Chapter 1

Question 1

Why Businesses exist?

Answer 1

Businesses exist essentially to provide goods and services for their customers. Customers can be anywhere abroad or in the UK

Question 2

What is an entrepreneur ?

Answer 2

Entrepreneurs are individuals who have a business idea that they develop by setting up a new business and encouraging it to gow

Question 3

Why do some individuals decide to set up an business?

Answer 3

Some have a talent or skill they wish to use to provide goods and services that they believe will sell

Others have spotted a gap in the market that they feel they can fill

Question 4

What would a business want to do after it has set up its business ?

Answer 4

Survival by covering costs and making a reasonable profit

Question 5

Define mission :

Answer 5

An organisation’s aims or long term intentions:it ultimate purpose

Question 6

Define mission statement:

Answer 6

A qualitative statement of an organisation’s aims that uses language intended to motivate employees

Question 7

What is a mission statement?

Answer 7

The means of communicating key stakeholders(individuals or groups) what the organisation is doing and what it ought to be doing

Question 8

What are Business objectives designed to do?

Answer 8

Business objectives are designed to enable a business to achieve its aims or mission

Question 9

How is a mission statement useful?

Answer 9

A mission statement is useful for defining what the business trying to do in a way that all staff can understand and identify.

Question 10

Objectives need to be SMART what is it?

Answer 10

Specific- clear and easily defined
Measurable-quantifiable
Agreed-managers and subordinates are involved in setting the targets
Realistic- acheviable and not in conflict with other objectives
Time bound-Based on an clear timescale

Question 11

Why business set objectives?

Answer 11

Co -ordinate business activity
Give a sense of direction to and guide the actions of the organisation as a whole
Act as a focus for decision making and effort

Question 12

What is strategy

Answer 12

the medium-to-long term plans through which an organisation intends to achieve its objectives

Question 13

Common business objectives

Answer 13

Profit 
Growth
Survival
Cash flow
Social and ethical objectives
Other include:
diversification
market standing
meeting the need of other stakeholders

Question 14

Total revenue may also be described as :

Answer 14

Income
Revenue
Sales revenue
Sales turnover
Turnover

Question 15

Total revenue calculation

Answer 15

TR=p×q(average selling price × quantity sold)

E.g. If selling price is £8 and 5 items are sold that the revenue is £40

Question 16

Define fixed costs

Answer 16

Costs that do not vary directly with output in the short run

Question 17

Define Variable costs

Answer 17

Costs that vary directly with output in the short run

Question 18

Define total costs

Answer 18

The sum of fixed costs and variable costs

Question 19

Define Profit

Answer 19

The difference between the income of a business and its total costs

Question 20

Profit calculation

Answer 20

P= total revenue-total costs

Question 21

Why is profit important

Answer 21

Profit is reward
Profit is a motivator
Profit is a measure of success
profit is a guide for future investments
profit is a source of finance
profit is attractive to stakeholders