Unit 1.1.1 Dynamic business

1. What personal qualities did Julie display when she set up her business? (3)

Cambridge Satchel Company

Julie Deane is a mother of two children. Back in 2008 Julie and her husband were exploring ways to pay for their daughter’s private school fees. Julie’s daughter was being bullied at her local school and the family were keen on moving her to a fee paying one. In order to secure this additional revenue, Julie decided to set up a business. She had always been a fan of her old school satchel and was struggling to find somewhere to buy a new one. Therefore, the concept of the Cambridge Satchel company was born. Since 2008 the Cambridge Satchel Company has continued to grow, including the opening of their own production facility that makes 500 satchels a day.

“Like any business, setting up takes hard work and determination. I made good use of the internet and used Google to find out all the information that was needed. I started just four years ago with a start-up fund of £600 and my mum, and I launched the business from the kitchen table”

Julie Deane quoted in 2012.

2. What were the main incentives for Julie establishing The Cambridge Satchel Company? (3)

3. Julie was given £600 from her mother to help start the business. How else might an entrepreneur help to fund the initial business start-up? (2)

4. What potential problems might Julie face as the business becomes established and continues to grow? (3)

Topic 1.1.4 Risk and reward

1. Definition Test: Write down the following definitions, using the table below. (10)

Risk

Reward

Business failure

Independence

Nottingham Forest Football Club

1977–1980 were the glory years for Nottingham Forest. Under the inspirational leadership of their manager, Brian Clough, the team won the European Cup in both 1979 and 1980. They also were top of the English League One (the equivalent status to winning the Premiership as well as winning the League Cup final at Wembley. With a modern ground and gates at full capacity, the club was one of the most successful in Europe.Today, the club is owned by Fawaz Al Hasawi, a Kuwaiti businessman, who has recently increased his personal loans to the club to a level of £67 million. Indeed, the net debt that the club is now liable for is £82 million and in May 2015 it posted an annual loss of £21.5 million. The Club plays football in the Sky Bet Championship.

Lack of security

2. What factors might have led to the reduced fortunes, both in terms of football and financially, for Nottingham Forest Football Club? (6)

3. What are the risks and rewards for the owner of Nottingham Forest Football Club? (6)

Additional Research topic:

How important is the participation in the Premier League for UK football clubs?

Topic 1.1.5 Enterprise1. Complete the definitions listed in the table below (12)

Branding

Unique Selling Point (USP)

Value Added

Customer Needs

Customer Wants

Goods

2. The table below shows the price of carrots at various outlets and at different stages of production. Explain the various reasons why the Prepared Essential Carrot Batons at Waitrose retail at £1.28 per kg more than the Loose Carrots at Tesco. (3)

Product Price

Carrots – loose at Tesco 60p per kg

Organic Carrots – 600g bag at Tesco £1.43 per kg

Essential Prepared Carrot Batons – 600g bag at Waitrose £1.88 per kg

3. The price of the 2016 BBC Great British Bake Off At Home book retails at the following prices:

Recommended Retail Price £20.00

Waterstones (during a book signing event following the final episode) £15.00

Lakeland £11.00

Thebookpeople .co.uk £7.99

WHSmith (online) £9.99

Amazon (prime) £7.99

All prices at 28 October 2016

Analyse why the price of the BBC Great British Bake Off book ranges from £7.99 to £15.00 on the day that the book was priced. What factors are therefore contributing to its value added? (3)

Extension QuestionWhy do you think that no retailer is charging the full RRP on the day following the Bake Off final?

Topic 1.2.1 Customer needs

1. Why do you think that Hilton have decided to launch this new brand within its portfolio? (3)

Hilton Launches Tru Hotels

Hilton Worldwide Holdings Inc. now has 13 brands within its portfolio. Famous in the UK for its Hilton and Doubletree brand of hotels, its largest brand within the USA is actually Hampton, with over 200,000 rooms in over 2100 hotels (or properties as Hilton prefers to call them)Currently, the Hampton by Hilton brand caters for the mid-market traveller experience in what Hilton calls its “Select rather than Full Service” However, Hampton by Hilton is considered to be “upper midscale” catering for business and leisure travellers willing to pay in the region of $100 a room.Tru is aimed to target the market at a pricing point 15–20% lower than Hampton. It is also aimed at younger travellers; both business and leisure, both in terms of its marketing, décor and use of in-house social media and public space. However, Hilton does not plan to compromise on quality, cleanliness and space within rooms.

2. How might the brand managers of the Hampton by Hilton respond to this new and growing brand within the portfolio? (6)

3. What aspects of the case study support the view that Hilton understands its customers’ needs? (3)

Topic 1.2.2 Market research1. Define the following terms that are related to Market Research: (10)

Primary research

Secondary research

Focus group

Quantitative data

Qualitative data

2. Complete the table which looks at the advantages and disadvantages of Primary Market Research. (16)

Primary Explanation Advantage Disadvantage

Survey

Questionnaire

Focus group

Observation

3. If a company were to purchase a Market Analysis report from Research Now what type of market research would this be categorised as? (1)

4. What are the advantages and disadvantages of this type of report?

Research Now

Research Now is a large US Market Research company that gathers data and information from millions of consumers around the world. Their website (www.researchnow.com) claims that they gather data from 8 million “deeply profiled” consumers. This is achieved by using platforms such as www.ereward.com where customers complete surveys in return for loyalty points that can be spent on leading brands.“Research Now” therefore claim that they have a large enough database to produce reports that provide market information to meet the needs of any company.

Topic 1.2.3. Market segmentation and mappingQuestion Answers1. What is the meaning

of market segmentation?

1) Dividing the market into sub-sets with common needs or wants2) Ensuring a broad product portfolio 3) Delegating tasks to middle managers4) Ensuring that the product is sold at a competitive price

2. Location, income, lifestyle and age

1) Factors that are part of the stock control system2) Ways to segment the market3) Provide an opportunity to develop and more productive workforce4) Elements of government economic policy

3. Demographics 1) The extent to which consumers identify with the place 2) The study of statistical differences that exist within a population3) A department in a firm making prototypes (or demo products)4) Considers the relationship between the management and employees

4. Quantitative data 1) Research among a large enough sample of people to provide statistically reliable results

2) In-depth research into a small group of potential or actual customers – to provide insight into why consumers buy what they buy

3) When a company taps into research that has already been carried out for general purposes

4) A numerical method of stock control5. Focus group 1) Research conducted first-hand, tailored to the company’s needs

2) A group discussion among people selected from the target market3) The use of closed questions on a form4) A team-building method of developing greater concentration

6. Lifestyle 1) The development of a more motivated workforce2) The market related to overseas holidays3) Grouping people by common characteristics in how they live, from

sports and leisure to views regarding the environment

4) A term used to show the growth in gyms in the UK over the past ten years

7. Market map 1) The development of branding by a business2) Companies operating in a particular market3) A document that provides directions to the local market4) Measuring where existing brands sit on a two-factor grid

8. Gap in the market 1) The collection of data in order to inform decision making2) An area on a market map where few or no existing brands operate3) The time of the week when the businesses in the market are closed4) An original feature of a product that competitors are not offering

Question Answers1. What is the meaning

of market segmentation?

1) Dividing the market into sub-sets with common needs or wants2) Ensuring a broad product portfolio 3) Delegating tasks to middle managers4) Ensuring that the product is sold at a competitive price

2. Location, income, lifestyle and age

1) Factors that are part of the stock control system2) Ways to segment the market3) Provide an opportunity to develop and more productive workforce4) Elements of government economic policy

3. Demographics 1) The extent to which consumers identify with the place 2) The study of statistical differences that exist within a population3) A department in a firm making prototypes (or demo products)4) Considers the relationship between the management and employees

4. Quantitative data 1) Research among a large enough sample of people to provide statistically reliable results

2) In-depth research into a small group of potential or actual customers – to provide insight into why consumers buy what they buy

3) When a company taps into research that has already been carried out for general purposes

4) A numerical method of stock control5. Focus group 1) Research conducted first-hand, tailored to the company’s needs

2) A group discussion among people selected from the target market3) The use of closed questions on a form4) A team-building method of developing greater concentration

6. Lifestyle 1) The development of a more motivated workforce2) The market related to overseas holidays3) Grouping people by common characteristics in how they live, from

sports and leisure to views regarding the environment4) A term used to show the growth in gyms in the UK over the past ten

years7. Market map 1) The development of branding by a business

2) Companies operating in a particular market3) A document that provides directions to the local market4) Measuring where existing brands sit on a two-factor grid

8. Gap in the market 1) The collection of data in order to inform decision making2) An area on a market map where few or no existing brands operate3) The time of the week when the businesses in the market are closed4) An original feature of a product that competitors are not offering

1. Define the following terms that are related to Market Research: (10)

Demographics

Lifestyle

Location

Market segments

Gap in the market

2. A market map is a method of measuring where existing brands sit on a two-factor grid, e.g. young/old compared with high price/low price. Undertake a market mapping for UK clothing retail brands using these perimeters. Look at Figure 11.1 on page 50 of the textbook to see an example of a market map filled out for different brands of chocolate. (2)

High price

Low price

Traditional market

Youth

3. How might travel a company like TUI Travel, Kuoni, P&O and Cunard respond to the report by CEBR consulting? (6)

Holiday spending

People over the age of 50 are spending more and more on holidays - including cruises – while younger people are travelling less, according to research.Over the past five years, the older age group has increased spending on travel by 23%, says a study by the CEBR consultancy for Saga.Those under 50 have cut spending on tourism by 5% during the same period.As a result, the older generation is now responsible for well over half the UK's total spending on holidays. Last year, the over-50s spent £39bn on travel, including £2.1bn on cruises.

Source: Reported on BBC News Online. Brian Milligan, 27th September 2016

Topic 1.2.4 Competitive environment Question Answers1. Creating a new product or process 1) Extension strategy

2) Entrepreneur3) Innovation4) Tariffs

2. An action or decision that is wrong from a moral standpoint

1) Ethical2) Unethical3) Strategic4) Quality

3. The competition between companies in the same market

1) Trade blocs2) United Nations3) The competitive environment4) Protectionism

4. Which of these is not a feature of competition?

1) Trade Unions2) Customer service3) Price4) Product range

5. Which of these might be viewed as an unethical practice?

1) Reducing prices in order to stay competitive 2) Donating a percentage of profits to charity3) Pumping chicken with water to make it look bigger

than it is4) Cutting costs by scaling back staffing

6. “Customers expect efficiency, speed, politeness, even with a smile.” This is an example of what?

1) Product range2) Location3) Customer service4) Quality

7. Fierce competition may force firms to do what?

1) Increase pay awards to staff2) Cut costs by cutting staff3) Increasing operations at a head office level4) Increase payments and donations to charity

Question Answers1. Creating a new product or process 1) Extension strategy

2) Entrepreneur3) Innovation4) Tariffs

2. An action or decision that is wrong from a moral standpoint

1) Ethical2) Unethical3) Strategic4) Quality

3. The competition between companies in the same market

1) Trade blocs2) United Nations3) The competitive environment4) Protectionism

4. Which of these is not a feature of competition?

1) Trade Unions2) Customer service3) Price4) Product range

5. Which of these might be viewed as an unethical practice?

1) Reducing prices in order to stay competitive 2) Donating a percentage of profits to charity3) Pumping chicken with water to make it look bigger

than it is4) Cutting costs by scaling back staffing

6. “Customers expect efficiency, speed, politeness, even with a smile.” This is an example of what?

1) Product range2) Location3) Customer service4) Quality

7. Fierce competition may force firms to do what?

1) Increase pay awards to staff2) Cut costs by cutting staff3) Increasing operations at a head office level4) Increase payments and donations to charity

1. Define the term Competition. (2)

2. Ivan Mitin clearly saw a gap in the market. Outline the strengths and weaknesses of his business concept. (6)

ZiferblatZiferblat is the Russian and German word for Clock Face. It is also the name of a unique chain of cafes, which are mostly based in northern England.The founder of the business is Ivan Mitin, who set up the business in Moscow in 2011. Currently, there are 13 branches of Ziferblat across Europe and the largest of these is in Edge Street, Manchester. The concept behind Ziferblat is that it is a comfy and welcoming space where you can either entertain friends or work. Each café has superfast Wifi, papers and books, board games, comfy sofas, piano and a large selection of cakes and savoury items. There is a decent range of teas and the coffee is excellent. Guests can help themselves to as much as they like as long as they wash up afterwards. There is no charge per item consumed. But the business makes a profit, so what is the catch? It makes a profit due to its unique pricing structure – guests are charged a rate of 6p per minute - In other words, £3.60 for every hour that they stay in the café. The minimum bill has been for 18p and the maximum was a man who stayed for 11 hours. In addition, guests can volunteer to do an hours work at the café and they are rewarded with two hours of credit.

3. How might existing cafes in the Northern Quarter of Manchester have responded to the opening of Ziferblat? (6)

Topic 1.3.1 Aims and objectivesQuestion Answers1. What does “specific”

mean?1) A type of profit after taxation2) An element that makes an objective SMART3) One of the stakeholders of a business4) A long-term strategic aim

2. What is an aim? 1) Ensuring the business hits its target2) A type of business ownership3) A general statement of where the business is heading4) A member of business segmentation

3. What is an objective? 1) A clear goal that is measurable, so success or failure is clear to see2) Internal promotion of a middle manager to a more senior position3) A general statement of where the business is heading4) Always focused on keeping the business going and maintaining as a

going concern4. What is market

share?1) The sale of stocks and shares in a market2) The mark-up on cost that the firm makes in the sale of its products3) The percentage of a market held by one company or brand4) The amounts available to be spent by households after income taxes

have been deducted5. A SMART objective

is what?1) Short-term2) Realistic3) Optimistic 4) Developed by focus groups within the business

6. A SMART objective is also what?

1) Time-bound2) Long-term3) Focussed on the growth into new markets4) Evaluated

7. Which of these is an example of a financial objective?

1) The development of enhanced industrial relations2) Improvement in profit levels by 5% over 3 years3) The creation of a new marketing campaign over the next 6 months4) Rationalisation of middle management roles within a business

8. A non-financial objective for an entrepreneur might include what?

1) A targeted revenue of £250,000 in the first year of operation2) Becoming independent and not having to report to line-managers3) Reducing overall total costs by 7% over the next two financial years4) Improving the market share within an Asian market by 18% by 2019

Question Answers1. What does “specific”

mean?1) A type of profit after taxation2) An element that makes an objective SMART3) One of the stakeholders of a business4) A long-term strategic aim

2. What is an aim? 1) Ensuring the business hits its target2) A type of business ownership3) A general statement of where the business is heading4) A member of business segmentation

3. What is an objective? 1) A clear goal that is measurable, so success or failure is clear to see2) Internal promotion of a middle manager to a more senior position3) A general statement of where the business is heading4) Always focused on keeping the business going and maintaining as a

going concern4. What is market

share?1) The sale of stocks and shares in a market2) The mark-up on cost that the firm makes in the sale of its products3) The percentage of a market held by one company or brand4) The amounts available to be spent by households after income taxes

have been deducted5. A SMART objective

is what?1) Short-term2) Realistic3) Optimistic 4) Developed by focus groups within the business

6. A SMART objective is also what?

1) Time-bound2) Long-term3) Focussed on the growth into new markets4) Evaluated

7. Which of these is an example of a financial objective?

1) The development of enhanced industrial relations2) Improvement in profit levels by 5% over 3 years3) The creation of a new marketing campaign over the next 6 months4) Rationalisation of middle management roles within a business

8. A non-financial objective for an entrepreneur might include what?

1) A targeted revenue of £250,000 in the first year of operation2) Becoming independent and not having to report to line-managers3) Reducing overall total costs by 7% over the next two financial years4) Improving the market share within an Asian market by 18% by 2019

1. Explain the difference between ‘aims’ and ‘objectives’. (2)

Bill Morrison, photographer

Bill Morrison has had a lifelong interest in photography. As a keen amateur he had the latest equipment and recently has attended many courses to learn more about the profession and become a professional photographer.A banker and then educator by training, he has decided at the age of 50 to set up his own micro-business, as a professional photographer. There were several stimulus factors for this decision, including his daughter moving away to university and therefore him having more time without the need to be a professional taxi service too!For the moment he continues with his day job as an educator and will need to reflect upon this as the business grows.

His website states:“I am a professional photographer currently establishing my business within the North West area. If you are looking for both a professional but very relaxed photography experience I think you will enjoy my approach and style. I like to get to know my clients so that the photographs produced truly reflect their lives and the occasion”

So far, the wedding and birthday shoots that he has been commissioned to do have produced outstanding results that his clients have been overwhelmingly pleased with.

www.billmorrisonphotography.co.uk

2. Explain why objectives should be SMART. (3)

3. What do you think was Bill’s financial objective when he set up the business? (3)

4. What do you think his non-financial objectives were when setting up the business? (3)

5. As the reviews have been so positive, it is likely that the business will continue to grow. What might be the pressures for Bill if this was the case? (6)

Topic 1.3.2. Costs, revenue and profitQuestion Answers1. You calculate total costs

with which formula?1) Fixed Costs + Marginal Costs2) Variable Costs × Quantity Produced3) Fixed Costs + Variable Costs4) Price × Quantity Sold

2. You calculate sales revenue with which formula?

1) Price × Quantity Sold2) Price × Quantity Produced3) Variable Costs + Fixed Costs4) The Average Variable Costs of the firm

3. Profit is calculated with which formula?

1) Price × Quantity Sold2) Price – Variable Costs3) Total Revenue – Total Costs4) (Average Revenue – Average Costs) × Quantity Made

4. What is interest? 1) The extent to which stakeholders are concerned about the business2) The charges made by banks for the cash they have lent to a business3) The total value of sales made within a period of time4) All the costs for a period of time such as a month

5. What is break-even? 1) Where a business is making its target profit levels2) Fixed Costs/(Price – Total Revenue)3) The total cost of production, even when the business is not making any

items of produce4) The level of sales at which total costs = total revenue

6. What is margin of safety?

1) A chart showing a company’s revenue and total costs2) Sales Revenue – Variable Costs3) Where the business ensures that it meets the latest health and safety

legislation issued by government4) The amount by which demand can fall before the business starts making

losses7. If a business is making

zero profit, it is said to be what?

1) Making a loss2) Failing to achieve its objectives3) Breaking even4) Covering its variable costs only

8. Variable costs include what?

1) Raw materials2) Management salaries3) The cost of rent to the landowner4) Loan repayments to the bank

9. Fixed costs include what?

1) Raw material costs2) Loan repayments to the bank3) The cost of packaging4) Wage costs

Question Answers1. You calculate total costs

with which formula?1) Fixed Costs + Marginal Costs2) Variable Costs × Quantity Produced3) Fixed Costs + Variable Costs4) Price × Quantity Sold

2. You calculate sales revenue with which formula?

1) Price × Quantity Sold2) Price × Quantity Produced3) Variable Costs + Fixed Costs4) The Average Variable Costs of the firm

3. Profit is calculated with which formula?

1) Price × Quantity Sold2) Price – Variable Costs3) Total Revenue – Total Costs4) (Average Revenue – Average Costs) × Quantity Made

4. What is interest? 1) The extent to which stakeholders are concerned about the business2) The charges made by banks for the cash they have lent to a business3) The total value of sales made within a period of time4) All the costs for a period of time such as a month

5. What is break-even? 1) Where a business is making its target profit levels2) Fixed Costs/(Price – Total Revenue)3) The total cost of production, even when the business is not making any

items of produce4) The level of sales at which total costs = total revenue

6. What is margin of safety?

1) A chart showing a company’s revenue and total costs2) Sales Revenue – Variable Costs3) Where the business ensures that it meets the latest health and safety

legislation issued by government4) The amount by which demand can fall before the business starts making

losses7. If a business is making

zero profit, it is said to be what?

1) Making a loss2) Failing to achieve its objectives3) Breaking even4) Covering its variable costs only

8. Variable costs include what?

1) Raw materials2) Management salaries3) The cost of rent to the landowner4) Loan repayments to the bank

9. Fixed costs include what?

1) Raw material costs2) Loan repayments to the bank3) The cost of packaging4) Wage costs

1. Define the following terms: (8)

Variable costs

Fixed costs

Revenue

Raw materials

2. Calculate the total monthly repayment on the loan, assuming that there are 60 equal payments and the total interest charge is split equally over each month. (3)

James and Beth Davenport

James and Beth Davenport decide to set up a small business selling coffee and other light refreshments from a small mobile van. They forge links with local groups such as “Park Run” to sell their products at meetings and events. Equally, their service is also available to be hired for private gatherings and parties.As with all businesses, they face both fixed and variable costs.They estimate that the variable costs of a cup of coffee and tea are 22 pence per unit. The business borrowed £7000 to purchase the second-hand van and modernise it too. This loan is being paid off over 5 years. Annual interest charges are £460, leading to total interest of £2,300.The price of a cup of coffee and tea is £1.60.

3. Calculate the total profit that James and Beth make if they sell 300 cups of coffee per morning. (Remember to include the interest charges and assume that there are 4 Saturdays per month) (3)

4. What other costs might James and Beth face in addition to wages, raw materials and interest charges? (3)

James and Beth cost out their own labour at the minimum wage of £7.20 per hour. Each Saturday morning they work a 4 hour shift when they set up their stall at the local park.

Topic 1.3.4 Cash and cash flow

1. Define the following terms: (8)

Cash

Cash flow

Overdraft

Insolvency

2. Outline some of the possible reasons why “OysterWorld” was forced to close due to Cash Flow reasons. (3)

Oyster World

A computer games company based in Treforest, Pontypridd in South Wales, has entered administration, with cash flow issues cited as the main reason for its closure. The firm, “OysterWorld” had sizable debts of £2.0 million despite funding in the region of £1.4 million from the Welsh Government. The firm had been unable to pay its workers at various times in its final few months of trading as serious cash flow problems began to emerge. 50 workers have now lost their jobs.

"I think the main reason that the company went into administration was because of cash flow,"

Quote from Andrew Tate, the accountant dealing with the closure of the business. BBC

News 24th August 2016

3. What might the business and its various stakeholders have done to ensure its continued success? (6)

4. Complete the following cash flow forecast: (24)

January February March April May

Opening Balance 0

Sales Income 3000 4000 4000 4000 5000

Borrowing 10000 0 0 0 0

Total Inflows

Materials 6000 1500 2500 1500 1500

Wages 2000 2000 2500 2000 2500

Other costs 1200 800 600 600 600

Total outflows

Net monthly balanceNet Cash Flow

Closing balance

Topic 1.3.6 Sources of financeQuestion Answers1. Crowd funding 1) Allowing another business to buy equity

2) Seeking financial support from an investment bank3) Raising capital online from many small investors4) Making a successful pitch to entrepreneurial dragons

2. Dividends 1) The proportion of a business that is owned by the banks2) A proportion of sales revenue paid to shareholders3) The market share that the business commands4) Payments to shareholders from the firm’s yearly profits

3. Trade credit 1) When a supplier provides goods, but is willing to wait to be paid2) A method of payment operated by VISA3) A loan by the bank to a firm4) A positive net cash flow into the business

4. Venture capital 1) The money gained from debtors once they repay their debts2) Capital from adventurous sources3) A combination of share capital and loan capital, provided by a bank

that is willing to take a chance on the success of a small firm4) Incremental funding into the business by government

5. Retained profit 1) The profit margins on products sold to customers2) The profit kept within the business and the best source of finance

for expansion3) The profit of a business expressed as a percentage of sales revenue4) The profit before dividends are paid to shareholders

6. Share capital 1) An overdraft facility that the bank provides to a business2) Raising finance by selling part-ownership in the business3) The market share the business has4) The market price of the business’s shares

7. A closing balance 1) The proportion of a business’s cash stocks that are kept in a bank2) The amount of cash left in the bank at the end of the month3) The assets of the firm at the point that it ceases trading as a

business4) Cash in to the business minus cash out of the business

8. Net cash flow 1) Cash in minus cash out – over a month2) Gross cash flow minus depreciation3) Annual profits minus variable costs4) The annual average rate of return

Question Answers1. Crowd funding 1) Allowing another business to buy equity

2) Seeking financial support from an investment bank3) Raising capital online from many small investors4) Making a successful pitch to entrepreneurial dragons

2. Dividends 1) The proportion of a business that is owned by the banks2) A proportion of sales revenue paid to shareholders3) The market share that the business commands4) Payments to shareholders from the firm’s yearly profits

3. Trade credit 1) When a supplier provides goods, but is willing to wait to be paid2) A method of payment operated by VISA3) A loan by the bank to a firm4) A positive net cash flow into the business

4. Venture capital 1) The money gained from debtors once they repay their debts2) Capital from adventurous sources3) A combination of share capital and loan capital, provided by a

bank that is willing to take a chance on the success of a small firm4) Incremental funding into the business by government

5. Retained profit 1) The profit margins on products sold to customers2) The profit kept within the business and the best source of finance

for expansion3) The profit of a business expressed as a percentage of sales revenue4) The profit before dividends are paid to shareholders

6. Share capital 1) An overdraft facility that the bank provides to a business2) Raising finance by selling part-ownership in the business3) The market share the business has4) The market price of the business’s shares

7. A closing balance 1) The proportion of a business’s cash stocks that are kept in a bank2) The amount of cash left in the bank at the end of the month3) The assets of the firm at the point that it ceases trading as a

business4) Cash in to the business minus cash out of the business

8. Net cash flow 1) Cash in minus cash out – over a month2) Gross cash flow minus depreciation3) Annual profits minus variable costs4) The annual average rate of return

1. Complete the table below, highlighting both the advantages and disadvantages of different types of long term sources of finance. (12)

Source Advantages Disadvantages

Personal savings

Share capital

Loans

Venture capital

Retained profit

Crowdfunding

Neigh

Tabitha Johnson was born in Devon and grew up in the countryside. She moved to London after graduating and began a well-paid finance job in the City. Her passions in life where linked to her upbringing; horses, out-door pursuits and healthy eating. She was particularly interested in making her own organic products. She decided to quit her job in the City and invested £15,000 into the conversion of a horsebox into an Organic mobile café – it was called “Neigh” The concept worked well, with Tabitha and her boyfriend selling their organic juices and snack bars at various summer festivals. They also managed to secure a regular pitch in London. Then in November 2015, the horsebox was stolen. The couple decided to use Crowdfunding to help them raise funding for another box – a method which proved to be successful for them. Several months later “Neigh II” was sourced and converted and the business has continued to operate successfully.

http://www.neighltd.com/aboutus

2. What entrepreneurial characteristics have both Tabitha and her boyfriend displayed as they set up Neigh? (4)

3. Evaluate the other sources of finance that Tabitha might have explored in order to rebuild Neigh II? (9)

Topic 1.4.1 Ownership and liabilityQuestion Answers1. Bankrupt 1) The situation where the bank balance in an account reaches zero

2) When an individual is unable to pay his/her debts, even after all personal assets have been sold for cash

3) The private equity an individual has on the value of their property4) Where property is sold to pay off an existed debt

2. Limited liability 1) The ability to limit the extent to which shareholders can invest in a business

2) When a business owner owes over 50% of the value of their business to a bank

3) Ensuring that there is only partial legal responsibility for an action4) Restricting the losses suffered by owners to the sum that they

invested in the business3. Private limited company 1) A small family business in which shareholders enjoy limited liability

2) When a business owner decides to float the business on the London Stock Exchange

3) When a business owner approaches an investor for additional funds

4) The investment of additional capital into the business by issuing further shares

4. Sole trader 1) The transformation of a small business to one that enjoys limited liability

2) A small, micro business that has only one member of staff3) A business that has only one product in its product portfolio4) A business run by one person; that person has unlimited liability for

the business debts5. Unlimited liability 1) Treating the business and the individual owner as inseparable,

therefore making the individual responsible for all the debts of a failed business

2) The development of a business idea that significantly increases the demands on the owner and adds considerable risk to the business

3) The unlimited nature of risks to a business4) The debts that must be repaid to banks after a loan has been taken

out6. Royalties 1) The rate of tax that a small business must pay

2) The percentage of revenue that is paid to staff as expenses 3) A business that has dealings with the government 4) A percentage of the sales revenue to be paid to the overall

franchise owner

Question Answers1. Bankrupt 1) The situation where the bank balance in an account reaches zero

2) When an individual is unable to pay his/her debts, even after all personal assets have been sold for cash

3) The private equity an individual has on the value of their property4) Where property is sold to pay off an existed debt

2. Limited liability 1) The ability to limit the extent to which shareholders can invest in a business

2) When a business owner owes over 50% of the value of their business to a bank

3) Ensuring that there is only partial legal responsibility for an action4) Restricting the losses suffered by owners to the sum that they

invested in the business3. Private limited company 1) A small family business in which shareholders enjoy limited

liability2) When a business owner decides to float the business on the

London Stock Exchange3) When a business owner approaches an investor for additional

funds4) The investment of additional capital into the business by issuing

further shares4. Sole trader 1) The transformation of a small business to one that enjoys limited

liability2) A small, micro business that has only one member of staff3) A business that has only one product in its product portfolio4) A business run by one person; that person has unlimited liability

for the business debts5. Unlimited liability 1) Treating the business and the individual owner as inseparable,

therefore making the individual responsible for all the debts of a failed business

2) The development of a business idea that significantly increases the demands on the owner and adds considerable risk to the business

3) The unlimited nature of risks to a business4) The debts that must be repaid to banks after a loan has been taken

out6. Royalties 1) The rate of tax that a small business must pay

2) The percentage of revenue that is paid to staff as expenses 3) A business that has dealings with the government 4) A percentage of the sales revenue to be paid to the overall

franchise owner

1. Define the following business terms: (10)

Limited liability

Unlimited liability

Sole trader

Bankrupt

Franchising

2. In order to establish a Countrywide Franchise, an entrepreneur will need to make an initial investment to purchase the rights to the territory and name. What are the different sources of funds that might be considered? (3)

Countrywide Grounds Maintenance

Countrywide Grounds Maintenance is a local Manchester business that took the decision back in 1985 to rapidly expand by adopting a Franchise model. The business is a gardening, landscape and maintenance firm with a focus on the corporate sector. Its clients include many blue-chip companies, charities and over 1500 schools, colleges and universities in the United Kingdom. The model allows entrepreneurs to establish their own franchise operations within tightly controlled territories across the UK. Most contracts are generated by Head Office in South Manchester, although franchisees are also welcome to establish their own client base too. http://www.countrywidegrounds.com/

3. What is an advantage to the entrepreneur of purchasing a Countrywide franchise opportunity rather than setting up their own unique business? (3)

4. What is a potential limitation to the entrepreneur in the longer-term? (3)

5. What is a benefit to Countrywide Grounds Maintenance Ltd in operating a franchise model? (3)

Topic 1.4.3. Location

1. List five factors that influence a business choice of location? (5)

2. Define the following business terms: (6)

Sutton Sports

Sutton Sports is a small sports shop based in Sutton Coldfield near to Birmingham in the West Midlands. It has relatively small premises but has a good range of stock and the owners have a good working knowledge of the equipment that they sell.The owners of the business have used the internet as the model to expand their business. They have an online presence on Amazon and sell many items through this medium. In addition, they also have a direct selling website www.sutton-sports.co.ukBoth of these mediums have led to sales on a nationwide scale rather than simply to customers in the local area.

Fixed premises

Proximity

Rent

3. Assume that you are the owner of Sutton Sports. You have two options to grow the business:

a) Establish additional shops to reinforce the brand, perhaps with a concentrated presence in the West Midlands.

b) Grow online sales by establishing a direct selling website and position the firm on a medium such as Amazon.

Justify which of these two options you would decide to use to grow the business? (9)

Topic 1.4.4. Marketing mix intro

1. Define the following business terms: (8)

Price

Product

Place

Promotion

Sweets and Feathers

Sweets and Feathers (www.sweetsandfeathers.co.uk) are a small business based near Manchester that specialise in providing a bespoke sweet stall hire for private parties, children’s parties and weddings.The customer hires the sweet cart and a host for up to three hours to accompany their party or event. The cart is loaded with traditional sweets that guests can help themselves to throughout the evening.The business was established 9 years ago and continues to be successful.

Topic 1.4.5 Business plansA business plan is a detailed proposal of the marketing and financial thinking behind a new business.

1. Complete the grid below by writing in the nine sections that all business plans should contain. (8)

Business aims and objectives

Tangle Teezer

The Tangle Teezer is one of the UK’s most successful hair products. It was invented by a former hair colour stylist, Shaun Pulfrey, who spent several years working for global hair stylists such as Vidal Sassoon. During this time he perfected a device to remove tangles from hair without the associated amount of potential pain in doing so.In 2007, Shaun took his idea onto the BBC Dragons Den series and pitched his idea. He was looking for £80,000 in return for 15% of his business. The dragons rejected his pitch saying that the product was like a horse brush and that it had no future. Shaun was undeterred and had a strong business plan that included raising £98,000 from his savings and by re-mortgaging his London flat. By 2016 the Tangle Teezer business is worth an estimated £200 million with Mr Pulfrey was the sole shareholder in it. He now plans to sell the business which would make him 5 times wealthier than Deborah Meaden, who rejected call for financial help.

2. Imagine that the dragons had invested in the business. What would the Dragons £80,000 investment now be worth? (3)

3. Give three benefits to Mr Pulfrey of him having a “strong” business plan when he was establishing the business. (3)

4. Shaun may well start up another business in the future. If so, why might he find it easier to develop an effective business plan? (3)

Topic 1.5.1 StakeholdersStakeholders are the people or groups with an interest in the success or failure of an organisation. Some work inside the business and some outside, and all are likely to have slightly different objectives.

1. Complete the diagram below, listing all of the stakeholders that a business might have. (8)

2. Different stakeholders will have slightly different objectives. At times, these objectives will conflict with each other. Write down three pairs of stakeholders and explain how the objectives conflict between them. (6)

Stakeholder 1 Stakeholder 2

Explain how the objectives between the stakeholders are in conflict with each other.

Stakeholder 1 Stakeholder 2

Explain how the objectives between the stakeholders are in conflict with each other.

Business

Stakeholder 1 Stakeholder 2

Explain how the objectives between the stakeholders are in conflict with each other.

3. Using the case study of your school, list four of the stakeholders and write down the objectives that each person or group might have. (8)

Topic 1.5.2 TechnologyQuestion Answers1. What are stakeholders? 1) Senior managers of a business

2) Owners of a share in a business3) All those groups with an interest in the success or failure of a

business4) The franchise owner of a business

2. What are pressure groups are?

1) Non-profit making firms such as OXFAM2) Organisations formed to put forward a particular viewpoint3) Owners of a business 4) Members of a trade union

3. What are shareholders? 1) Always actively involved in the daily running of the business2) All those groups with an interest in the success or failure of a

business3) Individuals and firms that have invested in a business and have a

partial ownership of it4) Always invited to invest in the business by the founder of the

firm4. What are payment

systems?1) Hire purchasing and leasing arrangements2) Ways of paying electronically, such as PayPal3) The collective name for the UK banking system4) Making a deposit to secure a product

5. What does e-commerce mean?

1) The use of social media in business2) Selling online rather than in a physical one-to-one transaction3) Trading in energy4) Developing a presence on the high street

6. What does m-commerce mean?

1) The development of digital communication2) Online trading3) An aspect of e-commerce, using apps and mobile phones4) The use of social media in business

7. What is meant by digital communication?

1) Information on a business website2) Messages or conversations conducted via email, text or social

media3) The development of a new aspect of branding4) Interaction with a supplier at a trade fair or exhibition

Question Answers1. What are stakeholders? 1) Senior managers of a business

2) Owners of a share in a business3) All those groups with an interest in the success or failure of a

business4) The franchise owner of a business

2. What are pressure groups are?

1) Non-profit making firms such as OXFAM2) Organisations formed to put forward a particular viewpoint3) Owners of a business 4) Members of a trade union

3. What are shareholders? 1) Always actively involved in the daily running of the business2) All those groups with an interest in the success or failure of a

business3) Individuals and firms that have invested in a business and have

a partial ownership of it4) Always invited to invest in the business by the founder of the

firm4. What are payment

systems?1) Hire purchasing and leasing arrangements2) Ways of paying electronically, such as PayPal3) The collective name for the UK banking system4) Making a deposit to secure a product

5. What does e-commerce mean?

1) The use of social media in business2) Selling online rather than in a physical one-to-one transaction3) Trading in energy4) Developing a presence on the high street

6. What does m-commerce mean?

1) The development of digital communication2) Online trading3) An aspect of e-commerce, using apps and mobile phones4) The use of social media in business

7. What is meant by digital communication?

1) Information on a business website2) Messages or conversations conducted via email, text or social

media3) The development of a new aspect of branding4) Interaction with a supplier at a trade fair or exhibition

1. Define the following terms: (6)

E-commerce

Payment systems

Social media

Hilton Digital KeyHilton have introduced their new “Digital Key” App. This allows their Hilton HHonors Loyalty members to bypass check in and go immediately to their room. All loyalty members are currently able to book hotel stays on any device with the HHonors App and check into a room of their choice. However, once they arrive at the hotel the customer still has to report to the front desk to check in. The new “Digital Key” removes the need to do this final step. Guests check in via the App and then select to the Digital Key option. By doing so, their mobile device becomes an electronic key and will active the door lock if the

2. A large percentage of room bookings are undertaken through the Hilton App. This is an example of M-Commerce, the mobile version of E-Commerce. Outline three advantages for Hilton Hotels of offering this method of booking to its customers. (3)

3. What feature should the Hilton App provide the customer with in order to allow it to stand out within a crowded hotel sector? (3)

4. Suggest two advantages to the customer and two advantages for Hilton of operating the new “Digital Key” system. (2)

Topic 1.5.3. LegislationQuestion Answers1. What is the Consumer Credit

Act?1) The introduction of online banking arrangements for retailers2) Every item sold on credit must have a clear indication of the

annualised percentage interest rate being charged.3) Every product on sale must also be sold on a credit basis too.4) Excessive interest rates must not be charged for products sold on

credit.2. What is the Weights and

Measures Act?1) The development of legislation to ensure that employees do not

lift excessively heavy weights2) A law just for the alcoholic licensing sector to ensure that

alcoholic drinks are sold in the correct measures3) A law that if a product has 150 grammes on the packaging then it

must contain at least that amount of the product4) A law which makes it an offence for a trader to use false or

misleading statements3. What does the Trade

Descriptions Act do?1) Ensures all businesses offer a credible guarantee to all customers2) Makes it an offence to misleadingly label goods and services3) Prevents illness from eating food sold to you4) Aims to reduce the inequalities that exist within employee

payment structures4. What is the legislation that

protects customers from misleading or dangerous practices by companies?

1) Health and Safety Legislation2) Credit Legislation3) Consumer Law4) Red Tape

5. What is ‘red tape’? 1) The use of legislation that protects consumers when there are health considerations

2) Laws passed by Acts of Parliament that relate to all firms3) Rules established by firms to support consumers when

undertaking purchasing decisions4) The term given to laws that might tie the hands of

businesspeople, making it harder to act entrepreneurially6. What is the Food Safety Act? 1) A law to help prevent illness from eating food sold to the public

2) A government funded training programme for those working in the food industry

3) A voluntary industry code where firms can sign up to training their workforce on matters relating to food hygiene

4) Consumer legislation that limits the supply of alcoholic beverages on sale to the public

7. Which of these is a law involved in recruiting new staff?

1) Food Safety Act2) Weights and Measures Act

3) Equality Act 4) Consumer Credit Act

Question Answers1. What is the Consumer Credit

Act?1) The introduction of online banking arrangements for retailers2) Every item sold on credit must have a clear indication of the

annualised percentage interest rate being charged.3) Every product on sale must also be sold on a credit basis too.4) Excessive interest rates must not be charged for products sold on

credit.2. What is the Weights and

Measures Act?1) The development of legislation to ensure that employees do not

lift excessively heavy weights2) A law just for the alcoholic licensing sector to ensure that

alcoholic drinks are sold in the correct measures3) A law that if a product has 150 grammes on the packaging then

it must contain at least that amount of the product4) A law which makes it an offence for a trader to use false or

misleading statements3. What does the Trade

Descriptions Act do?1) Ensures all businesses offer a credible guarantee to all customers2) Makes it an offence to misleadingly label goods and services3) Prevents illness from eating food sold to you4) Aims to reduce the inequalities that exist within employee

payment structures4. What is the legislation that

protects customers from misleading or dangerous practices by companies?

1) Health and Safety Legislation2) Credit Legislation3) Consumer Law4) Red Tape

5. What is ‘red tape’? 1) The use of legislation that protects consumers when there are health considerations

2) Laws passed by Acts of Parliament that relate to all firms3) Rules established by firms to support consumers when

undertaking purchasing decisions4) The term given to laws that might tie the hands of

businesspeople, making it harder to act entrepreneurially6. What is the Food Safety Act? 1) A law to help prevent illness from eating food sold to the public

2) A government funded training programme for those working in the food industry

3) A voluntary industry code where firms can sign up to training their workforce on matters relating to food hygiene

4) Consumer legislation that limits the supply of alcoholic beverages on sale to the public

7. Which of these is a law involved in recruiting new staff?

1) Food Safety Act2) Weights and Measures Act3) Equality Act 4) Consumer Credit Act

1. Define the following business words: (8)

Consumer rights

Legislation

Red tape

Consumer law

2. Write a short summary of each of the following Acts of Parliament: (8)

Trade Descriptions Act 1968

Consumer Rights Act 2015

Consumer Credit Act 1974

Weights and Measures Act 1985

3. Explain how the different types of government legislation impact upon the business. (6)

4. What is a consequence of “Red Tape” upon small business? (3)

Julian and Samantha Harrison

Julian and Samantha Harrison gave up relatively well-paid jobs in the City and moved north to the Derbyshire Peak District to set up a small café selling home-made healthy food. During the evening, the café transforms into a small restaurant with a set menu and a fine wine list. The couple employ a small staff, comprising of a full-time chef and three part-time waiting on staff.

Topic 1.5.4. The economyQuestion Answers1. What is the total spent by all

shoppers throughout the country?

1) A recession2) Government spending3) Consumer spending4) Aggregate demand

2. What is a recession? 1) An increase in sales and a fall in unemployment2) Two successive quarters of negative economic growth3) The total spent by all shoppers throughout the country4) An increase in the average price level within the economy

3. What does an increase in the Average Price Level lead to?

1) Recession2) Unemployment3) Inflation4) Depreciation in the Exchange Rate

4. What are interest rates? 1) The annual average increase in the price level2) The price charged when borrowing money3) The level of interest for a particular product which is entering a

market4) An element of fiscal policy

5. What is taxation? 1) Charges placed by government on goods and services2) The increase in prices due to excessive demand in the economy3) The value of sterling against other currencies4) The annual cost of a loan to the borrower

6. What is depreciation of the exchange rate?

1) An example of fiscal policy2) The increase in the external value of Sterling over a period of time3) The development of an effective payment system for

international clients4) When the external value of a currency falls against other

currencies7. Sterling was £1 = €1.30 and now

Sterling is £1 = €1.26. What is this an example of?

1) The use of supply side policy in the UK2) The appreciation of the exchange rate3) The depreciation of the exchange rate4) Keynesian fiscal policy

Question Answers1. What is the total spent by all

shoppers throughout the country?

1) A recession2) Government spending3) Consumer spending4) Aggregate demand

2. What is a recession? 1) An increase in sales and a fall in unemployment2) Two successive quarters of negative economic growth3) The total spent by all shoppers throughout the country4) An increase in the average price level within the economy

3. What does an increase in the Average Price Level lead to?

1) Recession2) Unemployment3) Inflation4) Depreciation in the Exchange Rate

4. What are interest rates? 1) The annual average increase in the price level2) The price charged when borrowing money3) The level of interest for a particular product which is entering a

market4) An element of fiscal policy

5. What is taxation? 1) Charges placed by government on goods and services2) The increase in prices due to excessive demand in the economy3) The value of sterling against other currencies4) The annual cost of a loan to the borrower

6. What is depreciation of the exchange rate?

1) An example of fiscal policy2) The increase in the external value of Sterling over a period of time3) The development of an effective payment system for

international clients4) When the external value of a currency falls against other

currencies7. Sterling was £1 = €1.30 and now

Sterling is £1 = €1.26. What is this an example of?

1) The use of supply side policy in the UK2) The appreciation of the exchange rate3) The depreciation of the exchange rate4) Keynesian fiscal policy

1. Define the following business words: (8)

Consumer incomes

Economic climate

Exchange rates

Inflation

2. A UK importer purchases 10,000 units of a product at a cost of €2.50 per item. Calculate the Sterling cost of this purchase based on the exchange rate of £1= €1.10 in October 2016. (3)

The UK Sterling (pound) has fallen to €1.10, its lowest level since March 2010. Based on fears related to Brexit, analysts are predicting that Sterling will continue to lose further value against the Euro throughout the next 12 months. HSBC have predicted that Sterling will also lose value against the US Dollar, ending 2017 at a rate of £1 = $1.10.Meanwhile, some travellers have reported that some airport Bureau de Change, are offering rates where they gain less than one Euro for one pound.On 3 December 2015 the rate for Sterling against the Euro was £1 = €1.41

(adapted from Independent, 17th October 2016)

3. The same importer purchased a similar amount of the product on the 3rd December 2015. Using the rate of exchange between Sterling and the Euro on this date, calculate the Sterling cost to the importer? (3)

4. How has the change in the exchange rate impacted upon the UK importer? (3)

5. Define the following terms: (6)

Taxation

Interest rates

Unemployment

Topic 1.5.5 External influences

1. Evaluate the decision that Toblerone decided upon. (9)

Toblerone decided to reduce the size of the chocolate bars and alter its design due to rising imported commodity prices coupled with the low levels of economic growth.Faced with these factors, Toblerone has several options available to them, including reducing the size of the packaging to increasing the price of the product to maintain their profit margins.

“Fair enough reducing the weight of the bar, but why the big gap in between segments? Looks stupid imo [in my opinion], could have just made the bar shorter and kept the original design.”Leo Yarker, commenting on Toblerone’s Facebook page.

2. Explain how both of the new law might impact upon a small business employing 35 staff. (6)

Two new workplace regulations became law in 2016. The first is the National Living Wage which is payable to those workers aged 25 years and over. Workers aged below 25 are eligible for the National Minimum Wage.Another piece of legislation is the concept of auto-enrolment. That is the requirement employers to ensure that all employees aged over 22years old begin to save for their retirement.