Understanding Business

Question 1

Four factors of production

Answer 1

Land - includes physical, all natural resources like farmlands
Labour - the work force
Capital - buildings, equipment tools cars and finance used for the production
Enterprise - entrepreneurs

Question 2

Sectors of business industry

Answer 2

Primary - these use the earths natural resources like fishermen
Secondary - these are the businesses that make things like car manufacturing
Tertiary - these are service industries like nursing
Quaternary - these are information providing services like ICT

Question 3

What are the sectors of economy

Answer 3

Private, public, third

Question 4

Private sector

Answer 4

They are owned by shareholders and controlled by a board of directors.
They are driven by profits and this is what there business is financed by

Question 5

Public sector

Answer 5

This is owned by the government and in controlled by appointed managers. These are goods and services provided in the basis of the need of others.
These are financed by taxes are are services such as NHS or police

Question 6

Third sector

Answer 6

These are owned by the trustees and also have appointed managers.
These are often charities and are financed by donations and grants.

Question 7

Privatised/nationalised

Answer 7

These are public organisation which have been transferred to the private ownership. In the care of nationalised these are then given over to state control.

Question 8

Sole traders

Answer 8

Owned, controlled and financed by one person.
Advantage - profits not shared, decisions made quick
Disadvantages- unlimited liability, long hours
Example - plumber

Question 9

Limited liability

Answer 9

Is where you can only lose what you have put into a company

Question 10

Unlimited liability

Answer 10

Where you can lose personal possessions as they are responsible for all debts

Question 11

Partnership

Answer 11

Owned by a minimum of 2 people who run a business to make profits.
Advantage - can raise more capital, risks are spread.
Disadvantage- unlimited liability, could be disagreements amongst partners
Examples - vets

Question 12

Private limited company (ltd)

Answer 12

Not allowed to sell shares.
Advantage- limited liability, more finance from shareholders.
Disadvantage- profits shares, can’t sell shares
Example - Timpson ltd

Question 13

Franchise

Answer 13

New business pays for permission to copy existing businesses.
Could be a ltd or a plc
Advantage- already established, guaranteed customers
Disadvantage- has to run according to original, percentage has to be given to original
Example - Pizza Hut

Question 14

Social enterprise

Answer 14

Business that trades if social or environmental purposes.
Advantages - helps community, funds from grants
Disadvantage- possible restriction in trading, asset lock.
Example - credit union

Question 15

Non- profits

Answer 15

No profits money used for it’s objectives
Advantage- tax benefits, limited liability
Disadvantage- limited funding, social pressure
Example - charities

Question 16

Public limited company (plc)

Answer 16

Stock can be sold on the share market
Advantages - limited liability, easier to raise capital
Disadvantage- set-up cost high, no control over shares
Example - Tesco plc

Question 17

Multinationals

Answer 17

Has different facilities and assets in another country.
Advantage- create jobs, tax advantages and grants
Disadvantage- accused of cutting corners, deskilled job
Example - Honda

Question 18

Business ethics

Answer 18

A set of value and principles that influence how an organisations behave.

Question 19

Social responsibility

Answer 19

Companies have to act in a way that takes social obligations into account
Advantage- make there advising and promotion better and more support
Disadvantage- decrease profits as it can cost more to be social ethical

Question 20

Corporate responsibility

Answer 20

A company is responsible for all stake holders internal and external and they need to take all concerns into consideration

Question 21

Legislation

Answer 21

Customer demand and pressure groups have an affect on companies changing their police’s to be more responsible

Question 22

Reasons for a business to grow

Answer 22

Sell more products and make profits
To gain control of market
To avoid being taken over
To keep business successful
To remove competition

Question 23

Reasons for a business to stay small

Answer 23

Easier to manage
Works feel they belong
More flexibility

Question 24

External expansion

Answer 24

Merger - 2 or more businesses join together
Takeover - a larger business takes over/ buys out a smaller one