Understanding Business

Question 1

What is a good?

Answer 1

These are physically tangible things. This means that they can be touched and seen e.g. mobile phone, chocolate bar, television.

Question 2

What is a service?

Answer 2

These are things that are done for others. Services are intangible. This means that they cannot be seen or touched after they are provided e.g. hairdressing, education, banking

Question 3

What is the definition of a durable product?

Answer 3

These goods and services last for a long time period and can be used again and again e.g. mobile phone, laptop

Question 4

What is the definition of a non-durable product?

Answer 4

These goods and services do not last for a long time period and are usually only used once e.g. newspaper, food

Question 5

What is the definition of a consumer?

Answer 5

Theses goods and services are consumed by private individuals to satisfy their needs and wants e.g. game consoles, technology, clothing

Question 6

What is the definition of Capital?

Answer 6

These goods and services are consumed by businesses so that they can provide other goods and services e.g. vehicles, money

Question 7

What are the 4 Factors of production?

Answer 7

Land
Labour
Capital
Enterprise

Question 8

What is the definition of land?

Answer 8

Land is all of the natural resources in it or on it (e.g. oil, wood, animals, crops, etc) that the organisation needs to produce goods and services. Land is paid for through rent.

Question 9

What is the definition of labour?

Answer 9

Labour is all of the work that is done by people either through physical or mental efforts. Labour is paid for by wages

Question 10

What is the definition of capital?

Answer 10

Capital is money invested into the business and all of the equipment and machinery it can be used to buy. Capital is paid for through interest. MAN MADE!!

Question 11

What is the definition of enterprise?

Answer 11

Enterprise is all of the ideas for goods and services a business had and how the other factors are combined to create a viable business.

Question 12

Name the 3 sectors of industry

Answer 12

Primary
Secondary
Tertiary

Question 13

Name the 3 sectors of economy

Answer 13

Private
Public
Third/voluntary

Question 14

Name the 3 different options for sizes of a business

Answer 14

Small
Medium
Large

Question 15

What is the turnover of a small, medium and large business?

Answer 15

Small business - less than £5.6 million
Medium business - less than £22.8 million
Large business - greater than £22.8 million

Question 16

How many people are there in a small, medium and large business?

Answer 16

Small business - less than 50 employees
Medium business - between 50 - 250
Large business - more than 250 employees

Question 17

Name the 3 types of businesses that operate in the private sector

Answer 17

Sole Trader
Partnerships
Private Limited Companies

Question 18

Give 2 advantages of being a sole trader

Answer 18

One advantage is quick decisions can be made in the business because they are all made by the single owner without interference

Another advantage of being a sole trader is there are few rules or laws that have to be followed when setting up a sole trader. This means that sole trader businesses can be easier to for people with little business experience to set up and operate.

Question 19

Give 2 disadvantages of being a sole trader

Answer 19

One disadvantage is the sole trader has unlimited liability, this means that if the business is not successful the owner could not only lose the business but also his/her own home, car, possessions to pay off the business debts. As if this wasn’t enough, they could be made bankrupt by the courts.

Question 20

How many people own/control a sole trader business?

Answer 20

1 person

Question 21

How many people own/control a partnership?

Answer 21

2-20 people

Question 22

What agreement do partnerships have?

Answer 22

A partnership agreement

Question 23

Give 2 advantages of being a partnership

Answer 23

One advantage is the work involved in running a business can be shared.

Another advantage is partners can specialise in different areas (e.g. one specialises in family law and another specialises in criminal law). This would make them well rounded.

Question 24

Give 2 disadvantages of being a partnership

Answer 24

One disadvantage is they have unlimited liability and could lose everything.

Another disadvantage is there may be arguments between the partners on how to run the business.

Question 25

If someone has a star in a private limited company, what are they?

Answer 25

A shareholder

Question 26

Give 2 advantages of being an LTD

Answer 26

One advantage is the shareholders have limited liability. This means that if the business runs out of money, the debt is limited to the money in the business and so the shareholders can only lose the money they have invested in the business.

Another advantage is there can be lots of capital available in the business because it can have lots of shareholders investing. This can allow the business to provide better goods and services.

Question 27

Give 2 disadvantages of being an LTD

Answer 27

One disadvantage is private limited companies have to follow the legal rules in the Companies Act. This can mean that limited companies can be complicated and difficult for people with little business experience to set up and operate.

Another disadvantage is the profits rom the business are shared between all the shareholders as dividends. This means that each owner makes less money than they would if they were working on their own.

Question 28

Who are public sector organisations set up and run by?

Answer 28

The government (on behalf of the people)

Question 29

What is the main aim of a public sector organisation?

Answer 29

To provide services to the general public

Question 30

What are the most common types of of public sector organisations?

Answer 30

Public corporations
Government funded service providers
Local authorities