Exam code: 0450, 0986 & 0264, 0774
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Define business plan.
A business plan is a document created by the business owner that provides forecasts of sales, costs, and cash flow and details key objectives.
What is the main purpose of creating a business plan?
The main purpose of creating a business plan is to reduce the risk associated with starting a business and to help raise finance.
One reason governments support business start-ups is to the country's level of output to achieve economic growth.
One reason governments support business start-ups is to increase the country's level of output to achieve economic growth.
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Define business plan.
A business plan is a document created by the business owner that provides forecasts of sales, costs, and cash flow and details key objectives.
What is the main purpose of creating a business plan?
The main purpose of creating a business plan is to reduce the risk associated with starting a business and to help raise finance.
One reason governments support business start-ups is to the country's level of output to achieve economic growth.
One reason governments support business start-ups is to increase the country's level of output to achieve economic growth.
Name one way governments directly support new businesses.
Governments can provide training and support sessions to entrepreneurs, offering advice about finance, operations, and marketing.
A business plan usually includes a forecast to help manage inflows and outflows of money each month.
A business plan usually includes a cash-flow forecast to help manage inflows and outflows of money each month.
What is in the aims and objectives section of a business plan?
The aims and objectives section explains what the business wants to achieve in the medium and long term, including financial and non-financial goals.
Define entrepreneur.
An entrepreneur is a person who is willing and able to create a new business idea or invention and takes risks in pursuit of success.
Entrepreneurs need to keep going when they experience setbacks or failures.
Entrepreneurs need resilience to keep going when they experience setbacks or failures.
Which characteristic allows an entrepreneur to solve problems creatively and stand out from rivals?
The characteristic is creativity, which helps an entrepreneur develop new solutions to problems and achieve business success.
True or False?
Enterprise zones can provide tax breaks and access to low-cost premises for new businesses.
True.
Enterprise zones offer tax breaks and access to low-cost premises to support business growth.
Give one way to measure the size of a business besides the number of employees?
Besides the number of employees, business size can be measured by the value of capital employed, value of sales, or value of output.
True or False?
The size of the workforce is always a reliable way to compare business size between companies.
False.
The size of the workforce can be misleading, especially if businesses use different production methods or employ part-time and agency workers.
Why might the value of sales be an inaccurate way to compare business size between two companies?
The value of sales may be inaccurate for comparison because businesses sell very different products at different prices and in different markets, making direct comparison unrealistic.
Define labour-intensive production.
Labour-intensive production is a method of production that relies more on human labour than on machinery or technology to produce goods or services.
Define capital employed.
The capital employed of a business is the total value of all the capital (money, equipment, buildings) that is currently invested in the business.
A small or medium-sized business (SME) employs less than employees, while a large business has or more.
A small or medium-sized business (SME) employs less than 250 employees, while a large business has 250 or more.
Why is the value of output not always a reliable way to measure business size?
The value of output is not always reliable because high-value output can be produced by few employees or limited capital, and it does not measure whether the goods produced are actually sold.
Comparing the employed between businesses can be misleading when one is -intensive and the other is -intensive.
Comparing the capital employed between businesses can be misleading when one is capital-intensive and the other is labour-intensive.
True or False?
The value of sales is an ideal way to compare the size of a business that sells sweets with one that sells luxury handbags.
False.
The value of sales is not ideal for comparison because businesses sell very different products, and prices and volumes sold can vary greatly between markets.
Define internal business growth.
Internal business growth is organic expansion driven by reinvested profits or loans, achieved by increasing market share, diversification, or entering new markets.
What is one advantage of internal business growth?
One advantage of internal business growth is that it is less risky, as it is financed by profits and uses existing expertise.
Firms often grow internally to the point where they are in a financial position to (merge or buy) with others.
Firms often grow internally to the point where they are in a financial position to integrate (merge or buy) with others.
Define external business growth.
External business growth is when a business expands by joining with or buying other businesses rather than growing on its own.
What is the difference between a merger and a takeover?
A merger combines two companies to form a new one, while a takeover is when one company buys control of another, often against its will.
In a takeover, the acquiring company buys a controlling stake in the target company's and gains control of its operations.
In a takeover, the acquiring company buys a controlling stake in the target company's shares and gains control of its operations.
What is vertical integration?
Vertical integration is the merger or takeover of another firm in the supply chain or a different stage of the production process.
Forward vertical integration involves merging with or taking over a firm in the supply chain.
Forward vertical integration involves merging with or taking over a firm further forward in the supply chain.
Define horizontal integration.
Horizontal integration is the merger or takeover of a firm at the same stage of the production process.
Give one common problem of business growth.
One problem is poor communication due to longer chains of command.
Why might an entrepreneur choose for their business to remain small?
Some entrepreneurs choose to remain small in order to maintain personal control over their business, reduce risk, and focus on providing a personalised service.
Define niche market.
A niche market is a small, specialised segment of the market, often with unique needs and less competition, allowing for potentially high profits.
True or False?
Small firms are always able to access bank loans and trade credit easily.
False.
Small firms often struggle to access finance, such as bank loans and trade credit, compared to larger firms.
Give one advantage of remaining a small business in terms of customer relationships.
Small businesses can develop personal relationships with their customers, leading to loyalty and word-of-mouth advertising.
Define diseconomies of scale.
Diseconomies of scale occur when a business grows too large, causing average costs to increase due to inefficiencies.
Why is availability of finance important for business success?
Availability of finance is important because it allows a business to invest in equipment, marketing, staff, and product development, which supports growth and competitiveness.
What is a suitable product in the context of business success?
A suitable product is one that solves a problem, meets customer needs, or has unique features. It must be of high quality and appeal to the target market.
Define competitive advantage.
Competitive advantage means offering something better than rivals, such as lower prices, better quality, or a strong brand, which helps a business succeed.
How can favourable economic conditions help a business succeed?
Favourable economic conditions, such as strong economies, low interest rates, and low inflation, increase customer spending and help businesses grow.
What are two common financial reasons why businesses fail?
Businesses often fail financially due to poor management of revenue and costs or cash shortages and limited access to finance.
Define overtrading.
Overtrading is when a business expands too quickly without sufficient resources, leading to poor coordination and planning, and increased costs.
True or False?
New businesses are less likely to fail than established businesses.
False.
New businesses are often more at risk of failure than well-established businesses due to lack of management skills, experience, and cashflow problems.