Chapter 1 Review

1.1 - 1.2

100

What is the main difference between a sole trader and a partnership?

A sole trader is owned and operated by one person while a partnership involves two or more owners.

200

What is the primary sector involved in?

Extracting raw materials

300

What is a primary characteristic of a cooperative?

Owned and operated by a group of members for mutual benefit

400

Name one advantage of a private limited liability company

limited liability for shareholders

500

What does the tertiary sector focus on?

Providing services.

1.2-1.3

100

Which part of the economy consists of organizations controlled by a regional and or national government with the main aim to provide essential goods and services for the general public?

The public sector

200

What is the name for an inactive partner not involved  in daily running of a business but is eligible for a portion of any profits earned by partnership.

Silent partner

300

What is the main difference between privately held companies and publicly held companies?

Privately held company shares cannot be traded on a public Stock Exchange.

400

What term describes: If the sole proprietorship fails, the sole trader is held responsible for all these debts of the business. There is no limit to the amount of losses a sole trader can incur.

Unlimited liability

500

Name three challenges for starting a business

Lack of finance, unestablished customer base, cash flow problems, marketing problems, people management problems, production

1.3 - 1.4

100

What is the main difference between a mission statement and a vision statement?

Vision statement is looking in the distant future while mission statement defines the purpose and everyday declaration of the organization.

200

A formal documented policy that sets out the way a business believes it should behave, including how to respond to situations that challenge its integrity of social responsibilities.

Ethical code of practice

300

Name one external factor that can influence a business’s operations

state of the economy, government constraints, the presence and power of pressure groups, new technologies

400

What external stakeholder is typically interested in a business following legal and regulatory standards?

The government 

500

Give an example of possible conflict between different stakeholders’ interests

• Employees demand higher wages, which raises production costs so can reduce the amount of profits from which shareholders receive dividend payments.
• Similarly, senior managers and directors may demand large bonuses for their work, but this may also reduce the profits available to distribute to the company’s shareholders.
• Shareholders may demand regular and higher dividend payments, but this may result in less retained profits (see Unit 3.2) available for production and marketing managers to improve their functional roles.
• Customers may want lower prices, but this reduced the firm’s profit margin so can upset the company’s shareholders.
• Employers may want greater efficiency and productivity gains by investing in new technologies, but this might create job losses for employees.
• The local community want demand businesses operate in a socially responsible way and create jobs in the local area, although this can create congestion and noise and air pollution in the local area, thereby upsetting other members of the community.

1.4 - 1.5

100

Who are the main internal stakeholders of a company?

Employees, managers, and shareholders

200

What is the primary interest of shareholders?

Maximizing profits and receiving dividends.

300

Name 2 types of internal economies of scale

Technical, financial, managerial, specialization, marketing, purchasing, risk-bearing

400

The amount of excessive administration and company policies that is likely to increase as a business grows refers to what kind of internal diseconomies of scale?

Bureaucracy

500

What is the main difference between a strategic alliance and a joint venture.

With a joint venture, two or more companies create a single legal entity in which each owns a share. By contrast, with a strategic alliance, each company works together but no new legal entity is created.

1.5 - 1.6

100

True or false, large multinational companies can account for a significant number of job opportunities in the host country

True

200

What do you call the nation that allows a multinational company to set up in its country?

host country

300

Name one benefit that multinational companies can have on their host country

Job creation, higher national income (GDP), Knowledge and technology transfer, Increased competition

400

What is one negative impact of MNCs on host countries?

job losses, repatriation of profits, vulnerability, social responsibilities, competitive pressures.

500

Name three reasons a business might choose to stay small.

Cost control, loss of control, financial risks, government aid, local monopoly power, personalized services, flexibility, small market size.