Module 2

Question 1

What is the key objective of businesses?

Answer 1

To make profit.

Question 2

What are the objectives of a sole trader?

Answer 2

To provide a living for the owner, profit and growth.

Question 3

Who controls a sole trading business?

Answer 3

One owner.

Question 4

What are the sources of finance for a sole trader?

Answer 4

Owner’s capital, overdraft, credit card, loans, grants, mortgage and profit.

Question 5

How are the profits distributed in sole tradership?

Answer 5

All to the owner.

Question 6

What are the objectives of a partnership?

Answer 6

To provide a living for the owner, to run a professional service, profit, growth and increased market share.

Question 7

Who controls a partnership?

Answer 7

Well, the partners… Duh.

Question 8

What are the sources of finance to a partnership?

Answer 8

Partners’ capital, credit card, overdraft, loans, grants, mortgage and profit.

Question 9

How are the profits distributed in a partnership?

Answer 9

Between the partners.

Question 10

What are the objectives of an incorperated business?

Answer 10

Profit, growth and increased market share.

Question 11

Who controls an incorperated business?

Answer 11

The board of directors, and managers working on their behalf.

Question 12

What are the sources of finance to an incorperated business?

Answer 12

Share capital, overdraft, loans, mortgage, debentures and profits.

Question 13

How are profits distributed in an incorporated business?

Answer 13

Between shareholders.

Question 14

What are the objectives of a franchise?

Answer 14

For the franchisor to expand business over a wider area and increase profits.
For the franchisee to set up a profitable enterprise using the support of the franchising organisation.

Question 15

Who controls a franchise?

Answer 15

The franchisee, subject to limitations established when forming the franchise.

Question 16

What are the sources of finance available to a franchise?

Answer 16

Franchisees have to pay a fee to the franchisor to buy the franchise rights; they can then access other sources of finance, such as bank loans, to keep the business running.

Question 17

How are the profits distributed in a franchise?

Answer 17

Franchisees pay a set percentage of their profits to the franchisor.

Question 18

What are the objectives of a joint venture?

Answer 18

To create a new venture based on an agreement between two existing companies; to make a profit in a new area of operations.

Question 19

Who controls a joint venture?

Answer 19

The new venture becomes a distinct entity, with responsibility for running the venture.

Question 20

What are the sources of finance for joint ventures?

Answer 20

Funds provided by the companies that create the joint venture; the joint venture can then access other sources of funds.

Question 21

How are profits distributed in a joint venture?

Answer 21

The joint venture distributes the profits to the companies that set it up.

Question 22

A business must have clear objectives. Businesses should keep their objectives in line with SMART. What does SMART stand for?

Answer 22

S - Specific
M - Measurable 
A - Achievable
R - Realistic 
T - Timed

Question 23

What are the 7 objectives of the public sector?

Answer 23

• Growth
• Expansion
• Survival
• Increased market share
• Social responsibly and image
• Customer loyalty
• Brand recognition

Question 24

What is another term for internal growth?

Answer 24

Organic growth.

Question 25

How can a business grow internally?

Answer 25

By reinvesting the profits made back into the business, or by the owners putting more capital into the business.

Question 26

Is internal growth normally fast or slow?

Answer 26

It tends to be a slow form of growth.

Question 27

How can a business grow externally?

Answer 27

It can merge with another business or take over another business.

Question 28

What is a merger?

Answer 28

When two business combine to form one firm.

Question 29

What form of expansion is a takeover classed in?

Answer 29

An “unfriendly” form of expansion.

Question 30

How do you measure a business by the number of employees?

Answer 30

Small business - less than 50 employees
Medium business - 50 - 249 employees
Large business - over 250 employees

Question 31

How do you measure a business by the value of output/turnover?

Answer 31

Small business - turnover of less than €10 million
Medium business - turnover of €10 - €50 million
Large business - A turnover of more than €50 million

Question 32

How do you measure a business by the market share?

Answer 32

A small firm may supply less than 5% of the total market, for example, whereas a firm supplying 44% of the market would be deemed a large business.

Question 33

How do you measure a business by capital employed?

Answer 33

Small business - capital employed of less than €10 million
Medium business - capital employed of between €10 - €43 million
Large business - capital employed of greater than €43 million

Question 34

What are the 6 main stakeholders in a business?

Answer 34

1. Owner’s/shareholders
2. Local community
3. Suppliers
4. Government
5. Customers
6. Managers/Directors/Employees

Question 35

Is the likelihood of business failure in the first 24 months of trading high or low?

Answer 35

Likelihood of failure. VERY HIGH.

It is hard work to succeed!

Question 36

What are some common reasons why businesses fail?

Answer 36

• poor selling techniques
• poor management
• poor cash management
• failure to plan for upcoming changes
• expanding too fast

Question 37

Why do a lot of smaller businesses choose to remain small?

Answer 37

• Flexibility of working hours and independence.
• Greater control over the firm.
• Able to understand your market better and provide a more personalized service.