What is Business?

Question 1

What is a mission statement?

Answer 1

A general statement of where the business is heading, expressed to make it seem especially purposeful and motivating.

Question 2

What are SMART objectives?

Answer 2

• Specific
• Measurable
• Agreed
• Realisitc
• Time Specific

Question 3

Why do businesses set objectives?

Answer 3

• Managers can feel confident in making decisions
• Motivation
• Basis for devising the strategy
• Budgeting

Question 4

What are objectives?

Answer 4

Stated measurable targets of how to achieve business aims

Question 5

What is profit maximisation?

Answer 5

Maximising turnover while reducing costs

Question 6

What are satisficing objectives?

Answer 6

Trying to make enough profit to keep owners comfortable

Question 7

What is cash flow?

Answer 7

The total amount of money coming and out of a business

Question 8

What are variable costs?

Answer 8

Costs that vary with the level of output

Question 9

What is a sole trader?

Answer 9

Only one person owns the business

Question 10

What are the advantages of being a sole trader?

Answer 10

• Quick and easy to set up
• Owner has complete control over decision making
• Minimal paperwork
• Easy to close/shut down
• 1 person benefits financially
• No administrative costs to pay when setting up

Question 11

What are the disadvnatges of being a sole trader?

Answer 11

• Unlimited liability
• Limitied source of finance
• The business is the owner e.g. the business suffers if the owner is ill
• Pay more tax than a company

Question 12

What is unlimited liability?

Answer 12

The owner is responsible for the total amount of debts and obligations of that business

Question 13

What is limited liability?

Answer 13

Shareholders of the business are legally responsible for the debts of the business only to the extent to the value of the share in the business

Question 14

What is a business partnership?

Answer 14

Business is started and owned by more than 1 person

Question 15

What are the advantages of being in a business partnership?

Answer 15

• Quite simple - minimal paperwork once set up
• Expertise and effort from more than one owner
• Specialist skills
• Greater potential to raise finance

Question 16

What are the disadvantages of being in a business partnership?

Answer 16

• Unlimited liability
• A poor decison made by one owner may damage the interests of the other partners
• Harder to raise finance than a company
• Complicated to sell or close

Question 17

What is a Limited Company?

Answer 17

The business is seperate legal entity to the owner

Question 18

What are the advantages of being a limited company?.

Answer 18

• Shareholders are protected
• Easier to raise finance
• Stable form of structure - business continues if shareholders change
• Can pay less tax

Question 19

What are the disadvantages of being a limited company?

Answer 19

• Greater admin costs
• Public disclosure of company’s information
• Directors legal duties
• Have to follow more expensive rules e.g. producing audited accounts

Question 20

What is incorporation?

Answer 20

Creating a separate legal identity for the organisation

Question 21

What are non-for-profit organisations?

Answer 21

Trade in order to benefit the community

Question 22

What are social enterprises?

Answer 22

Trades in goods and services for a social purpose i.e. surplus goes towards social aims

Question 23

What do political influences include?

Answer 23

• Services
• Infrastructure
• Tax policy
• Regulation
• The UK in the EU
• Change of government
• Terrorism and violence

Question 24

What do economic influences include?

Answer 24

• Growth rate
• Inflation
• Labour costs
• Business cycle
• Unemployment and employment rates
• Exchange rates
• The stock market

Question 25

What do social influences include?

Answer 25

• Demography
• Education
• Cultural norms
• Income distribution

Question 26

What do technological influences include?

Answer 26

• Online/digital developments on sales/marketing
• Robotics/automation on processes such as manufacturing
• Development of new products which might make others obselete
• Payment methods

Question 27

What do legal influences include?

Answer 27

• Regional laws
• Law enforcement
• Court system

Question 28

What do environmental influences include?

Answer 28

• Resource management
• Energy availibilty
• Workforce health
• Climate change

Question 29

What are public limited companies?

Answer 29

A company whos securties are traded on the stock exchange and can be brought and sold by anyone

Question 30

What is the private sector?

Answer 30

Part of the national economy that is not under direct state control

Question 31

What is the public sector?

Answer 31

Part of the economy that is controlled by the state

Question 32

What is ordinary share capital?

Answer 32

An ordinary share represents equity ownership in a company proportionally with all other ordinary shareholders, according to their percentage ownership in the company

Question 33

What are preference shares?

Answer 33

Shares where the owner gets paid dividends before ordinary shareholders.

If the company goes bankrupt, owners of preference shares are entilted to get paid from the company’s assets

Question 34

What is market capitalisation?

Answer 34

The value of the company on the stock market?

Share Price X No. Shares

Question 35

What are dividends?

Answer 35

Sum of money regularly paid to a company’s shareholders from their profits

Question 36

What is competiton?

Answer 36

Rivalry among sellers

Question 37

What are market conditions?

Answer 37

Characteristics of a market that the business is selling in e.g. intensity of rivalry and growth rate

Question 38

What are interest rates?

Answer 38

The price of borrowing money

Question 39

What are demographics?

Answer 39

Statistical data relating to the population and particular groups within it