Unit 1 - What Is A Business

Question 1

What is the definition of a good?

Answer 1

A good is a physical product such as a house or a designer suit.

Question 2

What is the definition of a service?

Answer 2

A service is an intangible item such as insurance or decorating.

Question 3

What is the definition of a product?

Answer 3

A product is a more general term which includes goods and services.

Question 4

What is the definition of GDP?

Answer 4

GDP measures the total value of the production of an economy (that is all a country’s businesses) over a period of time, normally one year.

Question 5

What is the purpose of a mission statement?

Answer 5

A mission statement sets out a business’s overall purpose to direct and stimulate the entire organisation.

Question 6

What is the definition of a business aim?

Answer 6

Aims are long-term plans of the business from which its corporate objectives are derived.

Question 7

What is the definition of an objective?

Answer 7

Objectives are medium to long-term goals established to coordinate the business.

Question 8

What is the definition of profit?

Answer 8

Profit measure the extent to which revenues from selling a product exceed the costs incurred in producing it over a time period.

Question 9

What is the definition of cash flow?

Answer 9

Cash flow is the amount of money moving into and out of a business over a time period.

Question 10

What is the definition of a fixed cost?

Answer 10

Fixed costs are costs that do not alter when the business alters its level of output. Examples include rent and rates.

Question 11

What is the definition of variable costs?

Answer 11

Variable costs alter directly with the business’s level out output, for example, fuel costs.

Question 12

What is the definition of total costs?

Answer 12

Total costs are fixed and variable costs added together.

Question 13

What is the definition of average costs?

Answer 13

Average costs are the total costs of production divided by the level of production or output to give the cost of producing a single unit of output.

Question 14

What is the definition of a sole trader?

Answer 14

A sole trader is a business that is owned and managed by one person, but it may employ other people.

Question 15

What is the definition of unlimited liability?

Answer 15

Unlimited liability occurs when an individual or group of individuals is personally responsible for all the actions of their business. With sole traders, there is no distinction in law between the individual and the business so they could lose their potential assets if the business has financial problems.

Question 16

What is the definition of a company?

Answer 16

A company is a business organisation that has its own legal identity and that has limited liability.

Question 17

What is the definition of incorporation?

Answer 17

Incorporation is the process of establishing a business as a separate legal identity that allows it to benefit from limited liability.

Question 18

What is the definition of limited liability?

Answer 18

Limited liability means that in the event of financial difficulties, the personal belongings of shareholders are safe.

Question 19

What is the definition of dividends?

Answer 19

Dividends are a share in the profits of a company that are distributed to the holders of certain types of company shares.

Question 20

What is the definition of market capitalisation?

Answer 20

Market capitalisation is the total value of the issued shares of a public limited company.

Question 21

What is the definition of a takeover?

Answer 21

A takeover occurs when one company acquired control of another by buying more than 50% of its share capital.

Question 22

What is the definition of privatisation?

Answer 22

Privatisation is the process under which the state sells businesses that it has previously owned and managed to private individuals and businesses.

Question 23

What is the definition of market conditions?

Answer 23

Market conditions refers to the number of features of a market such as the levels of sales, the rate at which they are changing and the number and strength of competitors.

Question 24

What is the definition of demand?

Answer 24

Demand is a term used by economists to indicate the amount of a particular good or service that consumers or organisations want, and can afford, to buy at given prices. It shows the level of sales that businesses can expect.

Question 25

What is the definition of real incomes?

Answer 25

Real incomes are incomes that are adjusted for the rate of inflation (increase in prices) to show changes in purchasing power.

Question 26

What is the definition of interest rates?

Answer 26

Interest rates are the price of borrowed money.

Question 27

What is the definition of fair trade?

Answer 27

Fair trade is a social movement that exists to promote improved trading terms and living conditions for producers of products in less-developed countries.

Question 28

What is meant by the term “sustainable production”?

Answer 28

Sustainable production occurs when the supply of a product does not impose costs on future generations by, for example, depleting non-renewable resources.