Unit 1

Question 1

What is a multinational company

Answer 1

It is a company that is located in more than 1 country. with its branches, offices and facilities in more than one country

• it often has its head offices in 1 country
• it has 25% of its earning revenue outside of the country

Question 2

What are advantages of multinational companies?

Answer 2

• increase in customers = wider target audience
• access to cheaper supplies = saves money
• access to cheaper labour = decrease in finance
• wider range of skills = increase in productivity and innovation

Question 3

What are private limited companies

Answer 3

it is a business owned by a shareholder with limited liability and whos shares are private and cannot be sold on the stock market but can be sold to family and friends

Question 4

What are 4 features of private limited companies

Answer 4

• difficult to raise finance
• limited liability
• they vote on major decisions
• their shares can only be sold/bought privately

Question 5

What is a public limited company

Answer 5

it is a incorporated business that allows the general public to buy and sell shares in the company via stock market ; all shareholders have limited liability

Question 6

What are advantages and disadvantages of public limited companies

Answer 6

Pro:
- more sources of finance
- limited liability

Con:
- no control of who your shareholders are
- expensive to set up

Question 7

Ansoff matrix
STEEPLE (4marker) and analysis
mission statement
types of diseconomies of scale and disadvantages
types of economies of scale and advantages

Question 8

What Is economies of scale

Answer 8

cost reductions that occur when a business increases their production

the cost advantages a company gains when it increases their production

(can occur via: negotiation)

Question 9

What are the advantages of economies of scale?

Answer 9

• lower production costs
• Increase in profit
• competitive advantage

Question 10

What is diseconomies of scale?

Answer 10

when a business grows so large that their cost per unit increases

Question 11

What are types of diseconomies of scale

Answer 11

Types:
Internal: an increase in average cost of production in the business due to factors that are within control of the organization.

External: a decrease of average costs of the business due to factors that are beyond the control of the organization

Question 12

What are the disadvantages of diseconomies of scale?

Answer 12

• reduces employee motivation = because they feel like they are not doing enough in the business and/or are not valued
• lack of communication

-

Question 13

What is ansoff matrix

Answer 13

Market development:

Question 14

what is a private sector?

Answer 14

busineses that are owned and run by private individuals and organizations that aim to eatn a profit for their owners.
- although they operate independently, they must abide by the rules and regulation of the country

eg: sole tradders, partners, privately held comapnies

Question 15

What is a public sector?

Answer 15

organizations that are controlled by regional and/or national governments, with a main aim of providing goods and services to the general public
- such services can, but do not always charge customers

eg: healthcare, education, emergency services

Question 16

What is a sole trader

Answer 16

a type of business owned and operated by 1 individual, while they can hire employees, they retain full ownership, control and responsibility including profit and liabilities.

Question 17

What are advantages and disadvantage of sole traders

Answer 17

ADV:
1. Simple setup: quick and cost effective to establish
2. Full profit retention
3. Owner has full control for decision making

DISADV:
1. Unlimited liability: personal assets are at risk
2.High workload: they bear all responsibilities and risks
3.Limited financing: reliance on personal funds and difficulty accessing external funds

Question 18

What is a partnership?

Answer 18

A business owned by 2 or more individuals who share responsibility for the businesses operations, profit and liability. Can be up to 20 partners

Question 19

What are advantages and disadvantages of partnerships?

Answer 19

ADV:
1. Increased Finance:
2. Specialization: diverse skills and shared responsibility
3. Shared Workload

DISADV:
1. Conflict: disagreements between partners = slower decision making
2. Profit sharing: earnings are divided
3. Unlimited liability: personal assets are at risk

Question 20

What is a privately held company?

Answer 20

it is a business owned by a small group of private investors whose shares are not publicly traded. They have limited liability and are not personally responsible for the company’s debts beyond their investment.

Question 21

What are advantages and disadvantages of privately held company?

Answer 21

ADV:
1. shares cannot be sold or bought without agreement
2. limited liability: shareholders only risk losing their investments
3. increased finance: more capital is raised than sole tradders and partnership

DISADV:
1.Expensive to opperate
2. shares can only be sold to family and friends
3. Targeted takeover by larger companies

Question 22

What is a public held company?

Answer 22

it is a limited liability business owned by shareholders, where shares are traded openly in a public stock exchange. (eg: NYSE). This allows the general public to buy and sell shares without prior permission from shareholders

Question 23

What are advantages and disadvantages of publicly held company?

Answer 23

ADV:
1. can raise significant funds from selling shares on stock market
2. shareholders have limited liability
3. continuity of business despite major changes with shareholders

DISADV:
1. business must disclose financial accounts = lack of privacy
2. high administrative cost
3. rivalry threat of takeover bid

Question 24

What is a silent/sleeping partner?

Answer 24

inactive owners of a partnership business, who provides additional capital without being involved in the actual running of the business