What is business? - 1.1

Question 1

What is a business objective?

Answer 1

A clearly defined target for a business to achieve over a certain period of time. Objectives should be SMART

Question 2

SMART

Answer 2

Specific, Measurable, Agreed, Realistic, Time specific

Question 3

Specific

Answer 3

Clearly defined or identified

Question 4

Measurable

Answer 4

Quantifiable target (10% increase)

Question 5

Agreed

Answer 5

Targets have to be discussed and mutually agreed - people are more likely to be committed to them

Question 6

Realistic

Answer 6

People will loose motivation to achieve objectives if they are unrealistic

Question 7

Time specific

Answer 7

By what time should the objective be met

Question 8

What is a mission statement?

Answer 8

A statement of the organization’s purpose - the reason the business exists

Question 9

Why is profit important to a business?

Answer 9

-To attract shareholders

-Its a source of finance

-Motivation

-For Survival

-As a Measure of Success

Question 10

What are fixed costs?

Answer 10

Costs that do not change as output changes (e.g. rent will not change with levels of production)

Question 11

What are variable costs?

Answer 11

Costs that change as output changes (e.g. raw materials, wages)

Question 12

What is semi-variable costs?

Answer 12

Costs that have fixed and variable elements (e.g. transport - fixed charge for renting vehicles but costs such as driver’s wages and fuel will change

Question 13

What is total costs?

Answer 13

fixed costs + variable costs

Question 14

What is revenue?

Answer 14

Money obtained from goods or services

Question 15

Revenue formula

Answer 15

quantity sold x average selling price

Question 16

What is a company?

Answer 16

A business organization which sells a product or service in exchange for revenue and profit and is owned by shareholders and has limited liability

Question 16

What is demand?

Answer 16

Amount of goods or services that consumers or organisations want and can afford

Question 17

What is an Aim?

Answer 17

Long term plans for the business from which its corporate objectives are derived and relate to the whole business.

Question 18

What is a gross domestic product?

Answer 18

Measures total value of the production of an economy (all a country’s businesses) over a period of time which is usually a year.

Question 19

What is profit?

Answer 19

Extent to which revenues from a product exceeds the cost of producing the product over a period of time.

Question 20

What is unlimited liability?

Answer 20

Individual/group is personally responsible for actions of the business so you could loose personal assets if there are financial problems within the business.

Question 21

Why do businesses exist?

Answer 21

• Create employment
• Enhance country’s reputation
• Creating new products (medicine)

Question 22

What are examples of business objectives?

Answer 22

-Growth to exploit market position and earn high profits
-Survival to continue trade
- Cash flow to pay debts on time
-Diversification to spread risks by selling a range of products

Question 23

Why do businesses set objectives?

Answer 23

To make sure everyone is working towards the same overall goal and coordinate employees. Also to review success of the businesses plans, managers can see how much has been achieved compared to set targets.

Question 24

Why is profit important?

Answer 24

So it can be used as a measure of success. Profitable businesses are attractive to customers as products are seen as desirable. They also are more likely to have the confidence of its suppliers allowing businesses to have more time between delivery’s and payments.

Question 25

Profit formula:

Answer 25

Profit= total revenue - total costs