The Nature of Business

Question 1

What is a business?

Answer 1

A group of people that make and sell products that satisfy the needs and wants of consumers

Question 2

What are goods and services? Describe the difference between them

Answer 2

A good is something tangible (you can touch it), it’s a product that you can physically buy, for example, fruit and vegetables. A service is intangible (you can’t touch it) and it is something that is done for you, for example, a hairdresser.

Question 3

What is profit?

Answer 3

Profit is the money left over after the expenses of a product have been deducted from the revenue

Question 4

What is income?

Answer 4

Income is where employees get money from their labor for providing their time to make or sell products

Question 5

What is choice?

Answer 5

Choice is where consumers have an option of choosing a type of product that has a variety of options

Question 6

What is innovation?

Answer 6

Creating a new or significantly improved product or service

Question 7

What is entrepreneurship and risk?

Answer 7

Where an individual starts and operates their own business

Question 8

What is wealth and quality of life?

Answer 8

Customers buy products that they purchase to make life easier. Quality of life refers to the well-being of an individual

Question 9

What are the seven roles that businesses play in the community?

Answer 9

Wealth and quality of life, entrepreneurship and risk, innovation, profit, choice, income, and employment

Question 10

In what ways can a business be classified?

Answer 10

Size, geographical spread, legal structure, and industry

Question 11

What are the 4 sizes of a business?

Answer 11

Micro, small, medium, large

Question 12

What is the geographical spread?

Answer 12

Geographical spread is where the business is located. It can be local (local population), national (within a country) or global (around the world)

Question 13

What is the classification of a small business?

Answer 13

A small business has less than 20 employees, it’s a sole trader or partnership, the source of finance is the owner(s), decisions are made by the owner(s) and its geographical spread is in a local area

Question 13

What is the classification of a medium business?

Answer 13

A medium business has 20 - 199 employees, it is a partnership or private company, the source of finance is the owners or private shareholders, decisions are made by the owners and its geographical spread is national

Question 13

What is the classification of a large business?

Answer 13

A large business has 200 or more employees, it is a public company, decisions are made by directors and it has a global geographical spread

Question 14

Describe the difference between a local and global business

Answer 14

A local business is usually a small business, it is in the area and typically only has one location. A global business is located in various countries and would have multiple franchises (business exists in another location).

Question 15

Describe the difference between a small and large business

Answer 15

A small business only contains less than 20 employees and it usually would be a sole trader for its legal structure. A large business has 200 or more employees and would run as a public company.

Question 16

Compare a micro and small business

Answer 16

A micro business has no more than 5 employees. A small business has less than 20 employees, however, they both have only one owner operating the business

Question 17

What is an industry?

Answer 17

A group of businesses that are involved in similar types of production

Question 18

What is the primary industry?

Answer 18

Producing natural resources

Question 19

What is the secondary industry?

Answer 19

Collecting raw materials (gathered from the primary industry) and turning it into products

Question 20

What is the tertiary industry?

Answer 20

Selling products made in the secondary industry. It also involves performing services for other people

Question 21

What is the quaternary industry?

Answer 21

Services that involve transferring and processing information

Question 22

What is the quinary industry?

Answer 22

Services that traditionally used to be performed in a home, for example, hairdressing or childcare

Question 23

What is the legal structure classifications?

Answer 23

Sole trader, partnership, private company, public company, government enterprise

Question 24

Describe the legal structure classifications

Answer 24

A sole trader is a business operated by one owner who is legally responsible for the business. They have an unlimited liability. A partnership is where a business is owned and operated by 2-20 people, it also has an unlimited liability. A private company is where you can invite 2-50 people to be private shareholders for the business. It has a limited liability. A public company is where shares are offered to the public. It has a limited liability government enterprise is a company that is owned and operated by the government such as Australia Post or service NSW.

Question 25

What is the difference between a limited and unlimited liability?

Answer 25

A liability is a legal responsibility. An unlimited liability involves the business and owner in the same legal entity. It means that the business owner is fully responsible for its debts. A limited liability is where the business becomes a corporation meaning that the business becomes legally separate from its owner(s)

Question 26

What is a private shareholder?

Answer 26

Specific people who put money into a business in return for owning part of it

Question 27

What is the main role of a business?

Answer 27

To produce and sell for a profit

Question 28

What is production?

Answer 28

Activities undertaken by the business that combine resources to create products that satisfy the needs and wants of consumers

Question 29

Businesses generate income from…

Answer 29

• employees –> wages, salaries, bonuses, overtime, commissions
• business owners –> from profits
• shareholders –> from dividends

Question 30

What are the roles of a business?

Answer 30

Profit, innovation, wealth and quality of life, entrepreneurship and risk, choice, wealth, income

Question 31

What are two types of income businesses provide

Answer 31

Salary and wages