Year 9 key questions 1

Question 1

Define limited liability.

Answer 1

The business and the shareholders that own it are distinct (separate) and so any debts can only only be taken from the business and not the owners personal possessions such as their house or car.

Question 2

Define unlimited limited liability.

Answer 2

There is no distinction between the business and the owner and so any debts that the business owes have to be payed off by the owner’s personal assets such as their car or house. The amount a business owner can lose is unlimited.

Question 3

What is a sole trader?

Answer 3

A business structure where one person is the owner, the sole trader has no legal distinction from the business and has unlimited liability.

Question 4

What are the advantages of being a sole trader?

Answer 4

• independence, the sole trader can make all their own decsions including their own working hours for example
• control, the sole trader has complete control over the business and any decsions eg product and price are theirs to make
• the sole trader keeps 100% of the profits and can decide how those profits are used.

Question 5

What are the disadvantages of being a sole trader?

Answer 5

• stress, as you are on your own you are the one who is responsible for all decsions which can be stressful, especially if you are ill and there might be no-one to help
• no-one to share ideas, as such you may have skills in some areas but not others so that can be difficult
• unlimited liability, any business debts are the responsibility of the owner and there is no limit to what they can lose, which may involve personal possessions such as a house

Question 6

What is a partnership?

Answer 6

A type of business structure of between 2 and 20 partners, often the structure for professions such as doctors, solicitors and accountants.

Question 7

What are the advantages of being in a partnership?

Answer 7

• Partners can share ideas and expertise, which can lead to more innovative thinking
• Risk is shared between partners, so all partners are responsible
• Easier to grow than a sole trader, as you can invite more partners

Question 8

What are the disadvantages of being in a partnership?

Answer 8

• All partners are responsible for each other’s decisions, so if a poor decision is made everyone must deal with the consequences
• Unlimited liabilty, so all partners are responsible for all debts
• Disagreements can occur

Question 9

What is a private limited company?

Answer 9

A type of business structure where the owners have incorporated and benefit from limited liability.

Question 10

What are the advantages of being a private limited company?

Answer 10

• The owners have limited liability
• Some customers may trust a ‘ltd’ company more than perhaps a sole trader as it may imply its a bigger more established company
• Banks may be more likely to lend to a ‘ltd’ as it is likely to have more owners/shareholders who are responsible for the running of the business.

Question 11

What are the disadvantages of being a private limited company?

Answer 11

• More difficult to set up than a sole trader, eg an Articles of Association is required to set up which outlines the rules and regulations of new owners and how the company will operate
• Shareholders may disagree which might impact on the time it takes to make decisions

Question 12

What is a public limited company?

Answer 12

A type of business structure that has its shares traded publicly on the stock exchange.

Question 13

What are the advantages of being a plc (public limited company)?

Answer 13

• Ability to raise finance (funds) through share capital
• Limited liability for investors
• Considered more prestigious and reliable, as it is usually much larger
• May be able to negotiate better prices for supplies/raw materials because it is larger, this is known as economies of scale

Question 14

What are the disadvantages of being a plc (public limited company)?

Answer 14

• Full financial records are available to the public
• Plc’s are at risk of takeover because anyone can buy and sell shares
• Because records are public there is more media attention, which can be negative

Question 15

What is a franchise?

Answer 15

When one business gives another business permission to trade using its name and products in return for a fee and a share of its profits.

Question 16

What are the advantages of operating as a franchise?

Answer 16

• Brand and reputation already established, so there is less risk in setting up this type of business
• Fee is likely to include a portion of national marketing costs, so you can benefit from brand recognition/promotional strategies
• Product or service is already known in the market
• Support and training provided by the franchisor

Question 17

What are the disadvantages of operating as a franchise?

Answer 17

• Initial cost to set up is high, the franchisee pays a fee to the franchisor
• The franchisee has very little freedom in decision making, there are restrictions on what franchisees can and cannot do
• Continued payments to be made, share of profits, sometimes referred to as royalties

Question 18

What is the difference between the terms ‘franchisee’ and ‘franchisor’?

Answer 18

The franchisee is the entrepreneur who is paying to set up the franchise, the franchisor is the business who owns the name and is accepting fees to use their name/products and business system.

Question 19

What are the advantages of a business conducting market research?

Answer 19

• To identify and understand customer needs
• To identify gaps in the market
• To reduce risk
• To inform business decisions.

Question 20

Define primary research and identify 5 methods of conducting primary research.

Answer 20

Primary market research involves obtaining information about customers, potential customers or competitors which is carried out for the first time. Methods include:

• Survey
• Questionnaire
• Observation
• Interviews
• Focus Groups (small group of people discussing a product)

Question 21

Define secondary research and identify 5 methods of conducting secondary research.

Answer 21

Secondary research involves obtaining information about market trends, compeitors and markets that already exists. Methods include:

• Internet
• Government statistics and reports
• Company Reports
• Newspapers/magazines/books
• Market reports

Question 22

1. What is the difference between quantitative and qualitative data?
2. How are each collected?

Answer 22

QuaLitavtive - Data is expressed in the form of opinions and judgements and is collected via open ended questions.

QuaNtitavtive - Data is expressed as numbers, percentages and statistics and is collected via closed questions.

Question 23

Idenitfy 4 ways social media can be used to conduct market research?

Answer 23

• Posting a link to a survey
• Conducting a poll
• Identifying trends and opinions via hashtags, retweets, shares and likes.
• Posting an open ended question on a site for qualitative data

Question 24

What are the advantages of using social media to conduct market research?

Answer 24

• Social media is a relatively cheap way of understanding customers, compared with traditional methods.
• It enables a wider selection of customrs to respond, which allows a business to deepen their understanding of the market which helps them to identify popular trends and develop or improve their products
• It’s more efficient, up to date information can be obtained quickly and in real time, which means the business can be more responsive to changes in the market place.