Gcse business studies qa 2004 final

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Gcse business studies qa 2004 final

  1. 1. tutor2u™GCSE Business StudiesQuestions and Answers 2004Authors: Dan Cottrell, Charlie Boddingtonwww.tutor2u.net© Dan Cottrell and Charles Boddington
  2. 2. INTRODUCTIONThis Tutor2u GCSE Business Studies Q&A 2004 aims to answer many of the typical GCSE questions that might appear in the summer exams. It uses thelanguage and diagrams the examiners are looking for.What does it cover? It has been written with reference to all the main exam board specifications. Each board and indeed each textbook splits BusinessStudies into to its own sections (product differentiation!). We have split the courses into six main sections, following the major sections of the boards, butyour board might approach it in a different order.How to use the Q&A? The Q&A needs you to add your own notes, questions and answers so it can be used as an effective revision tool. We’ve leftplenty of space to make your own adjustments, highlight the key points or make references to your textbook. Remember - TAKE OWNERSHIP and ADDVALUE!Don’t’ be afraid to TEST YOURSELF. The simple way is to cover up the right hand side of the page, read a question and then see if the answer is similarto one you would give.We are happy to receive suggestions about this edition of GCSE Business Studies Q&A 2004. Perhaps you have some further questions that you thinkshould be included in the next edition. Please email us at feedback@tutor2u.net.We would like to thank Jim Riley, Managing Director of Tutor2u for his excellent support and guidance and also to John Cottrell for his proof reading andlearned advice.Good luck with your studies and our best wishes to you in the exams!Dan Cottrell & Charlie Boddington
  3. 3. GCSE Business Studies Questions & Answers 2004TABLE OF CONTENTS1 EXTERNAL ENVIRONMENT AND BUSINESS ......................................................................................................................................... 17 1.1 The Business Environment ............................................................................................................................................................................................................... 17 1.1.1 What is a business? ............................................................................................................................................................................................................... 17 1.1.2 Why do businesses exist?...................................................................................................................................................................................................... 17 1.1.3 What is the difference between a need and a want? ............................................................................................................................................................. 17 1.1.4 What is a business activity? ................................................................................................................................................................................................... 17 1.1.5 What are the main categories of inputs to business activity?................................................................................................................................................. 17 1.1.6 What is a product? ................................................................................................................................................................................................................. 17 1.1.7 What is the difference between a consumer good and a producer good? ............................................................................................................................. 17 1.1.8 Provide five examples of consumer goods............................................................................................................................................................................. 17 1.1.9 Provide five examples of producer goods .............................................................................................................................................................................. 17 1.1.10 Explain what is meant by “value added”................................................................................................................................................................................. 17 1.1.11 What are the main categories of cost incurred by a business when it starts up? ................................................................................................................... 18 1.1.12 What is “profit”?...................................................................................................................................................................................................................... 18 1.1.13 What happens if a business makes a loss? ........................................................................................................................................................................... 18 1.1.14 What is meant by the term “entrepreneur”? ........................................................................................................................................................................... 18 1.2 External Factors Affecting Business................................................................................................................................................................................................ 18 1.2.1 What are the main areas in which external factors affect a business..................................................................................................................................... 18 1.2.2 Why does the external environment keep changing? ............................................................................................................................................................ 18 1.2.3 Are external factors a threat or an opportunity to a business? ............................................................................................................................................... 18 1.2.4 Give examples of how new technology has affected point of sale and production in a business?......................................................................................... 18 1.3 Economic Environment ..................................................................................................................................................................................................................... 19 1.3.1 Describe the main types of economic sector that are used to categorise different business activities................................................................................... 19 1.3.2 State three reasons for the increased importance of the tertiary sector ................................................................................................................................. 19 1.3.3 An airport hopes to expand by building another runway. Describe how three industries might be affected by this............................................................... 19 1.3.4 Using examples, explain the term “chain of production”......................................................................................................................................................... 19 1.3.5 What is meant by the term “specialisation”? .......................................................................................................................................................................... 19 1.3.6 Explain the difference between the “private sector” and the “public sector” ........................................................................................................................... 19 1.3.7 What is meant by the term “mixed economy”?....................................................................................................................................................................... 19 1.3.8 What kinds of businesses operate in the “voluntary sector”? ................................................................................................................................................. 19 1.3.9 Provide five examples of business organisations in the UK currently in the public sector ..................................................................................................... 19 1.3.10 What are the main objectives of private businesses? ............................................................................................................................................................ 19 1.3.11 What are the main objectives of public sector organisations?................................................................................................................................................ 19© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 3 of 87
  4. 4. GCSE Business Studies Questions & Answers 2004 1.3.12 Explain how a fall in the rate of income tax might affect the sales and profits of a business ................................................................................................. 19 1.3.13 Explain how a business might be affected by an increase in the price of raw materials ........................................................................................................ 19 1.3.14 Outline three ways in which changes in exchange rates might affect a business .................................................................................................................. 19 1.3.15 How might an increase in interest rates affect a business? ................................................................................................................................................... 19 1.3.16 Explain why a shortage of labour might affect a business...................................................................................................................................................... 19 1.3.17 Explain what is meant by the term “mobility of labour” ........................................................................................................................................................... 21 1.3.18 Provide four examples of “labour-intensive” industries .......................................................................................................................................................... 21 1.3.19 What is meant by the term “capital-intensive” industry?......................................................................................................................................................... 21 1.3.20 State two benefits and two costs to UK businesses of EU membership ................................................................................................................................ 21 1.3.21 Describe the main forms of legislation for consumer protection............................................................................................................................................. 21 1.3.22 Give examples of support and advisory agencies available to businesses ............................................................................................................................ 212 BUSINESS ORGANISATION AND OBJECTIVES .................................................................................................................................... 22 2.1 Forms of Business Ownership and Operation ................................................................................................................................................................................ 22 2.1.1 What are the main types of business organisation?............................................................................................................................................................... 22 2.1.2 How can the size of a business be measured?...................................................................................................................................................................... 22 2.1.3 What are the advantages and disadvantages of operating as a sole trader?......................................................................................................................... 22 2.1.4 Explain the legal requirements of a sole trader ...................................................................................................................................................................... 22 2.1.5 What is meant by unlimited liability? ...................................................................................................................................................................................... 22 2.1.6 Explain why a sole trader might consider taking on a partner and forming a partnership ...................................................................................................... 23 2.1.7 Explain what objectives a new partnership might have for its business ................................................................................................................................. 23 2.1.8 Explain why entrepreneurs might decide to remain a partnership rather than a private limited company.............................................................................. 23 2.1.9 What are the disadvantages of operating as a partnership? .................................................................................................................................................. 23 2.1.10 What is contained within a deed of partnership...................................................................................................................................................................... 23 2.1.11 What happens if a partnership business fails?....................................................................................................................................................................... 23 2.1.12 Explain what is meant by “a limited company” ....................................................................................................................................................................... 23 2.1.13 Explain what is involved in setting up a private limited company ........................................................................................................................................... 23 2.1.14 Who controls a company?...................................................................................................................................................................................................... 24 2.1.15 Explain why limited liability is an important feature of business organisation......................................................................................................................... 24 2.1.16 Explain why the ownership and management of a company are often separate ................................................................................................................... 24 2.1.17 What are the differences between a private limited company and a public limited company (plc)? ....................................................................................... 24 2.1.18 Why might a private limited company want to become a “plc”? ............................................................................................................................................. 24 2.1.19 What are the disadvantages of being a “plc”?........................................................................................................................................................................ 24 2.1.20 What is a flotation? ................................................................................................................................................................................................................ 24 2.1.21 Why might an individual want to buy shares in a company? .................................................................................................................................................. 24 2.1.22 What are the risks faced by an individual who buys shares in a company?........................................................................................................................... 24© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 4 of 87
  5. 5. GCSE Business Studies Questions & Answers 2004 2.1.23 What are the three main forms of co-operative? .................................................................................................................................................................... 25 2.1.24 List four examples of co-operatives currently operating in the UK ......................................................................................................................................... 25 2.1.25 Why might acquiring a franchise be a good way for an individual to start a business? .......................................................................................................... 25 2.1.26 Provide some examples of well-known businesses that use the franchise model ................................................................................................................. 25 2.1.27 What are the advantages and disadvantages of franchising?................................................................................................................................................ 25 2.1.28 State three possible reasons why franchising has become more popular in recent years ..................................................................................................... 25 2.1.29 Why are some organisations owned and run by the public sector? ....................................................................................................................................... 25 2.1.30 What reasons have been given to justify the privatisation of former public organisations in the UK? .................................................................................... 25 2.1.31 What are the possible disadvantages of privatisation? .......................................................................................................................................................... 25 2.1.32 Why do some businesses fail?............................................................................................................................................................................................... 25 2.2 Organisation of a Business ............................................................................................................................................................................................................... 25 2.2.1 Explain what is meant by the “Span of Control” ..................................................................................................................................................................... 25 2.2.2 What is the advantage of a narrow span of control ................................................................................................................................................................ 25 2.2.3 What is the difference between a tall and flat organisation .................................................................................................................................................... 25 2.2.4 What is meant by the term “hierarchy”? ................................................................................................................................................................................. 25 2.2.5 Explain what is meant by the term “chain of command”......................................................................................................................................................... 27 2.2.6 Why is it important for a manager to achieve effective delegation? ....................................................................................................................................... 27 2.2.7 What are the main departments you might expect to find in a large manufacturing business? What role do these departments play? ............................... 27 2.3 Business Aims and Objectives ......................................................................................................................................................................................................... 27 2.3.1 Explain what is meant by a “business aim” ............................................................................................................................................................................ 27 2.3.2 What is a mission statement? ................................................................................................................................................................................................ 27 2.3.3 What is the difference between an aim and an objective? ..................................................................................................................................................... 27 2.3.4 Why should a business set objectives?.................................................................................................................................................................................. 27 2.3.5 What criteria should a business objective meet? ................................................................................................................................................................... 28 2.3.6 Describe three reasons why business objectives may change over time .............................................................................................................................. 28 2.3.7 What are the main conflicts in business objectives ................................................................................................................................................................ 28 2.3.8 How might a business react to increase competition for their customers?............................................................................................................................. 28 2.3.9 Explain why profit might be more important to a business that revenue growth..................................................................................................................... 28 2.3.10 Describe two ways in which the aims of a public sector enterprise are different from those of a private sector organisation ................................................ 28 2.4 Stakeholders....................................................................................................................................................................................................................................... 28 2.4.1 What is a stakeholder?........................................................................................................................................................................................................... 28 2.4.2 Who are the main stakeholders in a large company that is quoted on the Stock Exchange? ................................................................................................ 28 2.4.3 Explain the difference between a stakeholder and a shareholder.......................................................................................................................................... 29 2.4.4 What is meant by social responsibility?.................................................................................................................................................................................. 29 2.4.5 Give examples of ethical policies a business may adopt ....................................................................................................................................................... 29© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 5 of 87
  6. 6. GCSE Business Studies Questions & Answers 2004 2.5 Starting a Business............................................................................................................................................................................................................................ 29 2.5.1 What are the main things a new business needs to start up? ................................................................................................................................................ 29 2.5.2 Explain why a business needs finance to start-up ................................................................................................................................................................. 29 2.5.3 Explain why it is important for a sole trader to prepare a detailed cash flow forecast when setting up a business ................................................................ 29 2.5.4 Describe the main ways in which entrepreneurs finance a new business.............................................................................................................................. 29 2.5.5 Apart from costs and a cash flow forecast, describe the main information a sole trader would include in the business plan ................................................ 29 2.5.6 Explain how a sole trader’s business might benefit from regular orders from customers....................................................................................................... 29 2.5.7 What are the main kinds of external finance available to a new business?............................................................................................................................ 29 2.5.8 Explain what a new business can do to protect its ideas and products.................................................................................................................................. 31 2.5.9 Assess the qualities that an entrepreneur must possess to be successful in business.......................................................................................................... 31 2.5.10 State and explain three reasons why small businesses may be successful when competing against larger businesses ...................................................... 31 2.6 Growing a Business........................................................................................................................................................................................................................... 31 2.6.1 Describe how the use of loss-leaders might help a business increase its sales .................................................................................................................... 31 2.6.2 State and explain four factors which might help the sales of a firm grow............................................................................................................................... 31 2.6.3 What is meant by the phrase organic growth ......................................................................................................................................................................... 31 2.6.4 Explain the reasons why a business might choose to diversify away from its original product .............................................................................................. 32 2.6.5 Using an example, explain what is meant by the term “transnational” ................................................................................................................................... 32 2.6.6 Assess the factors that might give a firm competitive advantage........................................................................................................................................... 32 2.6.7 Explain what is meant by the phrase “market share” ............................................................................................................................................................. 32 2.6.8 What is the difference between mergers and acquisitions ..................................................................................................................................................... 32 2.6.9 What is meant by the term “horizontal integration”?............................................................................................................................................................... 32 2.6.10 Explain what is meant by the term “vertical integration” ......................................................................................................................................................... 32 2.6.11 What are the advantages and disadvantages of mergers ...................................................................................................................................................... 32 2.6.12 What is a multinational organisation? .................................................................................................................................................................................... 333 MANAGING PEOPLE................................................................................................................................................................................. 34 3.1 Recruitment, Selection and Retention.............................................................................................................................................................................................. 34 3.1.1 Why might a business need to recruit staff? .......................................................................................................................................................................... 34 3.1.2 What changes in employment patterns might affect the recruitment needs of a business? ................................................................................................... 34 3.1.3 What are the main advantages and disadvantages of employing part-time staff? ................................................................................................................. 34 3.1.4 What are the different recruitment methods a business can use? ......................................................................................................................................... 34 3.1.5 What is the difference between internal and external recruitment?........................................................................................................................................ 34 3.1.6 What are the main advantages and disadvantages of internal and external recruitment ....................................................................................................... 35 3.1.7 What are the main stages of the recruitment process? .......................................................................................................................................................... 35 3.1.8 What is the role of a recruitment agency................................................................................................................................................................................ 35 3.1.9 What is a job description and job specification?..................................................................................................................................................................... 35© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 6 of 87
  7. 7. GCSE Business Studies Questions & Answers 2004 3.1.10 What are the main objectives of a recruitment advertisement?.............................................................................................................................................. 35 3.1.11 Where could a business place a job advertisement? ............................................................................................................................................................. 36 3.1.12 What are the factors that a business should consider when advertising a job? ..................................................................................................................... 36 3.1.13 What are the typical contents of a job application form? ........................................................................................................................................................ 36 3.1.14 What is a Curriculum Vitae?................................................................................................................................................................................................... 36 3.1.15 Why would a business use their own application form rather than rely on a candidate’s curriculum vitae? ........................................................................... 36 3.1.16 Explain why some candidates may be rejected after a business has received their application forms .................................................................................. 37 3.1.17 Explain why a business might use both a long and a short list to select the best applicants ................................................................................................. 37 3.1.18 Why is the interview an important part of any recruitment and selection process? ................................................................................................................ 37 3.1.19 List the kinds of information an employer will want to obtain during a recruitment interview.................................................................................................. 37 3.1.20 What kinds of information should a prospective employee try to find out during an interview?.............................................................................................. 37 3.1.21 What kinds of selection tests are sometimes used during the interview process? ................................................................................................................. 37 3.1.22 Why are businesses making greater use of selection tests?.................................................................................................................................................. 37 3.1.23 Why should an employer take up job candidate references before offering a job? ................................................................................................................ 37 3.1.24 What is meant by employee retention? .................................................................................................................................................................................. 38 3.1.25 What is meant by labour/staff turnover?................................................................................................................................................................................. 38 3.1.26 Explain why high staff turnover is a problem for many businesses ........................................................................................................................................ 38 3.1.27 Describe some of the ways in which a business can retain the staff it wants to keep ............................................................................................................ 38 3.2 Training ............................................................................................................................................................................................................................................... 38 3.2.1 What are the main reasons why a business should provide training for its employees?........................................................................................................ 38 3.2.2 What is meant by induction training? ..................................................................................................................................................................................... 38 3.2.3 What factors determine the length and type of induction training?......................................................................................................................................... 38 3.2.4 Name five elements likely to be included in an induction programme.................................................................................................................................... 39 3.2.5 Describe the main differences between “on-the-job” and “off-the-job” training....................................................................................................................... 39 3.2.6 Give three reasons why an employee might prefer off-the-job training .................................................................................................................................. 39 3.2.7 What are the disadvantages to a business of sending employees to off the job training? ..................................................................................................... 39 3.2.8 What is involved in an appraisal system? .............................................................................................................................................................................. 39 3.2.9 How can training motivate employees?.................................................................................................................................................................................. 39 3.2.10 In what ways does the Government get involved in helping businesses train employees?.................................................................................................... 40 3.2.11 Why is Health and Safety training needed? ........................................................................................................................................................................... 40 3.3 Motivation ........................................................................................................................................................................................................................................... 40 3.3.1 What is meant by motivation? ................................................................................................................................................................................................ 40 3.3.2 Outline the methods available for a business to motivate its employees ............................................................................................................................... 40 3.3.3 What are the advantages of having a well-motivated workforce? .......................................................................................................................................... 40 3.3.4 Who are the four main motivational theorists? ....................................................................................................................................................................... 40 3.3.5 What is Taylor’s theory of motivation and how did he believe employees should be motivated?........................................................................................... 40© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 7 of 87
  8. 8. GCSE Business Studies Questions & Answers 2004 3.3.6 What is Mayo’s theory of motivation and how did he believe employees should be motivated?............................................................................................ 41 3.3.7 What is Maslow’s theory of motivation and how did he believe employees should be motivated? ........................................................................................ 41 3.3.8 What is Herzberg’s theory of motivation and how did he believe employees should be motivated?...................................................................................... 42 3.3.9 What is meant by an autocratic management style?.............................................................................................................................................................. 42 3.3.10 When might an autocratic management style be suitable? .................................................................................................................................................... 42 3.3.11 What is meant by a democratic management style?.............................................................................................................................................................. 42 3.3.12 Distinguish between McGregor’s classification of workers into Theory X and Theory Y for motivation at work? ................................................................... 42 3.3.13 How could a business demonstrate to its employees that it believes in Theory Y? ............................................................................................................... 42 3.3.14 What is the best approach/style for a manager to use? ......................................................................................................................................................... 42 3.4 Rewarding Employees ....................................................................................................................................................................................................................... 42 3.4.1 Name five reasons why people go to work............................................................................................................................................................................. 43 3.4.2 What are the main types of financial incentives at work?....................................................................................................................................................... 43 3.4.3 What are the main types of non-financial incentives at work?................................................................................................................................................ 43 3.4.4 Explain why a business might offer its staff discretionary fringe benefits ............................................................................................................................... 44 3.4.5 What are the differences between wages and salaries? ........................................................................................................................................................ 44 3.4.6 What is the difference between gross pay and net pay?........................................................................................................................................................ 44 3.4.7 What is the difference between overtime and bonus pay?..................................................................................................................................................... 44 3.4.8 Which system of payment would be best for a team of car salesmen at a dealership? ......................................................................................................... 44 3.4.9 What are the advantages of profit sharing? ........................................................................................................................................................................... 44 3.4.10 How might a business use a bonus system to improve performance? .................................................................................................................................. 44 3.4.11 What are the advantages and disadvantages of the piece-rate system ................................................................................................................................. 45 3.4.12 What kind of pay package might be expected by a managing director of a company quoted on the London Stock Exchange ............................................. 45 3.4.13 What are the advantages and disadvantages of performance-related pay? .......................................................................................................................... 45 3.4.14 Which motivation theorists viewed money/pay as a good way of motivating employees? ..................................................................................................... 45 3.4.15 Explain the difference between job enrichment and job enlargement? .................................................................................................................................. 45 3.4.16 What is meant by empowerment?.......................................................................................................................................................................................... 45 3.4.17 What are the main reasons for differences in pay between different jobs and regions? ........................................................................................................ 46 3.5 Groups at Work .................................................................................................................................................................................................................................. 46 3.5.1 What is a trade union? ........................................................................................................................................................................................................... 46 3.5.2 What are the main categories of trade union? ....................................................................................................................................................................... 46 3.5.3 What is the role of the Trades Union Congress (“TUC”)? ...................................................................................................................................................... 46 3.5.4 What are the benefits of trade union membership to an employee and to an employer? ...................................................................................................... 46 3.5.5 What is meant by collective bargaining? ................................................................................................................................................................................ 46 3.5.6 List the main forms of industrial action a trade union can take against an employer. ............................................................................................................ 46 3.5.7 Why has the power and influence of trade unions declined over the last 20 years? .............................................................................................................. 47 3.5.8 What is an employers’ association?....................................................................................................................................................................................... 47© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 8 of 87
  9. 9. GCSE Business Studies Questions & Answers 2004 3.6 Employee Legislation ........................................................................................................................................................................................................................ 47 3.6.1 What are the main laws that affect how businesses manage people at work in the UK?....................................................................................................... 47 3.6.2 What is meant by the Minimum Wage?.................................................................................................................................................................................. 47 3.6.3 What type of firms would be most affected by an increase in the minimum wage? ............................................................................................................... 47 3.7 Communication .................................................................................................................................................................................................................................. 47 3.7.1 What is communication?............................................................................................................................................................................................................... 47 3.7.2 Who might be the receivers of internal communications and external communications from a manager of a business? ............................................................. 48 3.7.3 Why is effective communication vital to a business? ..................................................................................................................................................................... 48 3.7.4 Explain how effective communication can motivate employees..................................................................................................................................................... 48 3.7.5 What is two-way communication?.................................................................................................................................................................................................. 48 3.7.6 What are the five best methods of communication for obtaining feedback? .................................................................................................................................. 48 3.7.7 What factors would determine which method of communication should be used? ........................................................................................................................ 49 3.7.8 Describe three barriers to communication that a firm may face. .................................................................................................................................................... 494 ACCOUNTING AND FINANCE .................................................................................................................................................................. 50 4.1 Sources and Uses of Finance ........................................................................................................................................................................................................... 50 4.1.1 What are the main reasons a business needs finance?......................................................................................................................................................... 50 4.1.2 What is the difference between internal and external sources of finance? ............................................................................................................................ 50 4.1.3 What is the difference between short and long-term finance? ............................................................................................................................................... 50 4.1.4 What are the main kinds of long-term finance available to a business?................................................................................................................................. 50 4.1.5 How do businesses choose from the different sources of finance available to them? ........................................................................................................... 50 4.1.6 Why might a businessman wish to finance the start-up of a firm with his own cash or that of his family? ............................................................................. 51 4.1.7 What are the main sources of finance available to sole traders and partnerships? ............................................................................................................... 51 4.1.8 Why might a company wish to issue shares as a source of finance? .................................................................................................................................... 51 4.1.9 What are the differences between Ordinary Shares and Preference Shares......................................................................................................................... 51 4.1.10 How do the owners of shares (“shareholders”) receive a return on their investment? ........................................................................................................... 51 4.1.11 Explain what is meant by a “debenture” ................................................................................................................................................................................. 51 4.1.12 How do debentures (or loans) differ from ordinary shares? ................................................................................................................................................... 51 4.1.13 What are the main kinds of finance available to a business from a bank? ............................................................................................................................. 51 4.1.14 What is the difference between a bank overdraft and a bank loan?....................................................................................................................................... 52 4.1.15 Explain what is meant by the term “working capital” .............................................................................................................................................................. 52 4.1.16 What is “debt factoring”? ........................................................................................................................................................................................................ 52 4.1.17 Why do the Government and European Union provide grant finance to businesses? ........................................................................................................... 52 4.1.18 How might a business “lease” the assets it needs to operate? .............................................................................................................................................. 52 4.1.19 What are the advantages and disadvantages of leasing equipment? .................................................................................................................................... 52 4.1.20 Describe what is meant by hire purchase .............................................................................................................................................................................. 52© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 9 of 87
  10. 10. GCSE Business Studies Questions & Answers 2004 4.1.21 What are the main sources of finance available to public sector businesses?....................................................................................................................... 52 4.2 Financial accounting.......................................................................................................................................................................................................................... 53 4.2.1 Describe the main roles of the accounting function in a business.......................................................................................................................................... 53 4.2.2 What are the main accounting records that make up the financial accounting information of a business.............................................................................. 53 4.2.3 What are the financial statements of a business?.................................................................................................................................................................. 53 4.2.4 Explain the purpose of the profit and loss account................................................................................................................................................................. 53 4.2.5 How is the gross profit of a business calculated? .................................................................................................................................................................. 53 4.2.6 What are the main types of cost that would be included in “cost of sales”? ........................................................................................................................... 53 4.2.7 What are the main overhead costs of a business? ................................................................................................................................................................ 54 4.2.8 What is the difference between revenue expenditure and capital expenditure? .................................................................................................................... 54 4.2.9 Provide three examples in each case of costs that would be classified as revenue and capital expenditure......................................................................... 54 4.2.10 What is meant by “net profit”? ................................................................................................................................................................................................ 54 4.2.11 Give four examples in each case of how to improve gross profit and how to cut overheads ................................................................................................. 54 4.2.12 What information is provided by the balance sheet?.............................................................................................................................................................. 55 4.2.13 What are fixed assets?........................................................................................................................................................................................................... 55 4.2.14 Why do businesses need to account for “depreciation” of their assets? ................................................................................................................................ 55 4.2.15 What are the main categories of current assets..................................................................................................................................................................... 55 4.2.16 What are the main categories of current liabilities?................................................................................................................................................................ 55 4.2.17 What is a “provision”? ............................................................................................................................................................................................................ 55 4.2.18 Explain how the purchase of some plant and machinery by a business using a bank loan would affect its balance sheet ................................................... 55 4.2.19 What is meant by capital? ...................................................................................................................................................................................................... 55 4.2.20 What is the purpose of a cash flow statement?...................................................................................................................................................................... 56 4.2.21 Why can a profitable business go bankrupt? ......................................................................................................................................................................... 56 4.2.22 What accounting statements must be published by a limited company? ............................................................................................................................... 56 4.3 Analysing Financial Performance..................................................................................................................................................................................................... 56 4.3.1 What are the main ways in which management can measure the financial success of their business? ................................................................................ 56 4.3.2 Who are the main users of financial information? .................................................................................................................................................................. 57 4.3.3 Why would the government be interested in the financial performance of a business? ......................................................................................................... 57 4.3.4 What kinds of financial information would be of interest to a bank lending money to a business?......................................................................................... 57 4.3.5 What is the difference between “profit” and “profitability”? ..................................................................................................................................................... 57 4.3.6 What are the main uses of profitability ratios? ....................................................................................................................................................................... 57 4.3.7 Explain what is meant by the return on capital employed (“ROCE”) ...................................................................................................................................... 57 4.3.8 Explain why management might want to use the ROCE figure to measure the success of their business ............................................................................ 57 4.3.9 How might a business increase its ROCE?............................................................................................................................................................................ 57 4.3.10 How is the gross profit margin calculated?............................................................................................................................................................................. 58 4.3.11 Why might the gross profit margin of a business increase? ................................................................................................................................................... 58© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 10 of 87
  11. 11. GCSE Business Studies Questions & Answers 2004 4.3.12 What is the net profit margin? ................................................................................................................................................................................................ 58 4.3.13 Explain what is meant by a “liquidity ratio” ............................................................................................................................................................................. 58 4.3.14 What is the current ratio? ....................................................................................................................................................................................................... 58 4.3.15 What steps could a business take to improve its current ratio? ............................................................................................................................................. 58 4.3.16 How does the “Acid test” ratio differ from the current ratio? ................................................................................................................................................... 58 4.3.17 What is “stock turnover”? ....................................................................................................................................................................................................... 58 4.3.18 Why might a business experience an increase in its stock turnover ratio? ............................................................................................................................ 58 4.3.19 Explain what is meant by “debtor days” ................................................................................................................................................................................. 58 4.3.20 What steps could a business take to encourage customers to pay their debts more quickly? ............................................................................................... 59 4.3.21 What is meant by the “creditor days” ratio?............................................................................................................................................................................ 59 4.4 Business costs ................................................................................................................................................................................................................................... 59 4.4.1 What is the difference between a variable and a fixed cost? ................................................................................................................................................. 59 4.4.2 What are the main kinds of variable and fixed costs .............................................................................................................................................................. 59 4.4.3 When might a cost be described as being “semi-fixed”?........................................................................................................................................................ 59 4.4.4 What is meant by a “standard cost”? ..................................................................................................................................................................................... 59 4.4.5 What is a variance? ............................................................................................................................................................................................................... 59 4.4.6 How would a business use standard costing to help manage its business? .......................................................................................................................... 59 4.4.7 Explain what is meant by opportunity cost ............................................................................................................................................................................. 60 4.4.8 What are the main differences between direct and indirect costs? ........................................................................................................................................ 60 4.4.9 What is meant by the “break-even point” for a business? ...................................................................................................................................................... 60 4.4.10 What is meant by contribution?.............................................................................................................................................................................................. 60 4.4.11 What is meant by the “margin of safety”?............................................................................................................................................................................... 61 4.4.12 Why is it important for a business to understand its break-even point? ................................................................................................................................. 61 4.4.13 What is the formula for the break even point.......................................................................................................................................................................... 61 4.4.14 What are the limitations of break-even charts ........................................................................................................................................................................ 61 4.5 Budgeting and Business Plans......................................................................................................................................................................................................... 62 4.5.1 What is a budget? .................................................................................................................................................................................................................. 62 4.5.2 How does budgeting help managers control a business? ...................................................................................................................................................... 62 4.5.3 What are the main budgets produced by a business? ........................................................................................................................................................... 62 4.5.4 Explain the role a budget can play in motivating employees.................................................................................................................................................. 62 4.5.5 Explain what is involved in preparing a cash flow budget ...................................................................................................................................................... 62 4.5.6 Explain how a business plan could be used to help manage a business ............................................................................................................................... 63 4.5.7 Explain why a bank manager might want to see a business plan before giving a business a new loan ................................................................................ 63 4.5.8 Explain why it is wise for a firm to keep monitoring its cash flow forecast.............................................................................................................................. 63 4.5.9 How can a business improve its cash flow?........................................................................................................................................................................... 63© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 11 of 87
  12. 12. GCSE Business Studies Questions & Answers 20045 PRODUCTION ............................................................................................................................................................................................ 64 5.1 Introduction to Production ................................................................................................................................................................................................................ 64 5.1.1 What are the three main stages of production? ..................................................................................................................................................................... 64 5.1.2 What are the main kinds of input into production? ................................................................................................................................................................. 64 5.1.3 What activities are typical of businesses engaged in primary production? ............................................................................................................................ 64 5.1.4 How does secondary production compare with primary production? ..................................................................................................................................... 64 5.1.5 Provide five examples of businesses engaged in the tertiary production sector .................................................................................................................... 64 5.1.6 What is meant by mass production? ...................................................................................................................................................................................... 64 5.1.7 What are the typical features of a business that uses mass production?............................................................................................................................... 64 5.1.8 What are the main differences between unskilled and skilled work? ..................................................................................................................................... 64 5.2 Methods of Production ...................................................................................................................................................................................................................... 64 5.2.1 What are the three main methods of production in manufacturing?....................................................................................................................................... 65 5.2.2 What are the main characteristics of the job production method............................................................................................................................................ 65 5.2.3 List some examples of businesses that use the job production method ................................................................................................................................ 65 5.2.4 What is meant by the term “batch production”? ..................................................................................................................................................................... 65 5.2.5 In what circumstances would a business use a batch production method? ........................................................................................................................... 65 5.2.6 What are the main aims of the batch method......................................................................................................................................................................... 65 5.2.7 Name three advantages of the flow method........................................................................................................................................................................... 65 5.2.8 How should flow production be organised in order for this method to be effective?............................................................................................................... 65 5.2.9 Explain how changing seasonal demand can affect the production process of a business ................................................................................................... 65 5.3 Production Efficiency ........................................................................................................................................................................................................................ 66 5.3.1 What is meant by the productive capacity of a business?...................................................................................................................................................... 66 5.3.2 What is meant by efficiency? ................................................................................................................................................................................................. 66 5.3.3 What is meant by the term “productivity”?.............................................................................................................................................................................. 66 5.3.4 How might a business measure its productivity? ................................................................................................................................................................... 66 5.3.5 How can a business improve its productivity?........................................................................................................................................................................ 66 5.3.6 How might measuring levels of stock indicate a change in productive efficiency?................................................................................................................. 66 5.3.7 Explain two ways in which mass production can lead to poor productivity............................................................................................................................. 66 5.3.8 What are the main objectives of lean production? ................................................................................................................................................................. 66 5.3.9 How does cell production lead to improved productivity?....................................................................................................................................................... 66 5.3.10 What is Kaizen? ..................................................................................................................................................................................................................... 66 5.3.11 What are the advantages and disadvantages of just-in-time (“JIT”) production? ................................................................................................................... 67 5.3.12 What are the main ways in which technology can be used to improve production efficiency?............................................................................................... 67 5.3.13 Explain the benefits to a business of investing in new technology ......................................................................................................................................... 67 5.4 Economies of Scale ........................................................................................................................................................................................................................... 67© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 12 of 87
  13. 13. GCSE Business Studies Questions & Answers 2004 5.4.1 Define economies of scale ..................................................................................................................................................................................................... 67 5.4.2 What are the main kinds of internal economies of scale? ...................................................................................................................................................... 67 5.4.3 What are the main kinds of external economies of scale? ..................................................................................................................................................... 68 5.4.4 How can economies of scale occur if the total costs of a business are increasing? .............................................................................................................. 68 5.4.5 What are diseconomies of scale? .......................................................................................................................................................................................... 68 5.5 Quality Management .......................................................................................................................................................................................................................... 68 5.5.1 What is meant by quality? ...................................................................................................................................................................................................... 68 5.5.2 List four common examples of poor product or service quality .............................................................................................................................................. 68 5.5.3 Why is it important for a business to monitor and measure quality? ...................................................................................................................................... 69 5.5.4 What is the objective of quality control? ................................................................................................................................................................................. 69 5.5.5 What is Total Quality Management (“TQM”) .......................................................................................................................................................................... 69 5.5.6 What are the key advantages of TQM?.................................................................................................................................................................................. 69 5.5.7 Why is research and development important for quality control?........................................................................................................................................... 69 5.6 Business Location ............................................................................................................................................................................................................................. 69 5.6.1 Why might the availability of labour influence the location chosen by a business?................................................................................................................ 69 5.6.2 Which forms of business infrastructure would a business consider when choosing a business location? ............................................................................. 69 5.6.3 Explain the factors a business needs to consider before deciding to change location........................................................................................................... 70 5.6.4 Why do governments provide financial and other incentives to businesses that locate in a particular place? ....................................................................... 70 5.6.5 What is meant by the Uniform Business Rate?...................................................................................................................................................................... 70 5.7 Stock Control...................................................................................................................................................................................................................................... 70 5.7.1 What is the role of the purchasing department?..................................................................................................................................................................... 70 5.7.2 What are the main consequences of a stock-out? ................................................................................................................................................................. 70 5.7.3 What are the advantages and disadvantages of increasing the level of stock held by a business?....................................................................................... 70 5.7.4 What is meant by “economic order quantity (“EOQ”)? ........................................................................................................................................................... 70 5.7.5 What is the buffer stock level? ............................................................................................................................................................................................... 706 MARKETING .............................................................................................................................................................................................. 71 6.1 Introduction to Marketing .................................................................................................................................................................................................................. 71 6.1.1 Explain the meaning of the term “marketing” ......................................................................................................................................................................... 71 6.1.2 What are the four main kinds of market? Provide an example of each ................................................................................................................................. 71 6.1.3 Why does a business need to market its products?............................................................................................................................................................... 71 6.1.4 What is a “marketing orientated business”? ........................................................................................................................................................................... 71 6.1.5 What is a “product orientated” business?............................................................................................................................................................................... 71 6.1.6 Why have industrial markets become more market-orientated? ............................................................................................................................................ 71 6.1.7 Explain the difference between the roles played by a firm’s marketing department and the research and development department.................................... 71© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 13 of 87
  14. 14. GCSE Business Studies Questions & Answers 2004 6.2 Market Segmentation ......................................................................................................................................................................................................................... 71 6.2.1 What is a market segment ..................................................................................................................................................................................................... 71 6.2.2 What are the advantages for a business by segmenting a market?....................................................................................................................................... 72 6.2.3 What is a mass-market? Give an example............................................................................................................................................................................. 72 6.2.4 What is a niche market? Give an example............................................................................................................................................................................. 72 6.2.5 What are the main ways in which a market can be segmented? ........................................................................................................................................... 72 6.2.6 Why is age an important characteristic in segmentation? ...................................................................................................................................................... 72 6.2.7 What are the six standard socio-economic groupings in the UK? .......................................................................................................................................... 72 6.3 Marketing Research ........................................................................................................................................................................................................................... 72 6.3.1 What are the main purposes of marketing research? ............................................................................................................................................................ 73 6.3.2 What are the two main methods of marketing research and how do they differ?................................................................................................................... 73 6.3.3 What kinds of data are used in marketing research? ............................................................................................................................................................. 73 6.3.4 What are the main kinds of secondary data? ......................................................................................................................................................................... 73 6.3.5 Name four kinds of information that might be obtained from secondary research data ......................................................................................................... 73 6.3.6 Why is it important to use secondary data as part of marketing research? ............................................................................................................................ 73 6.3.7 What are the main aims of market and customer surveys? ................................................................................................................................................... 73 6.3.8 What is primary data? ............................................................................................................................................................................................................ 73 6.3.9 What are the main methods of field research to collect primary data?................................................................................................................................... 74 6.3.10 Explain why marketing research is important when considering whether to make new products .......................................................................................... 74 6.3.11 What desk research would be useful for a business introducing a new product? .................................................................................................................. 74 6.3.12 How is sampling used in marketing research......................................................................................................................................................................... 74 6.3.13 Describe four different kinds of sampling used in marketing research ................................................................................................................................... 74 6.3.14 Discuss the best ways in which a business could monitor the satisfaction of its customers .................................................................................................. 74 6.4 Marketing Strategy and Objectives................................................................................................................................................................................................... 74 6.4.1 Why is it important for businesses to set marketing objectives? ............................................................................................................................................ 74 6.4.2 Give some examples of marketing objectives and strategies................................................................................................................................................. 75 6.5 Marketing Mix ..................................................................................................................................................................................................................................... 75 6.5.1 What are the main elements of the marketing mix? ............................................................................................................................................................... 75 6.5.2 Provide three examples of how the elements of the marketing mix interact with each other ................................................................................................. 75 6.6 Products and Brands ......................................................................................................................................................................................................................... 75 6.6.1 Explain what is meant by product differentiation .................................................................................................................................................................... 75 6.6.2 What are the main stages involved in launching a new product?........................................................................................................................................... 75 6.6.3 Why do most businesses sell a range of products? ............................................................................................................................................................... 75 6.6.4 Explain how services are marketed? How does this differ from the marketing of goods?..................................................................................................... 75 6.6.5 Explain what is meant by a brand .......................................................................................................................................................................................... 76© Dan Cottrell, Charlie Boddington & Tutor2u Limited 2004 Page 14 of 87

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