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Understanding Business
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Test Bank for Understanding Business, 13th Edition by William Nickels,
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Understanding Business
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TEST BANK For Understanding Business 13th Edition byNickels, McHugh and McHugh
State the definition of a need. - ANSWER: What we require in order to survive (food,
water, shelter).
State the definition of a wants. - ANSWER: Goods/services that make our lives more
enjoyable and pleasure, but we don't require in order to survive (games consoles,
TVs, cars).
State the definition of goods. - ANSWER: A physical product that we can see and
touch (newspaper, jacket, pencil).
State the definition of services. - ANSWER: Something that is provided for us by an
organisation (taxi, cinema, haircut).
Describe the cycle of business. - ANSWER: Customers have needs wants ---->
businesses carry out market research to identify those needs and wants ---->
businesses produce goods and services ----> goods and services are bought and
consumed.
State the definition of the factor of production 'land'. - ANSWER: This refers to
natural resources and includes not only the surface of the earth but all the other
natural resources discovered within. (eg, fish, coal, oil, iron ore, crops and trees).
State the definition of the factor of production 'labour'. - ANSWER: This refers to
human resources (eg, employees who work for the business).
State the definition of the factor of production 'capital'. - ANSWER: This refers to
human-made resources (eg, the buildings, machinery and equipment used in the
production process).
State the definition of the factor of production 'enterprise'. - ANSWER: This is the art
of bringing together the other factors of production in order to produce goods and
services. The entrepreneur is the risk taker.
State what chain of production is. - ANSWER: The stages a product passes through
from start to finish.
State the definition of the sector of industry 'primary'. - ANSWER: Businesses
involved in the extraction of our natural resources from above and below the earths
surface (eg, farming, fishing, forestry, coal mining).
, State the definition of the sector of industry 'secondary'. - ANSWER: Businesses
involved with taking raw materials (from the primary sector) and manufacturing a
product (eg, car manufacturing, cake making).
State the definition of the sector of industry 'tertiary'. - ANSWER: Businesses
involved with providing a service (eg, hotel, cinema, supermarket, travel agent).
State what the private sector is. - ANSWER: Organisations owned by private
individuals that exist to make a profit.
State what a sole trader is. - ANSWER: A business owned and run by one person.
State the key features of a sole trader. - ANSWER: Owned by one private individual.
Controlled by the private individual.
Financed by their own personal savings or possibly a bank loan or grant.
State the advantages of operating as a sole trader. - ANSWER: -Easy to set up.
-Owner gets to keep all the profit.
-Owner gets to make all of their own decisions.
State the disadvantages of operating as a sole trader. - ANSWER: -Unlimited liability,
if the business goes bankrupt or in debt the individual owner is responsible for
paying it back. This could mean their personal possessions are taken to pay for this.
-Raising finance could be difficult.
-Workload and responsibilities cannot be shared with another owner.
State what a partnership is. - ANSWER: A business owned by 2-20 partners.
State the key features of a partnership. - ANSWER: Owned by the 2-20 partners.
Controlled by the 2-20 partners.
Financed by the investment of each individual partner and may also apply for loans
or grants.
State the advantages of operating as a partnership. - ANSWER: -More finance can be
raised compared to a sole trader.
-Workload and responsibility can be shared between partners.
-Partners each bring a different experience and expertise to the business.
State the disadvantages of operating as a partnership. - ANSWER: -Unlimited liability,
if the business goes bankrupt or in debt the individual owner is responsible for
paying it back. This could mean their personal possessions are taken to pay for this.
-Profit is split between the partners.
-There could be disagreements/arguments between partners.
-The actions of one partner are legally binding on others.
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