CH-1

EXAM-STYLE QUESTIONS
Short answer questions
1. Define the term ‘adding value’. [2]
2. Define the term ‘entrepreneur’. [2]
3. Analyse one characteristic of successful entrepreneurs. [5]
4. Explain one barrier faced by entrepreneurs, apart from limited finance. [3]
5. Explain one example of opportunity cost for an individual planning to become an entrepreneur.
[3]
6. Analyse one way a country is likely to benefit from the expansion of its business enterprises.
[5]
7. Explain one role of an intrapreneur in an existing business. [3]
8. Analyse one benefit of a detailed business plan to an entrepreneur. [5]
9. Explain one limitation of business plans. [3]
10. Explain one reason why a new hairdressing business will need a factor of production of your
choice. [3]
11. Explain one need that a new business must fulfil if it is to be successful. [3]
12. Analyse one way a supermarket could add value to the food and other goods it buys in.
[5]
13. Explain one reason why there are so many new business enterprises providing consumer
services. [3]
14. Explain one way in which an entrepreneur could overcome the barrier of having no savings to
invest. [3]
15. Analyse one benefit of entrepreneurship to your country’s economy.
[5]

Essay questions

1 a Analyse two ways a bakery could increase added value.

[8]
b Evaluate whether the success of an entrepreneur depends more on luck rather
than personal qualities and skills. [12]
2 a Analyse two benefits to your country’s economy of an increase in the number of
new business start-ups by entrepreneurs. [8]
b Evaluate the barriers that business entrepreneurs experience in your country.
[12] Data response questions
1 Rivelino
‘We are a global business,’ states Rivelino, one of three partners in Total Fintech Solutions (TFS).
This is a fast-growing business. It responds to the changing needs of other businesses by
developing the latest software to facilitate payment systems for e-commerce transactions within
the global marketplace. TFS has four full-time computer programmers.
This is not Rivelino’s first business venture. He also started up a herbal tea business and arranged
boat tours for tourists. He is always looking out for business opportunities. TFS is his
biggest success by far. He discussed setting up a software development company with a school
friend who was trained in software design and development. There have been opportunity costs.
Rivelino gave up time to start the new business venture and he used all his savings. His friend
had a marketing qualification and many business contacts. They were joined by another partner
who brought financial skills and further software design experience.
Rivelino encourages his employees to become intrapreneurs. He wants his employees to show
enterprise and initiative by developing their own business ideas. After much success in the
Caribbean market, he wants TFS to provide advanced customised software on a global scale.
Rivelino has vision, a drive to succeed and a love of software development. He recognises the
strength of competing businesses and the changes occurring in the business world, especially in
e-commerce.

a i Identify one quality of successful intrapreneurs. [1]

ii Explain the term ‘opportunity costs’. [3]
b Explain two qualities Rivelino has that make him a successful entrepreneur. [6]
c Analyse two ways the partners’ management skills contributed to the success of
TFS. [8]
d Evaluate the likely impact of a dynamic business environment on the future
success of TFS. [12]
2 Wesley’s laundry
Six months ago, Wesley was congratulated on his detailed business plan for a new laundry by the
bank manager. She agreed to lend him $30 000, half of the capital he needed for starting the
business. Wesley planned to offer a premium laundry service for local hotels and guesthouses.
His promise was ‘RETURNED NEXT DAY, or NOTHING TO PAY’.
There were few customers at first, as forecast in the business plan. But news of Wesley’s service
standards and next day promise soon spread. By the end of month three, the laundry was
working to full capacity. His business plan had not allowed for this level of demand. Wesley
needed more factors of production. He recruited three workers to help him.
It is now the end of month four. The bank manager has asked to see Wesley. He is shocked by what
he is told: ‘You have reached your overdraft limit. Cash coming into the business is not enough
to ensure survival. I want to see all of your accounting and sales records next week,’ she tells
him.
Wesley knows this will be a problem. He has been so busy that his accounting records are three
weeks out of date. Customers have not paid during this period. No bills have been sent out.
Some customers are claiming that they should not pay. Their laundry has taken three days to be
returned. The workforce is another problem. The workers often argue because there are some
jobs no one wants to do, such as handling chemicals and cleaning the boiling tanks at the end of
each day. Wesley has not clearly allocated jobs and the workers cannot decide themselves.
Wesley sat down with all the company’s paperwork and wondered why he had not gained some
experience in computer-based accounting. His own business skills were mainly in marketing.
No wonder the sales of the laundry were doing so well.

a i Identify one factor of production. [1]

ii Explain the term ‘customers’. [3]
b Explain two problems that Wesley now faces in managing his business. [6]
c Analyse two reasons why Wesley would benefit from understanding the concept
of opportunity cost. [8]
d Evaluate the benefits and limitations to Wesley of the detailed business plan. [12]
 CH-2
EXAM-STYLE QUESTIONS
Short answer questions
1. Explain one difference between private-sector and public-sector organisations. [3]
2. Explain one difference between a sole trader and a private limited company. [3]
3. Analyse one reason why there is usually a distinction between who owns and who controls a
public limited company. [5]
4. Explain one benefit for a business of engaging in a joint venture. [3]
5. Analyse one reason why the directors of a public limited company might decide
to convert the business back into a private limited company by buying back all of
the shares.
[5]
6. Explain one way in which legal identity and continuity help companies to operate effectively.
[3]
7. Explain one way in which limited liability makes it easier for companies to raise finance.
[3]
8. Analyse one way in which the relationship between ownership and control differs in two forms
of business ownership. [5]
9. Analyse one reason why the form of business ownership affects a business’s ability to raise
finance. [5]
10. Explain one reason why an entrepreneur might decide not to take out a franchise agreement but
to establish an independent business instead. [3]
11. Analyse one difference between private limited companies and public limited companies.
[5]
12. Explain one key feature of social enterprises. [3]
13. Explain one reason why the owners of a business might decide to establish it as a social
enterprise. [3]
14. Define the term ‘cooperative’. [2]
15. Explain one difference between the primary sector and the tertiary sector. [3]
16. Analyse one reason why an entrepreneur opening a hairdressing business might
have a greater chance of success if they bought a franchise licence than if they
attempted to establish an independent business. [5]
Essay questions

1. a Analyse two differences between sole traders and limited companies.

[8]
b Evaluate the factors that the owners of a rapidly expanding private limited
company should consider before deciding whether to convert it into a public limited company.
[12]
2. a Analyse two potential benefits to an entrepreneur of setting up a franchised
business. [8]
b Evaluate the use of joint ventures by a food manufacturing business
planning to expand sales in other countries. [12]
1 Joe to expand his business
Joe Sharma owns a small tea and coffee blending and packaging business. He buys in coffee beans
and tea leaves and processes them. He sells the finished product to chains of retail stores. His
business is facing increasing competition from large processors of tea and coffee based in other
countries. Sales of his product to retail stores are falling for another reason. The rapid increase
in consumer income is leading to many more people eating and drinking in hotels and
restaurants and buying less tea and coffee to consume at home.
The situation with his business is becoming so serious that he is thinking of selling his factory and
using the capital to purchase a few cafés and tea shops. He would then be able to benefit from
the changes in consumer spending habits. Joe realises that he will need more capital than the
sale of his factory would raise. Therefore, he is considering converting his sole trader business
into either a private limited company or a partnership with a friend who used to own a shop.

Identify
i one benefit to an entrepreneur of being a sole trader. [1]
ii Explain the term ‘partnership’. [3]
In
i which sector of industry is Joe’s business currently operating? Explain
your answer. [3]
ii In which sector of industry is Joe planning to set up his new business?
Explain your answer. [3]
e Analyse two problems Joe might face in switching from making tea and coffee
products to entering the café and tea shop market. [8]
f Advise Joe on the most suitable form of business ownership, given that extra
capital will be required. Justify your answer. [12]
2 Capital Waste Disposal Ltd (CWD)
Rajesh started collecting waste from factories ten years ago. He operated as a sole trader. He
recycled much of the waste and sold it as a raw material to be re-used by industry. When he
wanted to expand the business, he took on a partner who invested capital. His business
partner Eva was not interested in management.
Four years ago, Rajesh and Eva decided to create a private limited company. CWD became very
profitable and now operates several trucks and two waste recycling plants. The two shareholders
invested the profit back into the business and paid themselves high dividends. Rajesh and Eva
were encouraged by the company accountant to consider applying for a listing on the stock
exchange to convert the business to a public limited company.
The IPO was a huge success and Rajesh and Eva are now wealthy. Rajesh is still the CEO but he
does not like interference in his decisions by major shareholders. CWD now controls 56% of
the waste recycling business in Country X. Rajesh has received a takeover offer for CWD from
a multinational waste management company. The price offered for each share is very high and
Rajesh is recommending that all shareholders accept the offer.

e i Identify one benefit of private limited companies.

[1] ii Explain the term ‘initial public offering (IPO)’.
[3]
f Explain two reasons why the business ownership of CWD has changed over the
years. [6]
g Analyse one advantage and one disadvantage to Rajesh of the decision to
convert CWD to a public limited company. [8]
d Evaluate the most appropriate form of business ownership for CWD. [12]
CH-3
EXAM-STYLE QUESTIONS
Short answer questions
1 Explain why any one stakeholder group might want to compare the size of one
business with another. [3]
2 Explain one reason why capital employed might not be the appropriate way to
compare the size of two businesses. [3]
3 Explain one reason why comparing the size of two businesses by the number of
employees might give a misleading picture. [3]
4 Explain one way in which the market capitalisation measure of business size will be
affected by a stock exchange crash. [3]
5 Analyse one effect on business stakeholders of horizontal integration. [5]
6 Analyse one effect on business stakeholders of forward vertical integration. [5]
7 Analyse one potential strength for the business if the owner, who is retiring,
encourages their children to continue owning and managing the business. [5]
8 Analyse one benefit to your country’s economy that would result from the growth of
the number of small firms. [5]
9 Analyse one problem for a business of it being small. [5]
10 Explain to a manager one difference between organic and external growth. [3]
11 A fast-food business wants to expand using retained earnings to purchase more cafés.
Analyse one advantage to the business from this form of growth. [5]

Essay questions
1. a Analyse two different ways in which business size may be compared. [8]
b Evaluate the advantages and disadvantages to a mobile (cell) phone manufacturer of internal
growth. [12]
2. a Analyse two roles of small businesses in any industry of your choice. [8]
b Evaluate the likely strengths and weaknesses resulting from the family ownership of a mobile
(cell) phone retail business with ten shops. [12]
3. a Analyse two likely impacts on stakeholders of a business that grows through vertical
integration. [8]
b Evaluate whether a web design business should grow organically or by means of integration
with another business. [12]
Data response questions
1
Chai Wei’s restaurant
Chai Wei’s restaurant business is proving to be a great success. His strategy of charging very
low prices and locating in low-income areas of town is starting to bring rewards. Starting with
small premises 12 years ago, Chai Wei has since opened three other restaurants. In total, he now
employs 50 workers. The kitchens use ingredients from local specialist suppliers. Chai Wei
manages the business himself. He meets many customers, as he helps in the restaurants when
they are busy. One customer recently suggested several items that could be added to the menu.
Chai Wei spoke to his chef and, within two days, the new dishes were made available to customers. He
is a very ambitious entrepreneur.
Chai Wei wants to ensure that his business continues after he retires. He has three sons, one of whom
has worked in the restaurant since leaving school. Chai Wei plans to give management roles to all
three sons. He told a friend that ‘keeping the business in the family will ensure continuity and
commitment. I want the business to grow in the future and they will take over most of my work. I
could either open another restaurant or integrate horizontally with another business.’

1 i Identify one way business size can be measured, other than by the number
of employees. [1]
 ii Explain the term ‘integrate horizontally’. [3]
2 Explain two benefits to Chai Wei’s business of it still being quite small. [6]
3 Analyse one possible advantage and one possible disadvantage to the business if
Chai Wei appoints his sons as managers. [8]
4 Evaluate the likely impact on stakeholders if Chai Wei’s business takes over
another restaurant business. [12]

Machine Elec (ME)

ME manufactures components for washing machines. It supplies these to repair shops that maintain and
repair all brands of washing machines. It also sells online to consumers who are trying to fix their
own machines. Some of ME’s components have been redesigned by the business owner, Danny, and
are more reliable than the original parts. ME’s prices are lower than those charged by washing
machine manufacturers for components sold under their brand names. Some of these producers have
recently contacted ME to see if the business would repackage its components into branded boxes.
These could then be sold by the manufacturers under their own names.
Danny plans to use external growth to expand the business. He has proposed a merger with another
business in the same industry at the same stage of production. Danny will pay them some of the
profit of the integrated business. Danny wants to use these other premises as a research base for
two electrical engineers who would work on redesigning components and whole machines for
manufacturers.

1 i Identify one method of business integration other than a merger. [1]

ii Explain the term ‘external growth’. [3]

2 Explain two likely disadvantages to ME of the business growing larger. [6]
3 Analyse two roles of small businesses such as ME in the washing machine
industry. [8]
4 Evaluate the impact on stakeholders of Danny’s decision to merge ME with
another business. [12]