What Is Business

Question 1

Profit

Answer 1

Financial gain results from the difference between total revenue and total costs

Question 2

Revenue

Answer 2

Total income generated

Question 3

Total revenue equation

Answer 3

selling price x quantity sold

Question 4

Different types of costs

Answer 4

Variable, fixed costs, total costs, average costs

Question 5

Fixed costs

Answer 5

Maintain constant eg. Rent and salaries

Question 6

Variable costs

Answer 6

Fluctuate based on units sold eg. Raw materials

Question 7

Total costs equation

Answer 7

Fixed costs + variable costs

Question 8

Average costs equation

Answer 8

Total costs/ unit sold

Question 9

How can we improve profit?

Answer 9

Increase revenue and decrease costs

Question 10

Importance of profit

Answer 10

Business sustainability, growth and expansion, stakeholder value and employee benefits

Question 11

Sole trader

Answer 11

A business that is owned and operated by one person, usually small businesses

Question 12

Examples of sole traders

Answer 12

Plumbers, gardeners, photographers and cleaners

Question 13

Benefits of being a sole trader

Answer 13

Simple, quick and inexpensive to set up, owner has complete control and they keep all profits

Question 14

Drawbacks of being a sole trader

Answer 14

Pressure of working by yourself can be stressful, sources of finance are limited and unlimited liability

Question 15

Unlimited liability

Answer 15

If the business goes into debt, the owner may have to pay off the debt with their own personal assets

Question 16

Partnership

Answer 16

A business that is owned by 2-20 partners

Question 17

Deed of partnership

Answer 17

Legal document between partners - sets out the rules of the partnership and includes details on how the partners will share profits, responsibilities and workload

Question 18

Examples of a partnership

Answer 18

Dentists, doctors, accountants, solicitors and vets

Question 19

Benefits of a partnership

Answer 19

Shared workload, shared responsibility, more sources of finance, range of expertise and skills, easy to set up, greater flexibility and cover for illness/ holiday

Question 20

Drawbacks of a partnership

Answer 20

Unlimited liability, have to share profits with other partners, partners may fall out and decision making can be slower

Question 21

Limited liability

Answer 21

If the business goes into debt, the personal assets of the owner are safe. There is less risk for shareholders when they invest - makes it easier to attract investors to raise finance

Question 22

Who is a company owned by?

Answer 22

Shareholders

Question 23

How is a company formed ?

Answer 23

Incorporation

Question 24

The 2 types of companies

Answer 24

Private limited company and public limited company