theme 1

Question 1

Why do new business ideas come about?

Answer 1

• Changes in technology
• Changes in trends
• Products and services becoming obselete

Question 2

How do new business ideas come about?

Answer 2

• Adapting existing products / services / ideas
• Original ideas

Question 3

Impact of risk on a business

Answer 3

• lack of security
• business failure
• financial loss

Question 4

Impact of reward on a business

Answer 4

• business success
• profit
• independance

Question 5

The role of business enterprise

Answer 5

• to produce goods or services
• to meet customer needs
• to add value: convenience, branding, quality, design, USP

Question 6

The role of an entrepreneur

Answer 6

• organsis resources
• takes risks
• makes business decisions

Question 7

What are customer needs?

Answer 7

• price
• quality
• convenience
• choice

Question 8

Why are customer needs important?

Answer 8

• generating sales
• business survival
• brand image

Question 9

What is the purpose of market research?

Answer 9

• identify and understand cutomer needs
• identify a gap in the market
• reduce risk
• inform business decisions

Question 10

What are the methods of market research

Answer 10

• primary - getting it yourself
• secondary - someone elses

Question 11

Examples of primary research

Answer 11

• survey
• questionaire
• focus group
• observation

Question 12

Example of secondary research

Answer 12

• internet
• market reports
• government reports

Question 13

Pros and cons of primary research

Answer 13

• Pro: up to date, questions can be tailed to answer specific question for that business, allows business to have direct contact with existing or potential customers
• Con: time consumer, some surveys get low responce rates, expensive, can be bias in small or incorrect sample groups

Question 14

Pros and cons of secondary research

Answer 14

• Pro: is cheap, easily accessible
• Con: may be out of date, may not be relevent for the business

Question 15

What is qualitive and quantative data?

Answer 15

• qualitive - subjective, personal opinions e.g. focus group
• quantative - to do with numbers and statistics e.g. poll

Question 16

What are market segments?

Answer 16

• location
• age
• demographic
• income
• lifestyle

Question 17

Why do we use market mapping?

Answer 17

• identify a gap in the market
• identify competitors

Question 18

Understanding the competitive environment

Answer 18

• strengths and weaknesses of competitors based on: price, quality, location, product range and customer needs
• impact of competitors on business making decisions e.g. lower prices to remain competitive

Question 19

Effects of the use of social media

Answer 19

· Fast to access a wide range of people.
· Relatively cheap compared to other forms of market research.
· Can be used for primary or secondary research.
· A number of social media sites with different audiences.
· Analytical tools are required.
· Takes time and money to establish, build and monitor a presence.

Question 20

What are business aims and objectives

Answer 20

• aims - is the overall target / goal of the business
• objective - smaller targets / goals in order to reach the main aim

Question 21

Why are business aims and objectives useful?

Answer 21

• helps strategise and visualize how to complete problems / ambitions

Question 22

What types if aims and objectives are there?

Answer 22

• Financial - goals relating to money
• Non-financial - often personal goals or solving a social issue within society e.g. being more sustainable

Question 23

Why do aims and objectives differ between businesses?

Answer 23

Every business is different and because of this, their aims and objectives differ vastly. Business have different desires and things they want to accomplish. Some may focus more on the financial aims of the business and others may focus on the non-financial aims. It depends on the business and what they stand for

Question 24

revenue

Answer 24

sales price x units sold

Question 25

fixed costs

Answer 25

total costs - variable costs

Question 26

variable costs

Answer 26

total costs - fixed costs (or) cost per unit

Question 27

total costs

Answer 27

variable costs + fixed costs

Question 28

profit / loss

Answer 28

total revenue - total costs

Question 29

interest

Answer 29

interest (on loans) in % - ([total repayment - amount borrowed] / amount borrowed) x 100

Question 30

break even level of ouput

Answer 30

fixed costs / (sales price x variable costs)

Question 31

break even point in costs

Answer 31

break even point in units x sales price

Question 32

Margin of safety

Answer 32

actual sales - break even sales

Question 33

gross profit

Answer 33

total revenue - variable costs

Question 34

gross profit margin

Answer 34

gross profit / sales revenue x 100

Question 35

net profit

Answer 35

total revenue - total costs (or) gross profit - fixed costs

Question 36

net profit margin

Answer 36

net profit / sales revenue x 100

Question 37

contribition per unit

Answer 37

sales price - variable costs

Question 38

Net cash flow

Answer 38

cash inflow - cash outflow

Question 39

Opening balance

Answer 39

closing balance of previous month

Question 40

closing balance

Answer 40

opening balance + net cash flow

Question 41

Average rate of return

Answer 41

average annual profit [total profit / number of years] / cost of investment x 100

Question 42

break even diagram

Answer 42

cba to find it

Question 43

Why is cash important

Answer 43

* to pay suppliers * to prevent insolvency / business failure

Question 44

trade credit - short term

Answer 44

* supliers give a period of credit before payment * Pro - buy now pay later (free), potential discounts for early payments * Con - may be charges for late payments, not available wth all suppliers

Question 45

Overdraft- short term

Answer 45

* agreement with bank to go over

Question 46

what is unlimited liabilty?

Answer 46

* responsible and liable for ALL debts that the business incurs * It is simpler to set up these types of business * Sole traders and partners may be less inclined to take risks as all their personal wealth is at risk * Sole trader and partnerships * same entity

Question 47

What is limited liability?

Answer 47

* Private limited companies Ltd / Public limited company PLC * seperate entities * Risk is reduced as personal assests cannot be lost *Only money invested by shareholders in the business can be lost The business s more likely to have the confidence to take risks As losses are limited to the amount invested, this makes it more attractive for investors

Question 48

sole traders

Answer 48

* It is simply an extension of the legal personality of the owner * It may have one or more employees * The most common form of ownership in the UK * Unincorporated * Unlimited liability * Examples include street vendors, buildings, electricians, equestrian instructors

Question 49

factors effcting business location

Answer 49

market, labour, raw materials, competitors

Question 50

difference between Ltd and PLC

Answer 50

* Ltd sell shares to family and friends to raise capital * PlC sell shares on a stock exchange to members of the public and other institutions - run by directors

Question 51

What is the marketing mix?

Answer 51

Price, place, product and promotion

Question 52

Why make a business plan

Answer 52

* reduce risk * obtain finance

Question 53

What is in a business plan?

Answer 53

* business idea * aims and objective * target market (market research) * forecast revenue / costs / profit * cash flow forecast * sources of fincance * location * marketing mix

Question 54

effect of stake holders

Answer 54

* employees - if unhappy with work evironment, could strike * suppliers - late deliveries and poor quality / wanting payment on time * customers - will want best value for money, could go to competitors * community - want a business to behave ethically * owners - how much money they take out / reinvest / decisions * Government - changing legislation