Unit 1

Question 1

Key issues with different forms of business

Answer 1

Unlimited/ limited liability, Ordinary share capital, Market capitalisation and Dividends.

Question 2

Budgets

Answer 2

Agreed ceiling on the monthly spending by any department or manger.

Question 3

Corporate Objectives

Answer 3

Targets for the whole business, such as profit to rise by 20% a year for the next 3 years for the whole business.

Question 4

Delegated

Answer 4

Decision making power is passed down the the hierarchy.

Question 5

Entrepreneur

Answer 5

Person with the initiative and drive to make a business idea happen.

Question 6

Mission

Answer 6

Over riding motivation or purpose of a business

Question 7

Mission Statement

Answer 7

A short, powerful expressed sentence or two that explains the business aims clearly yet motivationally.

Question 8

Objectives

Answer 8

Targets precise enough to allow praise or blame for the person in charge.

Question 9

Profit Optimisation

Answer 9

the process of maximizing profits by finding the optimal balance between the prices of products or services and the costs associated with producing and selling those products or services.

Question 10

Strategy

Answer 10

Medium to long term plan for meeting objectives

Question 11

Four business functions

Answer 11

Marketing, Human Resources, Finance and Operations.

Question 12

Reasons businesses exist

Answer 12

create a profit or surplus funds, sell or provide goods or services, survive, expand, maximize sales, improve product quality, beat the competition, provide voluntary services, be kind to the environment

Question 13

Set businesses objectives

Answer 13

Managers cannot make every decision. Contributes towards achieving goals.

Question 14

Benefits of setting objectives

Answer 14

Motivating for managers and for all staff to have a clear goal to aim towards. Also, they are the basis for devising a strategy.

Question 15

Key Business Objectives

Answer 15

Profit Maximisation, Profit Optimisation, Growth, Cash Flow, Survival and Social and Ethical

Question 16

SMART stands for - write each word

Answer 16

Specific
Measurable
Achievable
Realistic
Timebound

Question 17

Bankrupt

Answer 17

INDIVIDUAL is unable to meet personal liabilities, some or all of which can be as a consequence of business activities.

Question 18

Creditors

Answer 18

individuals or entities that have lent money to another individual or entity
. For example, suppliers and bankers.

Question 19

Incorporation

Answer 19

Establishing a business as a separate legal entity from its owners, and therefore giving the owners limited liability.

Question 20

Limited Liability

Answer 20

Owners are not liable for the debts of the business; they can lose no more than the sum they invested.

Question 21

Monopoly

Answer 21

Where the sales of one business have a dominant share of its marketplace.

Question 22

Registrar of Companies

Answer 22

Government department where firms register to be incorporated.

Question 23

Sole Trader

Answer 23

Business owned by one person with unlimited liability.

Question 24

Unlimited Liability

Answer 24

Owners are liable for any debts incurred by the business, requires them to sell their personal assets and possessions and become personally bankrupt.

Question 25

Advantages of Limited Liability

Answer 25

1. Owners may feel more secure in taking business risks e.g. expanding business; 2. Owners can sell shares to raise finance = advantages for Ltd and pic

Question 26

Private Limited Company

Answer 26

Low start up capital, can be wholly owned by the entrepreneur, or investors. Shares cannot be bought and sold without agreement, cannot be listed on stock market. For example, Aviva.

Question 27

Public Limited Company

Answer 27

Share capital of more than £50,000 required to float on stock market, members of the public can buy shares. Increases company’s access to share capital, e.g. Tescos.

Question 28

Co-Operatives

Answer 28

a business or organisation that’s owned and controlled by its members, to meet their shared needs.

Question 29

Mutual Business

Answer 29

This includes building societies/ mutual life assurance. They have no shareholder or owners. Exists solely for best interests of members; Customers. For example, Nationwide.

Question 30

Charities

Answer 30

e.g. Oxfam, includes pressure groups, such as Greenpeace. Contributors are are not liable for any debts, but receive significant tax benefits.

Question 31

Public Corporation

Answer 31

Government owned businesses - trade mainly within the private sector. Most have been sold to the private sector, often forming a private monopoly. Crown Estate is one example - earns rental income for the government from publicly owned lands.

Question 32

Local Authority Service

Answer 32

Care homes for the elderly etc run by this public sector, even though there was alternative provision from the private sector. Priced below the private sector level or even free.

Question 33

Private Public Partnerships

Answer 33

Public services run in partnership with the private sector. Idea promoted by the Government as being more efficient

Question 34

Annual General Meeting (AGM)

Answer 34

Yearly meeting in which company directors invite all shareholders to come to hear results and vote on new resolutions. A legal requirement for PLCs.

Question 35

Dividend Cover

Answer 35

Measures how well a firm’s dividends are covered by its profits for the year. Accountants recommend a figure of at least 2, company should pay out no more than half its profits to shareholders.

Question 36

Market Capitalisation

Answer 36

Value placed on the business by the stock market, calculated as; share price x number of shares issued.

Question 37

role of shareholders

Answer 37

They literally own a share of the business, proportionate to their shareholding. It is to provide the capital to get the business going and to keep it growing

Question 38

shareholder rewards

Answer 38

Annual dividend payments and rise in the value of shares.