unit 1

Question 1

what is a business?

Answer 1

an organisation that produces goods or provides services to meet customer needs, typically for profit

Question 2

what are the 3 main purposes of business?

Answer 2

1. provide goods/services
2. meet customer needs
3. make a profit

Question 3

what is a good vs a services?

Answer 3

a good is tangible (e.g. a phone) a services is intangible (e.g. banking)

Question 4

what is the difference between profit and revenue?

Answer 4

revenue is total income from sales; profit is revenue minus cost

Question 5

state the formula for revenue

Answer 5

revenue = price x quantity sold

Question 6

what is a mission statement?

Answer 6

a brief summary of a business’s core purpose and values

Question 7

what are business objectives?

Answer 7

specific, measurable targets that help achieve a mission

Question 8

give 3 examples of common business objectives

Answer 8

1. increase profit
2. grow market share
3. improve customer satisfaction

Question 9

what is market share?

Answer 9

the % of total sales in a market controlled by one business

Question 10

define cost

Answer 10

the amount a business spends to produce goods or services

Question 11

what are fixed costs? give an example

Answer 11

costs that dont change with output, e.g. rent

Question 12

what are variable costs? give an example

Answer 12

costs that vary with output e.g. raw materials

Question 13

what is the formula for total costs?

Answer 13

total costs = fixed costs + variable costs

Question 14

what is profit?

Answer 14

the financial gain when revenue exceeds total costs

Question 15

what is the formula for profit?

Answer 15

profit = total revenue - total costs

Question 16

what are private sector businesses?

Answer 16

businesses owned by individuals or shareholders, not the government

Question 17

what are public sector organisations?

Answer 17

government-owned organisations that provide services like education or healthcare

Question 18

what is a sole trader?

Answer 18

a business owned and operated by one person

Question 19

what is a partnership?

Answer 19

a business owned by two or more people sharing profits and responsibilities

Question 20

what is a private limited company (Ltd)?

Answer 20

a business with limited liability and privately owned shares

Question 21

what is a public limited company (plc)?

Answer 21

a business with limited liability whose shares are sold on the stock exchange

Question 22

what is limited liability?

Answer 22

owners are only liable for the amount they invest in the business

Question 23

what is a shareholder?

Answer 23

an individual or institution that own shares in a company

Question 24

why do shareholders invest in companies?

Answer 24

to earn dividends and/or capital gains (increase in share value)

Question 25

what is a dividend?

Answer 25

a portion of a company's profit paid to shareholders

Question 26

what is market capitalisation?

Answer 26

total value of a company's issued shares: share price x number of shares

Question 27

what is the role of an entrepreneur?

Answer 27

to take risks and start businesses by organising resources and identifying opportunities

Question 28

what are stakeholders?

Answer 28

individuals or groups with an interest in a business (e.g. employees, customers, suppliers)

Question 29

what is the difference between internal and external stakeholders?

Answer 29

internal: part of the business (e.g. employees) external: outside the business (e.g. customers, suppliers)

Question 30

name 3 external environmental factors that affect buisnesses

Answer 30

1. economics (e.g. inflation = Increases business costs: Inflation increases prices of raw materials, labor, squeezing profit margins + Reduces consumer demand: Rising prices decrease consumer purchasing power, leading to lower sales and reduced investment) 2. legal (e.g. employment law = Businesses must adhere to laws on minimum wage, working hours, which increases compliance costs and potential legal liability if not followed + By ensuring fair treatment and clear rights, businesses can attract and retain talent, potentially leading to improved employee morale and performance) 3. technological (e.g. automation)

Question 31

what is opportunity cost?

Answer 31

the value of the next best alternative that is forgone when a business makes a choice

Question 32

what is the difference between profit maximisation and sales maximisation?

Answer 32

profit maximisation: focus on highest profit; sales maximisation: focus on highest sales volume

Question 33

what is social enterprise?

Answer 33

a business with social objectives that reinvests profits to achieve them

Question 34

what is not-for-profit organisation?

Answer 34

an organisation that doesnt aim to make profit but to benefit society (e.g. charities )

Question 35

whats the impact of inflation on businesses?

Answer 35

raises costs and may reduce consumer purchasing power.

Question 36

What is the definition of interest rates?

Answer 36

The cost of borrowing money and the return for lending money

Question 37

What is the definition of market conditions?

Answer 37

The relative attractiveness of the external market in which a business operates.

Question 38

What is the definition of demographic factors?

Answer 38

The characteristics of human populations and population groups, includes analysing the range of elements including migration trends, birth and death rates, ethnicity and gender and trends in age

Question 39

What is the definition of share price?

Answer 39

The price of a single share in a company; share prices usually determined by the supply and demand for shares

Question 40

What is the definition of ordinary share capital?

Answer 40

Money given to a company by shareholders in return for a share certificate that gives them part ownership of the company; ordinary share capital is permanent so a business will never be required to repay the value of the shares to their owners.

Question 41

How might competition affect business costs and demand for goods and services

Answer 41

Costs: - Increased spending: Businesses may spend more on promotion, advertising, and research and development to stand out from competitors Demand for goods and services: - Lower demand: Competitors reduce the demand for a specific business's products by offering similar goods or services to the same customers.

Question 42

Definition of interest rates:

Answer 42

Interest rates are the cost of borrowing money or the reward for saving, expressed as a percentage of the principal amount

Question 43

Benefits of interest rates:

Answer 43

Lower borrowing costs: When interest rates fall, the cost of taking out new loans or using existing credit lines decreases. This can also lead to lower monthly payments on existing debt, freeing up cash Competitive advantage: With lower borrowing costs, a business may be able to offer more competitive pricing to attract and retain customers

Question 44

Drawbacks of interest rates:

Answer 44

Less Disposable Income: Consumers with mortgages and personal loans face higher repayment costs, which reduces their disposable income and leads them to cut back on non-essential, discretionary spending. Lower Sales and Revenue: Reduced consumer demand can lead to a drop in sales, especially for retail sectors selling big-ticket or luxury items. Higher Supplier Costs: Suppliers also face increased operating and borrowing costs, which they may pass on to retailers through higher prices for goods and materials, squeezing margins even if the retailer itself has no debt

Question 45

What is the order of mission and the hierarchy of objectives?

Answer 45

Aims, mission, corporate objectives, functional objectives, business unit/individual targets