General

Question 1

Satisficing

Answer 1

Managers seek to make satisfactory profits rather than maximise wealth

Question 2

Revenue maximisation

Answer 2

A business acts to maximise revenue, not necessarily profit or wealth) in order to maintain or increase its’ market share, ensure survival and discourage competition. Indicators: large increase in revenue but low profit. No satisficing – the SHs are unhappy with the return to no satisfactory profits.

Question 3

SMART

Answer 3

Specific
Measurable
Achievable
Relevant
Timely

Question 4

Organisations primary objective

Answer 4

Business - make profits
Non-for-profit - provide goods or services at minimised cost

Question 5

Secondary objectives

Answer 5

Support the primary objective
ie market position, product development, technology, employees and management

Question 6

Constraints theory

Answer 6

Businesses where profit is not the most important constraint - often ethical constraints
ie Body Shop, Lush

Question 7

Triple bottom line

Answer 7

Profits planet people

Question 8

which is the primary objective

A To increase the annual profit after tax by 125% in the next 10 years
B To introduce an average of two new products each year for the next six years
C To double the share price within the next 10 years
D To become the market leader in four market segments within the next 10 years

Answer 8

C - primary
Others - secondary

Question 9

For a business, which two of the following would be classified as secondary objectives?
A The business’s market share target for next year
B The business’s productivity improvement target for next year
C The business’s mission statement
D The business’s financial objective of shareholder wealth maximisation
E The business’s vision

Answer 9

Secondary - A, B

Question 10

A major airline, FlotAir plc, has been drawing up a mission statement.
Requirement
Which three of the following items could be expected in it?
A We will double profits in three years
B We will encourage diversity in the workplace
C We intend to be the best airline in the world
D We aim to give excellent customer service
E We intend to take over XYZ airlines
F We intend to have a 30% market share on the London to New York route

Answer 10

B C D

Mission statement: what is our business? What is our value to the customer? What do we want our business to become? What should our business be?

A + F = numerical targets = secondary

E = detailed tactic

Question 11

Which of the following statements relating to Environmental, Social and Governance (ESG) objectives
is true:
A If businesses are only interested in maximising the wealth of shareholders, they should ignore
ESG objectives
B Businesses should only adopt ESG objectives if the costs are less than the fines of poor ESG
behaviour
C Even where shareholders are only interested in maximising their wealth, the value of a business
over the longer term is enhanced by good ESG practices
D ESG is likely to reduce the wealth of shareholders due to higher costs, but the owners have a
moral obligation to embrace good ESG performance

Answer 11

C

Many investors now avoid businesses with a poor ESG record

Good ESG record: increase the value of a company over the longer term as it will lead to higher share prices despite higher costs

Even if SHs are only interested in maximising their wealth, they adopt good ESG practices

Question 12

Do companies have responsibility over their supplies?

Answer 12

Yes - they should require suppliers to comply with its’ own social standards.