Chapter 1

Question 1

Give me 3 business objectives

Answer 1

Survival, Cash flow, Growth

Question 2

3 reasons why a business would set objectives

Answer 2

Everyone works towards the same goal which increases efficiency, Motivation for employees, enables progress to be measured aiding future decision making

Question 3

3 reasons why a business has a missions statement

Answer 3

Establishes direction of the business, Forms the basis of alignment with the owners and employees, Informs the public why the business exists.

Question 4

3 variable costs

Answer 4

Raw materials, direct labour, fuel

Question 5

3 fixed costs

Answer 5

Management salaries, rent, Insurance

Question 6

What is the difference between the mission of a business and the objectives of a business.

Answer 6

The mission refers to the organizations long-term intentions and details its overall purpose

Objectives are SMART and set out how the aims of the organization will be achieved

Question 7

What is the difference between A private limited company and a public limited company

Answer 7

Many private limited companies are owned by families/friends i.e. there is control over who can buy shares in the business whereas there are no restrictions who can buy shares in a plc.
Minimum capital requirement for a plc is £50,000; there is no requirement for a Ltd

Question 8

What is the difference between limited liability and unlimited liability

Answer 8

Limited liability is the legal protection offered to shareholders in public and private limited companies whereas unlimited liability means that the owners of an unincorporated business, for example a sole trader, are responsible for all the debts of the business

Question 9

What is the difference between the objectives of a sole trader and the objectives of a public limited company

Answer 9

Sole trader: survival; being own boss and perhaps to provide sufficient income to have a comfortable standard of living. Public limited company: linked to efficiency, cost savings, increase in sales/market share, growth, profit maximisation, increase in share value

Question 10

What is the difference between private and public sector organisations

Answer 10

Private sector organisations are run by individuals or groups of individuals, rather than being run and controlled by the government. The public sector consists of those organisations which are owned and controlled by the government on behalf of the public

Question 11

What is the difference between ordinary share capital and market capitalisation

Answer 11

Ordinary share capital is the total value of the shares when first issued and is permanently invested in a company. Market capitalisation is the current value of the issued shares

Question 12

2 benefits and drawbacks of sole traders

Answer 12

Owner can keep all the profit and has full control over the business. However has unlimited liability and lack of capital.

Question 13

2 benefits and drawbacks of ltd

Answer 13

Limited liability and has full control over who can buy shares. However, More difficult to raise capital compared to a PLC.
More expensive and time consuming to set up compared to a sole trader

Question 14

2 benefits and drawbacks of plc

Answer 14

Limited liability and Able to raise large amounts via sale of shares on the stock market. However, Expensive to set up
Must publish detailed financial information

Question 15

Give an example of a non-profit organisation

Answer 15

Many different forms of non-profit organisation exist e.g. charities, social enterprises, community groups; they may make a profit, but the profits are reinvested back into the organisation in order to meet its objectives rather than being distributed to owners

Question 16

Give an example of a public sector organisation

Answer 16

Government provides public services to all citizens in the country: NHS, education
Local government provide municipal services to local areas: libraries, parks, leisure centres