Unit 1: Business in the Real World

Question 1

Primary sector

Answer 1

extracting raw materials
e.g.
* fishing
* mining
* agriculture
1% of uk economy

Question 2

secondary sector

Answer 2

converting raw materials into goods - finished or unfinished

• car production
• t shirt production
• assembly plant - making components e.f steering wheel
  19% of uk economy

Question 3

tertiary sector

Answer 3

• providing the service
• financial services - banks
• leisure services - hotels
• transport services - taxis
• 80% of uk economy

Question 4

percentage change

Answer 4

new number - old number / old number
= ANS x 100

Question 5

what’s an Entrepreneur?

Answer 5

an individual who takes on Risk to hopefully gain a REWARD (mainly profit)

Question 6

Reasons for Entrepreneurs starting a business?

Answer 6

• more profit
• wants independence - be your own boss
• need a job
• interest/passion
• flexible hours
• spotted a business opportunity
• help others

Question 7

opportunity cost

Answer 7

The sacrifice when an alternate is chosen

Question 8

risks/ challenges of an entrepreneur

Answer 8

• setting a new business
• expanding a business
• limited liability
• competing with competitors
• attracting/retaining customers

Question 9

Profit distribution

• sole trader -
• partnership -
• private limited -
• public limited

Answer 9

• sole trader - 100% profit is yours
• partnership - shared to what deeds of partnership says. (60/40)
• private limited and public limited
  = shareholders will reciever diverdends

Question 10

Liability
- unlimited
- limited

• sole trader -
• partnership -
• private limited -
• public limited

Answer 10

• sole trader - Unlimited liablities
• partnership - Unlimited liablities
• private limited and public limited liablities
  = shareholders personal possesstions not at risk

Question 11

Management and control

• sole trader -
• partnership
• private limited -
• public limited

Answer 11

• sole trader - have full control but not support
• partnership - shared based on ‘deals of partnership’
• private limited -
• public limited -

Question 12

Sources of finance available

partnership
private limited
public limited

• sole trader -
• partnership -
• private limited -
• public limited

Answer 12

• sole trader -
• partnership -
• private limited -
• public limited -

Question 13

market size

Answer 13

the potential number of customers you could sell your products to

Question 14

market share

Answer 14

The percentage of total sales in a market that is attributed to a specific business or product.

Question 15

price skimming

why is it good or bad?

Answer 15

price penetration

why is it good or bad?

Question 16

competitive pricing

why is it good or bad?

Answer 16

Good:

Attracts customers by matching or undercutting rivals.
Helps maintain market position in competitive industries.
Avoids overpricing or losing customers.

Bad:

Reduces profit margins if prices are too low.
Doesn’t highlight product quality or uniqueness.
Can trigger price wars with competitors

Question 17

loss leader pricing

why is it good or bad?

Answer 17

Good:

Attracts customers to the business.
Encourages additional purchases of profitable items.
Increases market share and brand loyalty.

Bad:

Can lead to losses if customers only buy the discounted product.
May harm profitability if overused.
Risk of competitors matching prices, reducing effectiveness.

Question 18

cost plus pricing

why is it good or bad?

Answer 18

A pricing strategy where a business sets the price by adding a fixed percentage (markup) to the total cost of producing a product.

Formula:
Selling Price = Cost of Production + Markup

Good:

Simple and easy to calculate.
Ensures costs are covered with a guaranteed profit.
Reduces pricing decision uncertainty.

Bad:

Ignores market demand and competition.
May result in overpriced or underpriced products.
Doesn’t consider customer value perception.

Question 19

product life cycle in order

5

Answer 19

1. research and development
2. introduction
3. growth
4. maturity
5. Decline

Question 20

Benetfits of product differentiation

Answer 20

USP
- increases customer satisflication
- allows price skimming

• however high cost of new product
• will it be low in demand

Question 21

product portfolio

Answer 21

The range of products a business offers

Question 22

extension strategies

Answer 22

• improve packaging
• add new/more features
• new target markets
• advertising - billboard, ads, buy one get one free, magazines
• reduce process - has to make more than than the reduction

Question 23

boston matrix

Answer 23

A tool to analyze a product portfolio based on market share and market growth. Categories:

• Stars: High growth, high share.
• Cash Cows: Low growth, high share.
• Question Marks: High growth, low share.
• Dogs: Low growth, low share.

Question 24

why do promotion

Answer 24

• make customers aware of ur product
• Remind them of ur product
• Which will increase sale of product
• change preception about products
• therefore persude them to buy it

Question 25

5 ways of advertisment

Answer 25

1. Billboards 2. magazine 3. internet 4. newspaper 5. TV | B-MINT

Question 26

types of sale promotion

Answer 26

* Points of sales * Buy one get one free * Free gifts * Samples * Coupons

Question 27

types of promotion

Answer 27

* advertisment *sale promotion * sponsorship * social media * PR - Public relations

Question 28

promotion depends on the...

Answer 28

* money you haev * what your rivals doing * whats the nature of product * what makes sense for the target market

Question 29

e commerse defenition

Answer 29

Buying and selling goods or services online.

Question 30

m commerse defenition

Answer 30

Buying and selling goods or services through mobile devices.

Question 31

pros and cons of m commerce

Answer 31

M-commerce Pros: Convenience and accessibility. Faster transactions. Location-based services. M-commerce Cons: Smaller screen size. Dependence on internet and battery. Security concerns

Question 32

pros and cons of e commerce

Answer 32

E-commerce Pros: Wide customer reach. 24/7 availability. Lower operating costs. E-commerce Cons: Delivery delays. Security risks. Intense competition.

Question 33

Net cash flow formula

Answer 33

Net Cash Flow = Total Cash Inflows - Total Cash Outflows

Question 34

fixed cost | FC

Answer 34

do not change with output

Question 35

Variable cost | VC

Answer 35

change with output

Question 36

Average rate of return formula

Answer 36

(Average Annual Profit ÷ Initial Investment) × 100

Question 37

variable cost

Answer 37

Costs that change with the level of output, e.g., raw materials.

Question 38

average annual profit formula

Answer 38

(Total Profit over the Period) ÷ (Number of Years)

Question 39

break even point | + formula

Answer 39

The level of sales where total revenue equals total costs, resulting in no profit or loss. ## Footnote Fixed Costs ÷ (Selling Price per Unit - Variable Cost per Unit)

Question 40

break even cons and pros

Answer 40

Break-even Pros: Helps determine the minimum sales needed to avoid losses. Assists in pricing strategies and cost control. Simple and easy to understand. ## Footnote Break-even Cons: Assumes fixed costs and prices remain constant. Doesn't consider market changes or competition. Doesn't show profitability beyond the break-even point.

Question 41

what are the 3 financial statments

Answer 41

* cash flow forcast - how much cash in bank acc * income statement - how much profit made * statment of financial position - net worth of business

Question 42

gross profit formula

Answer 42

Sales Revenue - Cost of Goods Sold (COGS)

Question 43

Gross Profit margin formular

Answer 43

(Gross Profit ÷ Sales Revenue) × 100

Question 44

Net Profit margin formular

Answer 44

(Net Profit ÷ Sales Revenue) × 100

Question 45

advantages of a business plan

Answer 45

* Provides direction and focus. * Helps secure funding from investors or banks. * Identifies potential risks and opportunities. * Assists in setting realistic goals. * Aids in measuring business progress.

Question 46

pros and cons of sole trader

Answer 46

Pros of Sole Trader: Full control and decision-making power. Simple and low-cost setup. Keep all profits. Flexibility in business operations. ## Footnote Cons of Sole Trader: Unlimited liability. Limited access to capital. High workload and responsibility. Limited expertise and resources.

Question 47

pros and cons of partnership

Answer 47

Pros of Partnership: Shared responsibility and workload. More capital and resources. Diverse skills and expertise. Shared risk and liability. ## Footnote Cons of Partnership: Unlimited liability for partners. Potential for conflicts between partners. Profit sharing. Limited control for individual partners.

Question 48

pros and cons of Private Limited Companies

Answer 48

Pros of Private Limited Companies: Limited liability for shareholders. Easier to raise capital. Continuity of the business. More control and privacy than public companies. ## Footnote Cons of Private Limited Companies: Limited number of shareholders. More legal and regulatory requirements. Profits must be shared among shareholders. Higher setup and operational costs.

Question 49

pros and cons of Public Limited Companies

Answer 49

Pros of Public Limited Companies: Ability to raise capital by selling shares. Limited liability for shareholders. Enhanced public profile and credibility. Easier to expand and grow. ## Footnote Cons of Public Limited Companies: High regulatory and reporting requirements. Risk of loss of control due to shareholders. Vulnerable to market fluctuations. Expensive to set up and maintain.

Question 50

market growth formula

Answer 50

((New Market Size - Old Market Size) ÷ Old Market Size) × 100

Question 51

market share formula

Answer 51

(Company's Sales ÷ Total Market Sales) × 100

Question 52

benefits of market segmentation

Answer 52

* More targeted marketing strategies. * Better customer satisfaction by meeting specific needs. * Improved product development. * Enhanced competition and differentiation. * More efficient use of resources.