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AQA Business 3.1
What is Business?
| Question | Answer |
|---|---|
| State 3 business objectives | 1. To maximise profit 2. To increase market share 3. To enter new markets 4. To diversify 5. Survival |
| What are the reasons for setting business objectives? | To provide a focus for staff To inform the business strategy To provide a framework for improving the business performance |
| Why do businesses have a mission statement? | To inform stakeholders of the business's reason for existence. Mission statements are the starting point for setting objectives and strategy. |
| What is a sole trader? | A business owned and operated by one individual who has unlimited liability. Sole traders keep all profits but must file accounts |
| What is a partnership? | A business with two or more owners who have unlimited liability. They can share responsibility but must also share profits. |
| What is a private limited company? | A business owned by shareholders who have limited liability. Only a limited number of people may own shares. They are not responsible for business debts but must publish accounts to the general public. |
| What is a public limited company? | A business owned by shareholders whose shares may be traded on a public stock exchange. The shareholders have limited liability. Plc's face a threat of takeover. |
| What is ordinary share capital? | Ordinary share capital is the value of issued shares by a business. |
| What is market capitalisation? | Market capitalisation is the market value of issued shares i.e. current share price X no. of shares |
| What is limited liabilty? | It is the restriction of losses to a shareholders invested capital. |
| What is meant by a public sector organisation? | An organisation that is taxpayer funded and operated by a government department such as the NHS |
| What is a non-profit organisation? | An organisation that is run for the benefit of members or a third party. These include charities and clubs. |
| Why do people purchase shares? | As an investment to gain a return. Company profits usually result in dividend payments. Shareholders also hope for an increase in the share price. |
| What is a flotation? | When a private limited company becomes a public limited company |
| Why float on a stock exchange? | To gain access to funds Prestige/reputation To increase the original owners wealth |
| Why do plc shares prices change? | The value of shares is based on demand anddepends on the expected performance of the business. Better performance such as higher profits will increase demand and the share price |
| What is the drawback of flotation on a stock market? | Takeover threat which may result in loss of management jobs. |
| What are fixed costs? | Costs that do not change with output e.g. interest charges, rent, managerial salaries |
| What are variable costs? | Costs that change directly with output e.g. packaging, raw materials, piece rate wages |
| What is profit? | Total Revenue - Total Cost |
| What is revenue? | Selling price per unit X number sold |
| What is breakeven? | Fixed Costs รท (Selling price per unit - Variable Cost per unit) Express the answer in units |
| What are dividends? | Payments to shareholders from after tax profit. They are paid per share |
| What are interest rates? | The cost of borrrowing money and the reward from saving or lending. The main rate of interest is the BASE rate set monthly by the Bank of England. Other banks use this as a guide when setting their rates. |
| What is meant by market conditions? | The factors that influence demand in a market such as trends, competition, income levels, legislation. These can affect a businesses demand and productions costs. |
| What is meant by an ethical approach to business? | Doing no harm to society and the environment. This usually means having a more positive influence on both these aspects. Normally achieved through ethical objectives |
| What is meant by conflict of objectives? | Where a business struggles to achieve two separate aims. For example, aiming to pay workers more and increase profit. |
| What are demographic factors? | The make up of society and/or a businesses market. For example, the age profile, geographic dispersion, income equality that exist |
| What are mutual businesses? | Normally insurance groups or pension funds whose owners are customers who have purchased a policy. Policyholders are entitled to a share of profits. |
Created by:
mrholland
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