Mock december 2024

Question 1

What is unlimited liability?

Answer 1

Means the debts a business entails becomes a personal debts of the owner, for example sole traders. Sole traders can be forced to sell personal assets to pay off business debts.
Unlimited liability is seen as a huge financial risk.

Question 2

What is porter’s generic strategy?

Answer 2

This model gives business strategic options as how to approach selling products or service within a market, in order to generate competitive advantage. (CHECK FLASHCARD)

Question 3

What is delayering?

Answer 3

Means removing parts of the hierarchy, creating a flatter structure with wider spans of control. Delayering can help to lower costs as cutting management jobs can save lots of money tied into labour costs thus giving junior employees enhanced roles it’s more responsibility and can improve communication.
However, can cost business money in the short term as remaining staff need to be retrained for new roles, if overdone, if delayering is overdone managers can be stressed a overworked with huge spans of control.

Question 4

What is a budget?

Answer 4

Budget forecasts future earning and spending, usually over 12 month period. There are three types of budgets:
- Income budgets, forecasts amount of money that will come into business as revenue. To do this bus must predict how much it will sell and at what price. (research done by sales fig and market research)
- Expenditure budgets, predict what the bus total costs will be for the year taking into account fc and vc. Variable costs increase with output, so managers must predict output based on sale estimates.
- Profit budgets, uses income budgets minus expenditure budgets to calculate expected profit or loss will be for that year.