3.1 What is Business?
Q1: What is a mission statement?
A1: A mission statement is a brief description of a company’s fundamental purpose and
core values; it explains why the business exists.
Q2: What are the benefits of having a strong mission statement?
A2: It aligns stakeholders, guides decision-making, builds brand identity, and motivates
employees.
Q3: What are objectives?
A3: Objectives are specific, measurable targets that a business aims to achieve in order
to fulfil its mission.
Q4: Why do businesses set objectives?
A4: To provide direction, help with planning, measure performance, and motivate staff.
Q5: Describe the relationship between mission and objectives.
A5: Objectives are the steps a business takes to achieve its overarching mission.
Q6: What is revenue?
A6: Revenue is the total income generated from sales of goods or services.
Q7: What are fixed costs?
A7: Costs that do not change with output, such as rent and salaries.
Q8: What are variable costs and how are they calculated?
A8: Costs that change with output. Calculated as: variable cost per unit × number of
units produced.
Q9: What are total costs and how are they calculated?
A9: Total costs = fixed costs + variable costs.
Q10: Define selling price per unit.
A10: The amount charged to the customer for one unit of a product or service.
Q11: What is the difference between the private and public sector?
A11: The private sector is owned by individuals or companies; the public sector is run by
the government.
Q12: What is a sole trader?
A12: A business owned and operated by one individual.
Q13: Advantages of being a sole trader?
A13: Simple to set up, full control, keeps all profits.
Q14: Disadvantages of being a sole trader?
A14: Unlimited liability, harder to raise finance, full responsibility.
,Q15: What is a partnership?
A15: A business owned and managed by two or more people who share profits, losses,
and responsibilities.
Q16: Advantages of being in a partnership?
A16: Shared responsibilities, more capital, diverse skills.
Q17: Disadvantages of being in a partnership?
A17: Shared profits, potential for conflict, unlimited liability (unless LLP).
Q18: What is a private limited company (Ltd)?
A18: A company whose shares are owned privately and not sold on the stock exchange.
Q19: Advantages of being a private limited company?
A19: Limited liability, easier to raise capital than sole traders, ownership control.
Q20: Disadvantages of being a private limited company?
A20: Legal requirements, must publish financial accounts, limited share transfer.
Q21: What is a public limited company (PLC)?
A21: A company whose shares are traded publicly on the stock exchange.
Q22: Advantages of being a PLC?
A22: Ability to raise large capital, increased status and credibility.
Q23: Disadvantages of being a PLC?
A23: Risk of takeovers, regulatory scrutiny, loss of privacy.
Q24: Explain one disadvantage to shareholders of selling shares to finance
expansion.
A24: Dilution of ownership, reducing control and potential influence on decisions.
Q25: Why might a sole trader become a Ltd company?
A25: To benefit from limited liability and access to more capital.
Q26: Why stay as a sole trader?
A26: To maintain full control and simpler admin.
Q27: Why might a business owner buy back shares to become a private company
again?
A27: To regain control and avoid public scrutiny.
Q28: What does limited liability mean?
A28: Shareholders are only responsible for business debts up to their investment.
Q29: What does unlimited liability mean?
A29: The owner is personally liable for all business debts.
,Q30: Which forms have unlimited liability?
A30: Sole traders and general partnerships.
Q31: Which forms have limited liability?
A31: Private and public limited companies.
Q32: Does limited liability benefit all stakeholders of a PLC?
A32: Not necessarily – while it protects shareholders, creditors may be at greater risk.
Q33: Why might strategic decisions be more effective in a family-owned private Ltd
company than in a PLC?
A33: Fewer stakeholders involved, faster decision-making, aligned long-term goals.
Q34: What is a non-profit organisation?
A34: An organisation that exists for social or community benefit rather than to make
profit.
Q35: Advantages of a non-profit?
A35: Tax benefits, positive public image, focus on mission.
Q36: Disadvantages of a non-profit?
A36: Limited funding, reliance on donations, complex regulation.
Q37: Why set financial objectives in a non-profit?
A37: To ensure sustainability and efficient use of funds.
Q38: What is a social enterprise?
A38: A business with social or environmental goals that reinvests profits into its
mission.
Q39: Advantages of a social enterprise?
A39: Combines purpose with profit, attracts ethical consumers.
Q40: Disadvantages of a social enterprise?
A40: Can face tension between social goals and financial sustainability.
Q41: Define ordinary share capital.
A41: The money raised from shareholders in exchange for equity ownership.
Q42: What is market capitalisation?
A42: Total value of a company’s shares on the stock market.
Q43: How is market capitalisation calculated?
A43: Share price × number of shares.
Q44: Define dividends.
A44: Payments made to shareholders from company profits.
, Q45: Who are shareholders?
A45: Individuals or entities that own shares in a company.
Q46: Why do shareholders invest?
A46: To earn dividends and benefit from share price growth.
Q47: Influences on share price?
A47: Company performance, economic conditions, investor expectations.
Q48: Reasons for share price decrease?
A48: Poor financial results, negative news, recession fears.
Q49: Reasons for share price increase?
A49: Strong profits, positive news, new product success.
Q50: If share demand increases, what happens and why?
A50: Price rises due to scarcity of available shares.
Q51: If share supply increases, what happens and why?
A51: Price may fall due to surplus of shares.
Q52: Impact of profit rise on share price?
A52: Likely to rise as investors anticipate better returns.
Q53: Impact of job losses on share price?
A53: Could rise (cost-cutting) or fall (loss of confidence), depending on context.
Q54: Impact of company takeover on share price?
A54: Usually rises due to buyout premium.
Q55: Impact of recession on share price?
A55: Generally falls due to reduced consumer demand.
Q56: Impact of new product announcement on share price?
A56: May rise due to anticipated growth.
Q57: Benefits of share price rise for stakeholders?
A57: Shareholders gain value, company reputation improves, may attract more
investment.
Q58: Effect of ageing population on private hospital profits?
A58: Likely positive due to increased demand for healthcare services.
Q59: Political factors influencing demand, costs, and decisions?
A59: Legislation, tax policy, trade agreements, political stability.
Q60: Economic factors?
A60: Interest rates, inflation, exchange rates, economic growth.
Q1: What is a mission statement?
A1: A mission statement is a brief description of a company’s fundamental purpose and
core values; it explains why the business exists.
Q2: What are the benefits of having a strong mission statement?
A2: It aligns stakeholders, guides decision-making, builds brand identity, and motivates
employees.
Q3: What are objectives?
A3: Objectives are specific, measurable targets that a business aims to achieve in order
to fulfil its mission.
Q4: Why do businesses set objectives?
A4: To provide direction, help with planning, measure performance, and motivate staff.
Q5: Describe the relationship between mission and objectives.
A5: Objectives are the steps a business takes to achieve its overarching mission.
Q6: What is revenue?
A6: Revenue is the total income generated from sales of goods or services.
Q7: What are fixed costs?
A7: Costs that do not change with output, such as rent and salaries.
Q8: What are variable costs and how are they calculated?
A8: Costs that change with output. Calculated as: variable cost per unit × number of
units produced.
Q9: What are total costs and how are they calculated?
A9: Total costs = fixed costs + variable costs.
Q10: Define selling price per unit.
A10: The amount charged to the customer for one unit of a product or service.
Q11: What is the difference between the private and public sector?
A11: The private sector is owned by individuals or companies; the public sector is run by
the government.
Q12: What is a sole trader?
A12: A business owned and operated by one individual.
Q13: Advantages of being a sole trader?
A13: Simple to set up, full control, keeps all profits.
Q14: Disadvantages of being a sole trader?
A14: Unlimited liability, harder to raise finance, full responsibility.
,Q15: What is a partnership?
A15: A business owned and managed by two or more people who share profits, losses,
and responsibilities.
Q16: Advantages of being in a partnership?
A16: Shared responsibilities, more capital, diverse skills.
Q17: Disadvantages of being in a partnership?
A17: Shared profits, potential for conflict, unlimited liability (unless LLP).
Q18: What is a private limited company (Ltd)?
A18: A company whose shares are owned privately and not sold on the stock exchange.
Q19: Advantages of being a private limited company?
A19: Limited liability, easier to raise capital than sole traders, ownership control.
Q20: Disadvantages of being a private limited company?
A20: Legal requirements, must publish financial accounts, limited share transfer.
Q21: What is a public limited company (PLC)?
A21: A company whose shares are traded publicly on the stock exchange.
Q22: Advantages of being a PLC?
A22: Ability to raise large capital, increased status and credibility.
Q23: Disadvantages of being a PLC?
A23: Risk of takeovers, regulatory scrutiny, loss of privacy.
Q24: Explain one disadvantage to shareholders of selling shares to finance
expansion.
A24: Dilution of ownership, reducing control and potential influence on decisions.
Q25: Why might a sole trader become a Ltd company?
A25: To benefit from limited liability and access to more capital.
Q26: Why stay as a sole trader?
A26: To maintain full control and simpler admin.
Q27: Why might a business owner buy back shares to become a private company
again?
A27: To regain control and avoid public scrutiny.
Q28: What does limited liability mean?
A28: Shareholders are only responsible for business debts up to their investment.
Q29: What does unlimited liability mean?
A29: The owner is personally liable for all business debts.
,Q30: Which forms have unlimited liability?
A30: Sole traders and general partnerships.
Q31: Which forms have limited liability?
A31: Private and public limited companies.
Q32: Does limited liability benefit all stakeholders of a PLC?
A32: Not necessarily – while it protects shareholders, creditors may be at greater risk.
Q33: Why might strategic decisions be more effective in a family-owned private Ltd
company than in a PLC?
A33: Fewer stakeholders involved, faster decision-making, aligned long-term goals.
Q34: What is a non-profit organisation?
A34: An organisation that exists for social or community benefit rather than to make
profit.
Q35: Advantages of a non-profit?
A35: Tax benefits, positive public image, focus on mission.
Q36: Disadvantages of a non-profit?
A36: Limited funding, reliance on donations, complex regulation.
Q37: Why set financial objectives in a non-profit?
A37: To ensure sustainability and efficient use of funds.
Q38: What is a social enterprise?
A38: A business with social or environmental goals that reinvests profits into its
mission.
Q39: Advantages of a social enterprise?
A39: Combines purpose with profit, attracts ethical consumers.
Q40: Disadvantages of a social enterprise?
A40: Can face tension between social goals and financial sustainability.
Q41: Define ordinary share capital.
A41: The money raised from shareholders in exchange for equity ownership.
Q42: What is market capitalisation?
A42: Total value of a company’s shares on the stock market.
Q43: How is market capitalisation calculated?
A43: Share price × number of shares.
Q44: Define dividends.
A44: Payments made to shareholders from company profits.
, Q45: Who are shareholders?
A45: Individuals or entities that own shares in a company.
Q46: Why do shareholders invest?
A46: To earn dividends and benefit from share price growth.
Q47: Influences on share price?
A47: Company performance, economic conditions, investor expectations.
Q48: Reasons for share price decrease?
A48: Poor financial results, negative news, recession fears.
Q49: Reasons for share price increase?
A49: Strong profits, positive news, new product success.
Q50: If share demand increases, what happens and why?
A50: Price rises due to scarcity of available shares.
Q51: If share supply increases, what happens and why?
A51: Price may fall due to surplus of shares.
Q52: Impact of profit rise on share price?
A52: Likely to rise as investors anticipate better returns.
Q53: Impact of job losses on share price?
A53: Could rise (cost-cutting) or fall (loss of confidence), depending on context.
Q54: Impact of company takeover on share price?
A54: Usually rises due to buyout premium.
Q55: Impact of recession on share price?
A55: Generally falls due to reduced consumer demand.
Q56: Impact of new product announcement on share price?
A56: May rise due to anticipated growth.
Q57: Benefits of share price rise for stakeholders?
A57: Shareholders gain value, company reputation improves, may attract more
investment.
Q58: Effect of ageing population on private hospital profits?
A58: Likely positive due to increased demand for healthcare services.
Q59: Political factors influencing demand, costs, and decisions?
A59: Legislation, tax policy, trade agreements, political stability.
Q60: Economic factors?
A60: Interest rates, inflation, exchange rates, economic growth.
