AQA GCSE Business (8132) · Spec 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6 and 3.1.7
3.1 Business in the real world
Read the notes, then try the questions. Each one is marked the moment you press Check, and shows the right answer and why.
Key ideas
- Businesses exist to meet customer needs and wants. They add value when customers will pay more than the inputs cost.
- Entrepreneurs take risks. They can lose the money they put in, and they are not paid a guaranteed wage.
- Sole traders and partnerships have unlimited liability. Ltd and plc companies have limited liability: shareholders can lose only what they invested.
- Only a plc can sell shares to the public. A Ltd cannot.
- Aims are long-term goals. Objectives are specific, measurable targets, such as 'increase sales by 10% in 12 months'. New businesses often aim for survival first.
- Stakeholders are any people or groups with an interest in a business. Their interests can conflict, for example shareholders want profit but employees want pay.
- Growth can be organic (from inside the business, such as opening a new branch) or external (taking over or merging with another business).
- A business plan sets out aims, the market, costs and finance. It helps a new business get money and cuts the risk of failure, but it cannot guarantee success.
- Location depends on the business. A shop needs customers walking past. A factory may need to be near suppliers, workers or transport links.
Key terms
- Limited liability
- Owners can lose only the money they invested, not their personal possessions.
- Unlimited liability
- The owner's personal possessions can be used to pay the business's debts.
- Stakeholder
- Any person or group with an interest in what a business does.
- Objective
- A specific, measurable target that helps a business reach its aim.
- Dividend
- A share of profit paid to shareholders.
- Organic growth
- Growth from inside the business, for example opening a new branch.
- External growth
- Growth by taking over or merging with another business.
Common mistakes
- Mixing up Ltd and plc. Both have limited liability, but only a plc can sell shares to the general public.
- Writing a vague objective such as 'make more money'. A good objective has a number and a time limit.
- Saying a stakeholder is only an owner or a customer. Employees, suppliers, the local community and others are stakeholders too.
Exam tip
The 1-mark and 2-mark questions reward the exact term, such as 'limited liability'. For a 2-mark 'Outline' or 'Explain', make one point and then develop it with 'which means...' or 'so...'. For a 6-mark 'Analyse', build a chain: a point, a link to the business in the question, then the effect on that business.
Free practice questions
7 questions, 12 marks. Answer, then press Check. The marking guide explains how the marks are worked out. Nothing is saved.
- Question 1 · Matching[3 marks]
Match each business to its sector of the economy.
- Question 2 · Multiple choice[1 mark]
Which of the following types of business ownership has shareholders but cannot advertise its shares to the general public?
- Question 3 · Matching[4 marks]
Match each stakeholder to their main interest in a business.
- Question 4 · True or false[1 mark]
State whether this statement is True or False.
- Question 5 · True or false[1 mark]
State whether this statement is True or False.
- Question 6 · Multiple choice[1 mark]
Which is the best-written objective?
- Question 7 · Multiple choice[1 mark]
Which of the following is an example of external (inorganic) growth?