AICE Final Review

Business

100

What is an entrepreneur?

Someone who takes the financial risk of starting and managing a new venture

200

List and explain the three sectors of business activity.

Primary- extracting natural resources so that they may be used and processed by other firms Secondary- manufacturing or processing products from natural resources Tertiary- services to consumers and other businesses

300

Describe free-market, command, and mixed economies.

Free-market: economic resources are largely owned by the private sector with very little state intervention Command: economic resources owned, planned, and controlled by the state Mixed: economic resources owned and controlled by both

400

What is the difference between joint ventures and holding companies?

Joint venture- two or more businesses agree to work together closely on a particular project and create a separate business division to do so Holding company- a business organization that owns and controls a number of separate businesses, but does not unite them into one unified company

500

List and explain four ways to measure the size of a business.

1- number of employees 2- sales turnover: total dollar value of sales made during a given period 3- capital employed: total dollar value of all the long-term finance invested in the business 4- market capitalization: total dollar value of a company's issued shares 5- market share: sales of the business as a proportion of total market sales

Marketing

100

What is marketing?

Marketing is the management task that links the business to the customer by identifying and meeting the needs of customers profitably; it does this by getting the right product at the right price to the right place at the right time

200

Explain the difference between mass marketing and niche marketing.

Mass marketing is selling the same products to the whole market with no attempt to target groups within it. Niche marketing is identifying and exploiting a small segment of a larger market by developing products to suit it.

300

List three benefits of market orientation.

Market orientation is an outward-looking approach basing product decisions on consumer demand, as established by market research. 1- the chances of newly developed products failing in the market are much reduced 2- if consumer needs are being met with appropriate products, then they are likely to survive longer and make higher profits 3- constant feedback from consumers

400

How do you calculate market share?

Market share (%) = (firm's sales in time period / total market sales in time period) x 100

500

Explain primary and secondary market research.

Primary research includes: focus groups, qualitative research, and quantitative research, such as observation and recording, test marketing, and consumer surveys Secondary research includes: government publications, local libraries and local government offices, trade organizations, market intelligence reports, newspaper reports and specialist publications, internal company records, and the Internet

Finance

100

What is working capital?

Working capital is the capital needed to pay for raw materials, day-to-day running costs, and credit offered to customers. In accounting terms: Working capital = current assets - current liabilities

200

Give three examples of a business requiring additional finance.

1- a business wishes to open a new branch 2- a business has broken a law and needs to pay a fine 3- the business wants to enter a new field and requires certain equipment/capital

300

Explain overdraft and hire purchase.

Overdraft: bank agrees to a business borrowing up to an agreed limit as and when required Hire purchase: an asset is sold to a company that agrees to pay fixed repayments over an agreed time period; the asset belongs to the company

400

What are some advantages of debt finance?

- as no shares are sold, the ownership of the company does not change or is not 'diluted' by the issue of additional shares - loans will be repaid eventually, so there is no permanent increase in the liabilities of the business - lenders have no voting rights at the annual general meetings - interest charges are an expense of the business and are paid out before corporation tax is deducted, while dividends on shares have to be paid from profits after tax - the gearing of the company increases and this gives shareholders the chance of higher returns in the future

500

List and explain internal and external sources of finance.

Internal: - profits retained in the business - sale of assets - reductions in working capital External: - short-term: - bank overdrafts - trade credit - debt factoring - medium-term: - hire purchase and leasing - medium-term bank loan - long-term: - long-term loans from banks - debentures/banks - sale of shares; equity finance

Accounting

100

What is accounting?

Accounts are financial records of business transactions, which are needed to provide essential information to groups both within and outside the organization

200

What is the difference between internal and external accounting?

Internal account users: - business managers External account users: - banks - creditors - customers - government and tax authorities - investors - workforce - local community

300

What is liquidity?

Liquidity is the ability of a firm to pay its short-term debts

400

What is the difference between gross profit and net profit?

Gross profit margin (%) = (gross profit / sales revenue) x 100 Net profit margin (%) = (net profit / sales revenue) x 100

500

Explain the difference between the balance sheet and income statement.

Balance sheet: records the net wealth or shareholders' equity of a business at one moment in time Income statement: records the revenue, costs, and profit (or loss) of a business over a given period of time

Misc.

100

What is HRM? Explain.

Human Resource Management (HRM) is the strategic approach to the effective management of an organization's workers so that they help the business gain a competitive advantage

200

What is the difference between internal and external recruitment?

Internal recruitment stays within the organization or business premises. External recruitment goes outside of the business or organization, such as government job centers, recruitment agencies, or newspapers

300

What is the difference between redundancy and dismissal?

Redundancy: when a job is no longer required; so the employee doing this job becomes redundant through no fault of his or her on Dismissal: being dismissed or sacked from a job due to incompetence or breach of discipline

400

What are the 4 P's of the marketing mix?

The marketing mix includes the four key decisions that must be taken in the effective marketing of a product - product: consumer and industrial goods and services - price: how much the product costs - place: where and how a product will be sold to consumers - promotion: advertising the product

500

What does PED stand for, and how is it calculated?

Price elasticity of demand (PED) measures the responsiveness of demand following a change in price. PED = percentage change in quantity demanded / percentage change in price