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GCSE Business Paper Two - Grade 9 Notes
Complete Grade 9 notes covering the whole business paper two AQA specification.
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Business Paper OneUnit 1 - Business in the real world
Enterprise- An enterprise is simply another name for a business
What is an entrepreneur?
Someone who takes a calculated risk through starting a business
What are the characteristics of an entrepreneur?
Hard-working, Innovative, Organised, Willing to take a risk.
What are the objectives of an entrepreneur?
Become your own boss
Flexible working hours
Pursue an interest
Earn more money
Dissatisfaction with current job.
Purpose of a business - goods/services, distributing products, fulfilling
business opportunity, provide good / service to benefit someone (social.
enterprise). E.g a TV.
Goods - actual objects, can be touched, produced and consumed.
Services - activities, intangible, provided by other people, e.g a hairdresser.
Need - something you can’t live without, water + food.
Want - Something you can live without - phone.
In order to satisfy customers, a business needs to accurately identify its
customers’ needs and wants.
Type of Description Examples
Business
Primary Producing raw materials extracted from Farming, mining,
nature. fishing
Secondary Manufacturing goods which are made with Car manufacturing,
raw materials and turned into finished goods. steel, chemicals.
Construction.
Tertiary Providing services including distribution Shops, transports,
business. hairdressing.
Factors of production
Land - where business is based - includes resources under land.
Labour - employees
Capital - buildings and machinery.
Enterprise - Entrepreneur who sets up a business, organizes factors of production
and takes risk including in running the business.
Dynamic nature of a business - Businesses are constantly faced with change.
Some of these changes will be outside the control of the business.
,Not for profit organizations are social enterprises.
Limited vs Unlimited Liability
Unlimited liability is a big risk when operating as a sole trader or
partnership
When it comes to money owed by a business, the owners may have to use
their own personal funds to pay for any debts, possibly through the sale of
homes or other assets if there is not enough money in the business to pay
these debts fully. The owners are liable for any debts the business incurs.
Within limited companies, shareholders are NOT responsible for the
company’s debts. Shareholders may only lose the money they have
invested in the company to help pay off any outstanding debts or
liabilities. This means the liability of the shareholders is limited to the
value of their investment into the company’s shares.
Sole Trader
A sole trader is an individual owning the business on their own.
Most businesses in the UK are small businesses. These businesses
normally operate as a sole trader, e.g hairdressers, plumbers or
electricians.
A sole trader can also employ people but those employees do not share in
the ownership of the business.
Pros Cons
Simple set-up process, cheap, quick sales Unlimited liability
immediately, taxes in line w/income tax.
No need to publish accounts - private Fewer sources of finance as cannot
finances. issue shares. Expansion is harder.
Retain all profits Need to be multi-skilled.
Decision making control over business. Difficult to take holidays.
Partnership
A partnership is formed where a business is started and owned by more than one
person. Common examples of partnerships are doctors, solicitors or vets. A legal
document, called a partnership agreement is always recommended and sets up
how profits are divided up.
Pros Cons
Simple to form a business Unlimited liability
together
Minimal paperwork once Short life: if a partner leaves or dies
partnership agreement is set up. partnership ends.
,Partners can provide specialist Decision-making can take longer. Partners
knowledge and skills. have to live with the decisions of others.
Jobs can be shared Harder to raise finance than a company.
Greater potential to raise finance, Profits need to be shared.
any losses will be shared.
Limited Companies
A company is formed when a business is set up to have a separate legal identity
from its owners. Its owners are now known as shareholders who each owns
shares in the company. Shareholders receive a share of the profits, known as a
dividend, a reward for being a shareholder.
The business will be run by a board of directors, appointed by the shareholders.
The board of directions runs the company on a day to day basis and will make all
the important decisions.
Private Limited Companies
Private limited companies can raise funds form investors such as friends and
family, but NOT from the general public, as its shares aren’t on the stock
exchange.
Pros Cons
Limited liability - protects the personal Shareholders have to agree on profit
wealth of the shareholders distribution.
Easier to raise finance - to expand as Greater administrative costs than
the company can sell shares. setting up as a sole trader. Directors’
legal duties is strict.
Stable form of structure - company Finance limited to friends and family.
continues to exist even when the
shareholders change.
Original owners are likely to retain Less privacy
control.
Public Limited Companies
Most of the largest businesses in the country will be public limited companies.
Famous examples of public limited companies in the UK include BP, M+S, Tesco,
and Barclays.
Public limited companies are complicated and expensive to set up, but this type
of company can raise large sums of money through listing its shares on the stock
exchange.
The trading of shares in this way can make the company vulnerable to a
takeover. This could mean the original shareholders lose control if they end up
holding less than 50% of the shares.
, Pros Cons
Limited liability Shareholders have to agree on profit
distribution.
Can raise large sums of finance Greater administrative costs.
via the stock exchange. This is
permanently invested.
Stable form of structure Public can see the company information and
accounts and finance can be limited by the
stock market valuation of the company.
Firm is more prestigious Risk of company being taken over.
Separation of ownership and control.
PLCs have to raise a minimum of 50k share capital. And must have at least 2
directors and one company secretary.
Not for Profit Organisations
Not for profit organisations are set up to achieve objectives other than profit. To
be classed as a not-for-profit organisation, at 50% of the organisation's surplus
money must be reinvested back into the enterprise or into activities to help
satisfy the social need.
Aims and Objectives
Aims set the overall purpose for the business, the long term goal.
Objectives are specific measurable targets to help meet the aims of the
business.
Survival - Often entrepreneur discover their idea was not as good as they
originally thought or the external business environment makes it hard to trade,
which means the business finds it difficult to run profitably.
Profit Maximisation - Profit is the main objective for most businesses. This is the
reward to the entrepreneur for their hard work and the risks they undertook.
Market share maximisation - Some businesses will be more concerned with
increasing market share or becoming the market leader.
Growth - Not all businesses want to grow, but most do. This means that they can
increase their profits and the value of the business, through expanding within
the home market or internationally.
Business Objectives
Social/ethical responsibilities - increasingly businesses are aware of their
responsibilities to the society in which they operate. These may be related to the
environment or having correct ethical behaviour.
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