Theme 1

Question 1

Benefit to a business of using an overdraft

Answer 1

Overdrafts do not require long forms and business plans to be completed to apply for the funds, unlike a loan. These forms are time-consuming to complete, which can be off-putting, so this makes an overdraft a desirable option for a new entrepreneur.

Question 2

Disadvantage of a franchisee setting up a business as a franchise

Answer 2

The franchisee is not able to make their own decisions regarding the business. For example, if a franchisee is running a fast food restaurant they can only offer the food options the franchisor states even if there is a demand for other options.

Question 3

2 benefits of a private limited company

Answer 3

• Limited Liability
• Can raise additional funds by selling shares

Question 4

Explain how the aims and objectives of a business may change overtime.

Answer 4

When a business first starts up, it may aim to survive and break even. This is because it is challenging to become established. However as the business starts to secure more loyal customers it’s aims can be more ambitious. E.g. they may aim to make a specific level of profit.

Question 5

Explain one benefit of a business providing good customer service.

Answer 5

Good customer service may lead to satisfied customers, who may write positive reviews on social media, which may attract new customers, thereby increasing revenue/market share.

Question 6

List some forms of primary market research.

Answer 6

• surveys/ questionnaires
• focus group
• interview
• observation
• test marketing

Question 7

List examples of stakeholders.

Answer 7

• customers
• employees/managers
• owners
• local community
• suppliers

Question 8

Disadvantage of using a focus group to carry out research.

Answer 8

One confident person may dominate the focus group and, therefore, influence the views of others, which could lead to bias. This could lead to poor decisions being made if the data is biased.

Question 9

Explain one benefit to a business of changing from a partnership to a private limited company.

Answer 9

More finance can be raised more easily by selling shares. These funds can be used to help the business expand and therefore, reduce risk and increase profits.

Question 10

Explain one consequence to a business which is experiencing cash flow problems.

Answer 10

A bank may ask for a cash flow forecast to support a loan application. If the forecast shows that there are cash flow problems, the bank will be unlikely to lend funds because the business may struggle to meet loan repayments. Therefore, cash flow problems may prevent the business from expanding and thereby limit its opportunity to generate further cash.

Question 11

Explain one disadvantage to a business of using qualitative market research data.

Answer 11

Qualification data is likely to be generated from a smaller group of respondents so the results may be less representative of the whole market. This may mean that decisions which are based on the results may not be successful.