Business Exam

What is a business?

What is a business?

A business is an organization that provides goods and/or services to the consumer to satisfy needs and want they canbe local, regional, national, or global

What is the difference between a good and a service?

Goods are products that we can see and touch that we buy in exchange for money whereas a services are products that we cannot see or touch but rather the assistance given to another person in exchange for money

What is the difference between profit and non-proft?

A for-profit business sells goods or services to satisfy the needs, wants and demands of consumers for the sole purpose of making profit whereas a non-profit business operates strictly to help people within a community

What is a sole proprietorship and the advatages/disadvatages?

A business owned by one person who is known as the owner/proprietor, they have a wide range of responsibilities, the funds to run the business usually come from family/friends, bank loan or savings the advantage of this is that if the business prospers the owner gets all of the profits whereas the disadvantage is that if the business does poorly the owner is responsible and takes all the risk (unlimited liability)

What is a partnership and the disadvantages/advantages?

A business where two or more individuals share the costs and responsiblities, the terms of this partnership are recorded in the partnership agreement, the most common form of this is a general partnership although when two partners form a limited partnership they are only responsible for the funds they both invested in the initial business (limited liability), the advantage of this is that start-up costs are low, access to more knowledge whereas the disadvatages are you have to split profits, complications when selling and complications with decisions as you are not the sole owner

What is a corporation and the disadvantages/advantages?

A business granted legal status to operate with rights, privileges and liabilities that are distinct from those of the people who work for the business, they can be of any size, sell stocks or shares, those who buy the stocks or shares are shareholders and have limited liability and are ran by a board of directors, shareholders may also recieve a dividend the advantages of a corporation is that there is limited liability and continuous life whereas the disadvantages is that it is a complex process and conflict of interests

What is a franchise and the disadvatages/advantages?

A franchise is when a franchiser license the rights to its name, procedure, designs and expertise to another business called the franchisee the advantage of this is that there is less risk, brand recognition whereas the disadvantages is that you have less control and ongoing fees

What is a co-operative and the disadvantages/advantages?

A business owned by the workers or members who by the products or use the services, this business is motivated by service not profit, the advantages of this is that there is limited liability and shared responsibility whereas the disadvantage is that there are equal voting rights so decisions made take longer and ongoing fees which can be expensive

What is the formula for profit?

Profit = Revenue - Expenses - Costs

What is the difference between needs and wants?

A need is something that consumers need to survive whereas a want is something that provides comfort or pleasure to ones life

What are economic resources also known as?

Factors of production

What are natural resources?

Materials that come from the earth such as water

What are human resources?

People who work to create the goods and services such as farmers

What are capital resources?

Items that last long and need substantial financial investment by a business (assets) such as trucks

What is interdependence?

When a business relys on the goods and services froma variety of businesses to satisfy consumer needs and wants

What is demand? How does it affect price?

Demand is the quanity of a good or service that consumers are willing and able to buy at a particular price, if population increase demand goes up and vice versa, trends and predictions for the future can also affect the price

What is supply? How does it affect price?

Supply is the quantity of a good or service that business are willing and able to make/provide within a range of prices that people would be willing to pay, when production costs increase the cost of product increase, when the price is too high less people buy and when competition is high the price will lower

What is competition?

When two or more businesses offer the similar or the same products or services

Why is competition good for a business?

Competition is good for business as they are able to increase the price of goods to increase their profit

Why is competition good for consumers?

When there is more competition, businesses are more likely to provide more quanity of goods, better services and better quality of goods allowing for consumers to shop around for the best deal

What is the equilibrium price?

Producer and buyer is happy (Supply is equal to demand)

What are ethics?

Rules that help us tell the difference between right and wrong and they encourage us to do the right thing

What are values?

Values tell us what is important and they help us make decisions about what is right and wrong

What are morals?

Are rules we use to decide what is good or bad

What is the purpose of a code of ethics?

A code of ethics is a document that companies use that explains specifically how employees should respond in certain situations to further honesty and integrity

What is a dilemma?

A situation where a difficult choice must be made between two or more options

What is an ethical dilemma?

A moral problem with a choice between a potential right and wrong

What is whistle-blowing?

Occurs when an employee informs officials or the public about an illegal or ethical violation

Who is Enron and what happened to them?

A form of fraud that involved tampering with record and accounting scandals where executives used fraudulent accounting practices to inflate the company’s revenues and hide debt in its subsidiaries and is now bankrupt

What is fraud?

A crime of lying or pretending such as false or misleading advertising, “bait and switch” selling and double ticketing items for sale to name a few

What is insider trading?

Buying or selling shares of a company based on confidential information, this type of trading is in fact illegal

What is CSR? Give and example of a company that practices CSR.

Stands for Corporate Social Responsibility and a business exhibits this through their values, ethics and the contributions it makes to communities

What is CSR driven by?

A desire to protect customers and to treat employees and shareholders fairly

How do businesses practice CSR?

• Providing safe and healthy work environments

• Adopting fair labour policies

• Protecting the environment

• Being truthful in advertising

• Avoiding price discriminations

• Donating to charity

What are the 4 pillars of CSR?

• Employees

• Environment

• Community

• Customers

What are natural resources?

Materials supplied by nature from which everything in the world is made from, the six types of natural resources that primary industries (extractive industries) supply us with are:

• agriculture

• fishing and trapping

• mining

• water

• fuel and energy

• logging and forestry

What are raw materials?

Any goods used in the manufacturing of other goods, there are two main types:

• Ingredients: raw materials that are combined or converted to become a part of the finished product

• Supplies: raw materials that do not become a part of the finished product, but are used in the production creation process

What is labour?

All of the physical and mental work needed to produce good and services, this is very expensive so business seek ways to save on labour costs such as:

• Automation: many task are performed by more than one person using machines

• Consolidation: when many small manufacturing sites close down and are centralized into one large site

• Outsourcing: hiring another company to perform tasks for any company

What is capital?

The money investing in the business and is often referred to as monetary capital, there are two forms:

• Liquid: converted to cash easily

• Non-liquid: cannot be converted into liquid capital easily making them harder to spend

• Intellectual property: the ideas or the talent of a business’ workforce (non-tangible)

What is information?

In order to produce goods, reduce risk, and enhance profitability businesses need information on: new technology customers competition political conditions sources of supply

What is management?

The people who run the businesses and control or direct the factors of production which allows them to allocate company resources and make decisions that affect the day-to-day and long-term operations of the business

What is management in a large business?

Higher-level managers and/or the board of directors makes the decisions regarding profit distribution

What is management in a small business?

A single business manager or owner may make all of the business decisions

What is purchasing?

Someone is responsible for purchasing all of the raw materials needed to produce the product or services (purchasing agent or department, buyer, owner) and they need to ensure they are checkign for quality, price and hidden costs

What is processing?

Converting one item into another some go through the process of refining which is converting raw materials into semi-finished or finished products such as sugar cane → sugar

What is quality control?

Standards used to ensure all produced products conform to prescribed levels of excellence and they are set by the company, government or other organizations

What is grading?

Checking products for quality and size against fixed standards for the product or product catergory which allows consumers to make informed purchasing decisions if they don’t meet standards they will do “scratch and dent” sales or seconds (doesn’t apply to food)

What are the 4 ways to improve or maintain productivity?

Providing more training (initial, ongoing, retraining, specialized), invest in capital (computers etc.), new technology (robotics and automation), new inventory systems (JIT)

What are the two fundamental roles of marketing?

to sell what a business makes to manage the brand

What is branding?

All the features that make up a products image: Brand name Trademark or logo Slogan

Why is a brand name important?

It allows consumers to distiguish your brand from that of the competition it needs to be distinctive, stand out and memorable

What is a logo?

A symbol that is associated with the company or product and it can take the following forms: wordmark/monogram/letters emblem/visual/combination brandmark/abstract/symbol

What is a trademark?

A word, symbol, deesign or a combination of all three that a business uses to distinguish its goods or services from others

What is a slogan?

A short or catchy advertising phrase associated with a company or product

What is the product life cycle?

Graphs the changes in popularity or sales volume of a product overtime

What are the different stages of the product life cycle?

• Introduction: establish a market and build demand, make consumers aware of product features, availability etc., geared towards “early adopters”

• Growth: gain customer interest and increase market share

• Maturity: maintain market share and make high profits

• Decline: Maintain product, get what you can, discontinue product

• Decision-point: brand-management decision are made either to discontinue or remake

What are the non-traditional product life cycles?

• Fads: extremely popular for a short time

• Trend: lasts longer than a fad but influences many other areas

• Niches: a section of the market in which a product dominates and into which few competitors enter

• Seasonal: products that are popular during a specific time or season

What are the four P’s of marketing?

• Product: what a business sells because they see a need, they can and they want a profit and considers the quality, design, features and benefits

• Price: prices must be set with care to ensure success, today’s consumers are price conscious so businesses need to be price sensitive and do their research

• Place: the channels of distribution which are the paths of ownership that goods follow as they pass from the producer or manufacturer to the consumer

• Promotion: an attempt to sell a product and it involves making the consumer aware of the product usually to generate a positive result

What are the two C’s of marketing?

• Competition: the sellers of a specific product and is often expressed in terms of the total dollars spend annually on the product

• Consumers: in order to be competitive businesses study the consumer market (those who may use the product or service)

What is market share?

The percentage of teh market that a company or brand has

What is market segment?

A part of the overall market with similar characteristics

What is indirect competition?

Products or services that are not directly related to each other but fall under the same category

What is direct competition?

Products that are similar to each other

What is direct channel of distribution?

Connects the consumers to the producers of the goods or services also referred to as maker-use relationship

What is indirect channel of distribution?

Has one ore more intermediaries who import products (importers), wholesale goods (wholesalers) or retail products (retailers)

What is specialty channel of distribution?

An indirect way to distribute products by using vending machines, e-commerce etc.

What are demographics?

The study of obvious characteristics that categorize human beings such as: age, gender, family life cycle, ethicity, culture, income level

What are psychographics?

The study of lifestyle: the way people live, their values, beliefs, and motivations

What are the different types of advertising?

• direct-to-home

• out-of-home

• radio

• television

• newspapers

• magazines

• internet

• social media

What is the difference between primary and secondary data?

Secondary data is information collected by others such as websites whereas primary data is refers to current information collected and analyzed for a specific purpose such as surveys

What is AIDA?

Aida stands for:

• Attention: hooks and has something for the reader

• Interest: simple, easy, positive affect

• Desire: connecting the sales message to your visual, make them want it and offer something they cannot refuse

• Action: ask for the sale, make it easy to buy

What is legal tender?

Forms of payment that are accepted as payment for goods and services classified by the government of Canada: coins bank notes

Why is it said that money’s true value is its purchasing power?

Coins and bank notes have no true value, the plastics/polymer are worthless and the metals for the coins, they only are important because it allows them to buy items or invest

Why are security features importannt for money?

The security features help to discourage counterfeiting and they have other features as well to help the visually impaired and to make the bills last-longer and stay cleaner

What is counterfeiting?

The production of a false item to imitate the original in order to decieve, steal or replace

What is comparison shopping?

Comparing the price, quality, features and services in order to make smart purchases

What is a clearance sale?

A sale where seasonal goods are sold below the regular price to clear out old stock and to make room for new items

How do we spend our money?

Today’s society is a consumer driven one so that means the economy offers consumers a never-ending supply of exciting and innovative goods and services allow consumers to shop around for the best deal

When is a good time to buy?

A good time to buy would be when there are clearance sales, promotional sales or resort to second-hand shopping (thrifting)

What is budgeting and why is it important?

Budgeting is when you make a plan for smart spending and savings based on your income and expenses, this is important as it can help you find money for the things you really want or need which can help you achieve your goals

What is gross income?

Total earnings before taxes and other deductions

What is disposable income?

The amount of an individual's income after taxes and deductions

What is discretionary income?

The amount of an individual's income that is left for spending, investing, or saving after paying taxes and paying for personal necessities

What are fixed expenses?

A cost that is constant

What are variable expenses?

A cost that varies from month to month

What are necessities?

An expense that is needed in order to live or is extremely essential such as food, shelter

How are banks similar to businesses?

They both operate usually for the sole purpose of making a profit

What is the difference between a Schedule I, II, III bank?

• Schedule I: canadian owned and controlled

• Schedule II: foreign owned

• Shedule III: foreign banks allowed to operate within Canada

What is the prime lending rate?

The rate charged to borrowers by chartered banks is indicated by the bank rate or prime lending rate that the Bank of Canada sets several times a year

How does insurance work?

by sharing risk payments are used from many policyholders to pay out the claims of a few (annual premium) insurance companies will pool together those premiums paid by policyholders these premiums can drain severely when a disaster happens

What is the Bank of Canada’s main responsibility?

Regulate the money supply and keep the economy stable

What is the money supply?

Total amount of moeny in circulation

What is saving?

Putting money aside for future use

What is investing?

Using savings to earn extra income

How does risk vary between saving and investing?

Saving usually results in a lower yield/rate of return but less risky whereas investing typically results in a higher yield/rate of return but more risky

What percentage of your income should you put away for savings?

10-20%

What is inflation?

As prices rise, purchasing power decreases overtime

What does saving for a rainy day mean?

Saving for emergencies or unexpected hardships

Why is important to save?

Saving can allow you to save for emergency needs, long or short term goals and security or future needs depending on what financial institution you plan with you can earn interest, safety and insure against loss

How much of your pay cheque should you set aside?

10%