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UNIT 1 THE BUSINESS ENVIRONMENT
WITH ANSWERS
BUSINESS ACTIVITIES - CORRECT ANSWER-Tasks completed by a business to achieve its objectives, e.g. buying, selling and producing products or services. RETAIL CUSTOMERS - CORRECT ANSWER-Customers who buy finished products, e.g. frozen peas from a supermarket. BUSINESS CUSTOMERS - CORRECT ANSWER-Businesses that purchase products or services from another business. UNLIMITED LIABILITY - CORRECT ANSWER-When the owners of a business are personally liable for all debts incurred by the business if the business itself does not have the funds to repay them. LIMITED LIABILITY - CORRECT ANSWER-When the owners of a business are liable for the debts incurred by the business only to the value of their investment in the business. DISECONOMIES OF SCALES - CORRECT ANSWER-When a business becomes too large, the cost per unit may increase and the business may become more inefficient, e.g. communication becomes slower as more employees join the hierarchy. BUSINESS AIMS - CORRECT ANSWER-A summary of what the business wants to achieve in the future. RECESSION - CORRECT ANSWER-A period of economic decline where demand and output fall.
ECONOMIES OF SCALE - CORRECT ANSWER-Cost advantages gained when the size of a business increases, e.g.suppliers may offer discounts to those placing larger orders. UNIQUE SELLING POINT (USP) - CORRECT ANSWER-A specific factor that makes a business stand out from its competitors, e.g. excellent customer service. FUNCTIONAL AREA - CORRECT ANSWER-A division of a business where employees have similar roles, skills and expertise, e.g. marketing function, human resource function. STATEMENT OF FINANCIAL POSITION - CORRECT ANSWER-A summary statement on a particular date that shows a business's assets, liabilities and owner's equity. INCOME STATEMENT - CORRECT ANSWER-A financial statement that shows the revenue and expenses a business has received and paid over a period of time; the statement will show the profit the business has made during this time. CASH FLOW FORECASTING - CORRECT ANSWER- Estimating the expected cash inflows and outflows for a period of time in the future to identify likely surpluses or shortages. PRICING STRATEGY - CORRECT ANSWER-The method used to determine the price of a product/service, taking into consideration the market, competitors pricing, customer incomes, etc. DISCIPLINARY PROCEDURE - CORRECT ANSWER-A specified process for dealing with alleged employee misconduct, e.g. poor performance. GRIEVANCE PROCEDURE - CORRECT ANSWER-A specified process for dealing with a complaint made by an
REVENUE - CORRECT ANSWER-The money earned from selling manufactured output, goods purchased or services offered; the total revenue of a business is based on both the level of output and the selling price per unit. NET CASH FLOW - CORRECT ANSWER-The difference between money coming into a business and money going out of a business. PROFIT - CORRECT ANSWER-The surplus left over from revenue after paying total costs. CASH FLOW - CORRECT ANSWER-The movement of money into and out of a business. LOSS - CORRECT ANSWER-The deficit of revenue after paying total costs. INSOLVENT - CORRECT ANSWER-When a business is unable to pay its debts. BREAK EVEN - CORRECT ANSWER-The point at which the level of sales allows total costs to equal total revenue; at the break-even point a business makes no profit or loss. MARGIN OF SAFETY - CORRECT ANSWER-The amount a business sells in excess of its break-even point. INCOME STATEMENT - CORRECT ANSWER-A financial statement that shows the revenue and expenses a business has received and paid over a period of time; the statement will show the profit the business has made during this time. GROSS PROFIT - CORRECT ANSWER-Revenue minus cost of sales.
COST OF SALES - CORRECT ANSWER-The total amount the business had paid to create or make available a product or service that has been sold. NET PROFIT - CORRECT ANSWER-Gross profit minus expenses. ASSETS - CORRECT ANSWER-Resources owned by a business, e.g. cash, motor vehicles, premises, machinery. CASH FLOW FORCAST - CORRECT ANSWER-A management accounting report that outlines predicted future cash inflows and cash outflows per month over a given period of time. CASH FLOW STATEMENT - CORRECT ANSWER-A financial accounting statement that shows the actual cash inflows and outflows for a business over the previous 12 months. STAKEHOLDER - CORRECT ANSWER-Any person, group or organisation that has an interest in a business because they are, or may be, affected by the activities of that business. INTERNAL STAKEHOLDER - CORRECT ANSWER-An individual or group who are involved in a business directly by being or representing members of the workforce; this includes owners (e.g. chief executive, directors, managers, supervisors, assistants) and trade unions. EXTERNAL STAKEHOLDER - CORRECT ANSWER-A person or group of people with links to the business e.g. because of their personal location or that of the business they are connected with the organisation directly. They can be shareholders, customers, suppliers, potential investors, lenders, local community, pressure groups, and central and local government (e.g. HMRC, environmental health, planning department.
DIVERSIFICATION - CORRECT ANSWER-A strategy for expansion into new markets, and/or developing and selling new products. SWOT ANALYSIS - CORRECT ANSWER-A tool that enables a business to analyse the Strength, Weaknesses Opportunities and Threats of its current operations. BUSINESS PERFORMANCE - CORRECT ANSWER-How a business judges if it is succeeding and in which areas it needs to improve, to maintain or gain in terms of market share. FINANCIAL ANALYSIS - CORRECT ANSWER-A variety of different tools that enable a business to review its current financial arrangements, make improvements and future plans for the organisation. KEY PERFORMANCE INDICATOR (KPI) - CORRECT ANSWER-A measure that a business judges itself against based upon the goals it has set itself.
