nature & purpose of business'

Question 1

what is a business?

Answer 1

is an organisation that exists to provide goods and services on a commercial basis to customers.

Question 2

what is an entrepreneur?

Answer 2

is someone who starts a business

Question 3

what is a primary sector?

Answer 3

extraction of natural resources e.g farming

Question 4

what is a secondary sector?

Answer 4

production of finished good and components e.g manufacturing - factory job.

Question 5

what is a tertiary sector?

Answer 5

providing services to consumers and businesses e.g selling products - hair dressers

Question 6

what is a quaternary sector?

Answer 6

providing information & ICT e.g website design + data services - google

Question 7

what is a mission statement?

Answer 7

the overriding goal of the business, a vision for the future

Question 8

what is a business objective?

Answer 8

implements the mission statement, provides a target and motivates employees and provides a clear focus.

Question 9

objective topics
increase sales
reduce cost
increase cash flow
improve customer satisfaction

Answer 9

• successfully launch five new products in the next 2 years (marketing)
• use cheaper materials, could use different manufacturing company. (operations)
• shorter time to pay you - trade credit lower to 30 days instead of 90 (finance)
• improve customer support - motivation and satisfaction, training and team building. (people/HRI)

Question 10

what influences businesses objectives

Answer 10

age of business
ownership
competition
market condition
state of economy

Question 11

how do you work out profit?

Answer 11

total revenue – total cost

Question 12

what is a profit margin?

Answer 12

amount of percentage of the final selling cost

Question 13

how do you work out total cost?

Answer 13

fixed cost + variable cost

Question 14

how do you work out average unit cost?

Answer 14

total cost/output cost

Question 15

how do you work out revenue?

Answer 15

quantity sold x average selling price

Question 16

what is profit?

Answer 16

it depends on percentage of the final selling price that is profit and quantity selling a greater quantity will make more profit as long as the price isn’t reduced.
profit makes businesses more attractive to banks and investors

Question 17

what is an unincorporated business?

Answer 17

the owner is the business - no legal difference the owner has unlimited liability for business actions, most unincorporated businesses operate as sole traders.

Question 18

what is an incorporated business?

Answer 18

legal differences between the business and the owners, owners have limited liability, most incorporated businesses operated as private limited companies.

Question 19

what is a sole trader?

Answer 19

it is a business that is owned by 1 person. there is only 1 owner but they may have many employees e.g hairdressers.
advantage - quick and easy to set up, they can have flexible hours and lots of control.
disadvantage - high levels of responsibility for owner

Question 20

what are public limited companies?

Answer 20

is a business that is managed by directors and owned by shareholders e.g Royal Mail
advantage - businesses have the ability to raise additional finances through share capital
disadvantage - it is expensive to set up, requiring a minimum of £50,000 set up cost.

Question 21

what are private limited companies?

Answer 21

is a company that has a separate legal identity to its owners and doesn’t list shares on the stock market, the company can only have up to 50 shareholders e.g accumulus accounting
advantage - often owned by one or more shareholders which are usually supportive family members
disadvantage - the legal companies are expensive to set up, must use specific documents.

Question 22

what can influence share price?

Answer 22

financial peformance (profit growth)
relationship with key investors
state of economy
general market sentiment

Question 23

what are market conditions?

Answer 23

they describe a wide range of factors affecting the market. these then influence the cost and the demand

Question 24

what is GDP?

Answer 24

measure of value of output (activity) in the economy, value used to assess changes in economic growth

Question 25

what is demand?

Answer 25

how much of a good or service a consumer wants and is able to pay for. for a business demand turns into revenue.

Question 26

what is real income?

Answer 26

real income measures the amount of disposable income available to consumers e.g households

Question 27

what is an interest rate?

Answer 27

is a reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed.

Question 28

what is fair trade?

Answer 28

guarantee a higher price to certified producers.
improve production standard - a grower will be able to receive a fair trade licence if it can improve working conditions and sustainability.