Ch 1 Enterprise

Question 1

What is the purpose of a business?

Answer 1

An organisation that identify customers’ wants and needs, purchase resources and produce tangible products or intangible services to satisfy customers, mostly for profit

Question 2

Definition of value added

Answer 2

Value addition is the difference between the price of the product and the cost of raw materials

Question 3

Definition of capital goods

Answer 3

They physical goods used by industry to aid in the production of other goods and services.

Question 4

What are the factors of production?

Answer 4

• Land - site for buildings and raw materials
• Labour - skilled/unskilled, permanent/temporary
• Capital - factories/offices, finance and machines
• Enterprise - risk takers, decision makers and coordinators

Question 5

Define opportunity cost

Answer 5

It is the loss of the potential gain from other alternatives when one alternative is chosen. As resources are scarce, they can only be put to one use although they might have alternative uses

Question 6

Why many businesses fail early on?

Answer 6

• Lack of record keeping
• Lack of working capital
• Poor management skills
• Changes in the business environment

Question 7

What a business needs to succeed?

Answer 7

• Organised: help you complete tasks and stay on top of things to be done, won’t forget
• Keep detailed records: know where the business stands financially and what potential challenges you could be facing => gives you time to create strategies to overcome the obstacles
• Analyse competition: study and learn from your competitors
• Take risks: allows you to gain experiences and knowledge
• Understand risks and rewards: always calculate the positive and negative sides to a decision and weigh them

Question 8

Qualities an entrepreneur is likely to need for success

Answer 8

• Innovative
• Committed and self-motivated
• Multi-skilled
• Leadership skills
• Self-confidence
• Risk taking

Question 9

What are the roles of business enterprise in the development of a business and a country?

Answer 9

• Employment creation
• Economic growth
• Innovation and technological change
• Increased social cohesion

Question 10

What is a social enterprise?

Answer 10

A business with mainly social objectives that reinvests most of its profit into benefiting the society rather than maximising returns to owners

Question 11

Define entrepreneur

Answer 11

Someone who takes financial risk when starting a new venture. They will be the risk taker, decision maker and coordinator

Question 12

Define triple bottom line

Answer 12

The 3 objectives of social enterprises:

• Economic: make a profit to reinvest back to the business and return to owners
• Social: provide jobs for local
• Environmental: protect it

Question 13

Differences between a charity and a social enterprise

Answer 13

• Social enterprises have to fund their own capital, does not rely on donations
• Compete against other businesses within the market
• They need to make profit to survive