definitions

Question 1

delegation

Answer 1

passing authority down the hierarchy, to allow more junior employees some decision making power

Question 2

overtrading

Answer 2

when a business expands at a rate that cannot be sustained by the capital base

Question 3

liquidity

Answer 3

the ability of a business to pay its bills on time, which all depends upon having enough cash in the bank

Question 4

opportunity cost

Answer 4

the cost of missing out on the next best alternative when making a decision

Question 5

trade-off

Answer 5

accepting less of one thing to achieve more of another

Question 6

unlimited liability

Answer 6

owners are liable for any debts incurred by the business, even if this requires them to sell all their assets and possessions and become personally bankrupt

Question 7

limited liability

Answer 7

owner is not liable for the debts of the business; they can lose no more than the sum they invested