

Answer 39

1- Social- To provide jobs to handicapped people or those who are underprivileged.
2- environmental- to minimize pollution and effect on the environment.
3-Financial- To make a profit and re invest it into the business

Question 40

How does a government support business start up?(write five points )

Answer 40

1- Advice and ideas- The government may give start up ideas and plans.
2-Finance- Government may give low-interest loans and grants in areas of high unemployment.
3- Labor- Government may provide staff training to increase efficiency and output.
4- Premises- Government may give low-cost premises.
5- Research- Government encourages universities to allow the entrepreneurs to research in their research facilities.

Question 41

What are the benefits of being an entrepreneur?(write 4

points)

Answer 41

1- There is no need to worry about job security
2- Own ideas and skills can be made use of
3- If the business becomes successful then the profit will be made and the entrepreneur will get recognition.
4- The working hours and holidays can be chosen according to own will.

Question 42

Write some characteristics of successful entrepreneurs (write 6 points )

Answer 42

1- Hardworking- Long working hours and short holidays are common in successful business people.
2- Risk taker- The ability of taking and managing the risk of business is very important to become successful
3- Confidence- The entrepreneur should be confident that his business will be successful. This skill would help him to convince banks to give him loan and creditors to supply on credit.
4- Optimistic- Entrepreneur should have good hopes and be positive about their business. If they think of failing constantly they will fail.
5- Innovative- Entrepreneur should be innovative and creative. He should be able to come up with new ideas to make his business successful.
6- Effective communicator- Entrepreneur should be able to communicate with banks effectively to convince them to give loans. He should have good communication skills.

Question 43

What is a capital intensive business?

Answer 43

Capital intensive business is a business which relies heavily machinery and capital equipment for production.

Question 44

What is labor intensive business?

Answer 44

It is a business that relies on Labor and manpower for production rather than machines.

Question 45

What is de-industrialization and where does it occur?

Answer 45

De-industrialization is when the secondary sector in a country faces a recession. i.e. the tertiary sector becomes more important than the secondary sector. It occurs in developed countries.

Question 46

What is industrialization and where does it occur?

Answer 46

Industrialization is when the secondary sector faces a boom. It happens when secondary sector gets more importance i.e. becomes more important than other sectors. It occurs in developing countries.