The Business Management Knowledge Test

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Quizzes Created: 12 | Total Attempts: 21,923

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1/62 Questions

The University of Warwick conducts secondary research in order to assist inimproving its market position as one of the leading universities in the UK.Which of the following is not an example of secondary research?
- In-depth interviews with open day visitors
- Using market intelligence reports
- Information from the University and Colleges Admissions Service
- Higher Education articles in the Times Education Supplement

About This Quiz

The Business Management Knowledge Test explores key entrepreneurial and management styles through real-world examples. It assesses understanding of risk-taking, independence in business, leadership styles, and the motives behind major business decisions.

The Business Management Knowledge Test - Quiz

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2.

The IKEA Group, owned by Swedish entrepreneur Ingvar Kamrad, has a large workforce made up of employees ranging from full-time permanent to part-time seasonal staff. Ingvar’s management style has been described by his staff as restrictive and absolute. Which of the following management styles would most apply to Ingvar Kamprad?
- Democratic – consultative
- Democratic – paternalistic
- Autocratic
- Laissez Faire
- Administration
Correct Answer

A. Autocratic

Explanation

Ingvar Kamprad's management style is described as "restrictive and absolute," which aligns with an autocratic management style. Autocratic leaders make decisions without consulting their employees and have full control over the decision-making process. They tend to have a top-down approach and expect strict adherence to their instructions and policies. This style is characterized by a lack of employee involvement in decision-making and limited autonomy for employees.

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3.

Andy Walker, General Manager at Virgin Active Ltd health club in Derby, organizes monthly ‘Coffee and Chat’ meetings with his staff to discuss and agree new ideas with him. Which one of the following leadership styles does Andy seem to be using in this case?
- Democratic
- Theory X
- Paternalistic
- Autocratic
Correct Answer

A. Democratic

Explanation

Andy's organization of monthly "Coffee and Chat" meetings with his staff to discuss and agree on new ideas indicates that he is using a democratic leadership style. This style involves involving employees in decision-making processes and valuing their input and opinions. By organizing these meetings, Andy is promoting open communication, collaboration, and participation among his staff members, which are key characteristics of a democratic leadership style.

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4.

If the price of Apple iPhones increases, the company would be willing to supplymore because
- Producing Apple iPhones had become more profitable
- Costs of producing iPhones had recently increased
- VAT on mobile phones had increased
- Prices of competitors’ mobile phones had fallen
Correct Answer

A. Producing Apple iPhones had become more profitable

Explanation

If the price of Apple iPhones increases, the company would be willing to supply more because producing Apple iPhones had become more profitable. When the price of a product increases, the profit margin per unit sold also increases. This means that the company can make more money by producing and selling more iPhones. Therefore, they would be willing to increase their supply in order to take advantage of the higher profitability.

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5.

Sebastian Bertollini, the owner of a new clothing manufacturing company based in the town of Biella in Italy, chose to lease a machine rather than buy it.As a result of this decision, Sebastian will benefit from
- More sales revenue
- Lower start-up costs
- Lower labour costs
- Better quality output
Correct Answer

A. Lower start-up costs

Explanation

By choosing to lease a machine instead of buying it, Sebastian Bertollini can benefit from lower start-up costs. This means that he will not have to spend a large amount of money upfront to purchase the machine, which can be a significant expense for a new clothing manufacturing company. Leasing allows him to make smaller monthly payments, freeing up his capital to be used for other aspects of the business such as marketing, hiring employees, or purchasing materials. This decision helps to reduce the financial burden at the beginning of the business and allows for more flexibility in managing the company's finances.

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6.

Before setting up in business as a personal trainer in 2010, Marvin Burtonundertook qualitative and quantitative market research.Which one of the following questions is most likely to lead to qualitative results?
- How often do you visit a gym?
- What price are you currently paying for gym membership?
- What motivated you to join a gym?
- How long have you been a member of a gym?
Correct Answer

A. What motivated you to join a gym?

Explanation

The question "What motivated you to join a gym?" is most likely to lead to qualitative results because it asks for the respondent's personal motivations and reasons for joining a gym. Qualitative research focuses on understanding people's attitudes, opinions, and experiences, which can provide more in-depth insights into their motivations. In contrast, questions about frequency of gym visits, price of membership, and length of membership are more quantitative in nature, as they seek specific numerical data rather than subjective experiences.

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7.

During 2009, it was reported that a number of Maclaren baby buggies had adesign fault, which made them dangerous to use.Which one of the following would be an immediate consequence of the above?
- An increase in price
- An increase in supply
- A fall in demand
- A fall in profits
Correct Answer

A. A fall in demand

Explanation

A fall in demand would be an immediate consequence of the reported design fault in Maclaren baby buggies. When a product is deemed dangerous to use, consumers are likely to lose trust in the brand and become hesitant to purchase the product. This decrease in consumer demand would result in a fall in demand for the baby buggies, as parents would opt for safer alternatives. As a result, Maclaren's sales would decline, leading to a fall in profits.

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8.

Which group of stakeholders of Virgin Active Ltd, Derby, is most likely to benegatively affected by an extension to the club’s opening hours?
- Suppliers of shampoo
- Members who live 10 miles away
- Shareholders
- Staff
Correct Answer

A. Staff

Explanation

Staff is the most likely group of stakeholders to be negatively affected by an extension to the club's opening hours. The longer opening hours would require staff members to work longer shifts or additional hours, potentially leading to increased stress, fatigue, and a poor work-life balance. It could also result in decreased job satisfaction and employee morale. Therefore, the staff would bear the negative consequences of the extended opening hours.

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9.

Phiroz and Sabiha are directors of an ice cream manufacturing company, SweetHeart Ice Cream Ltd. The company operates in a niche market, supplyingnon-dairy ice cream to Asian restaurants in the Birmingham region.Which one of the following would be least likely to be used by Phiroz and Sabihagiven the company’s current market position?
- Methods of adding value
- Television advertising
- Qualitative market research
- An ethical stance
Correct Answer

A. Television advertising

Explanation

Television advertising would be least likely to be used by Phiroz and Sabiha given the company's current market position because they operate in a niche market, supplying non-dairy ice cream to Asian restaurants in the Birmingham region. Television advertising is a more expensive and broad-reaching marketing method that may not effectively target their specific customer base. Instead, they would likely focus on methods of adding value, qualitative market research, and maintaining an ethical stance to cater to their niche market and build customer loyalty.

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10.

Sue Russell decided that she would leave her job at Denby Potteries (UK) Ltd in order to set up her own business. Which of the following is the most likely explanation for Sue’s decision to set up her own business?
- To develop a niche market
- To reduce risk-taking
- For non-ethical reasons
- To work independently
Correct Answer

A. To work independently

Explanation

Sue Russell's decision to set up her own business is most likely because she wants to work independently. This suggests that she desires to have control over her own work and make decisions without having to answer to a boss or follow someone else's instructions. By starting her own business, Sue can have the freedom and autonomy to run the business according to her own vision and goals.

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11.

Which one do you like?
- Option 1
- Option 2
- Option 3
- Option 4
Correct Answer

A. Option 1
12.

Ruth Badger, star of the BBC series ‘The Apprentice’, has argued that the most important characteristic of a successful entrepreneur is ‘having the right attitude’. Which of the following is least likely to be a characteristic of a successful entrepreneur?
- Resilience
- Creativity
- Cautiousness
- Hard working
Correct Answer

A. Cautiousness

Explanation

Cautiousness is least likely to be a characteristic of a successful entrepreneur because being cautious often involves a reluctance to take risks, which is a quality that successful entrepreneurs typically possess. Entrepreneurs need to be willing to take calculated risks in order to seize opportunities and grow their businesses. While resilience, creativity, and hard work are all important qualities for entrepreneurs, cautiousness can sometimes hinder progress and limit potential success.

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13.

The price of petrol increased on average by 20% in the European Community in 2009. Which of the following is a demand factor which would most likely lead to an increase in the price of petrol?
- A decrease in the price of oil
- A decrease in the price of cars
- A decrease in promotional costs of petrol retailers
- A reduction in government tax charged to oil companies
Correct Answer

A. A decrease in the price of cars

Explanation

A decrease in the price of cars would most likely lead to an increase in the price of petrol because it would increase the demand for cars. As more people are able to afford cars at a lower price, the number of cars on the road would increase. This would result in an increase in the demand for petrol, leading to an increase in its price.

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14.

It has been reported that ‘the growth of the Wagamama chain of noodlerestaurants in central London has been phenomenal’. Growth centred aroundWagamama’s ‘competitive advantage’.Each of the following might provide Wagamama with a competitive advantage, except
- Paying the national minimum wage to employees
- Paying the national minimum wage to employees
- All food is cooked fresh to order
- The average stay of customers is relatively short
Correct Answer

A. Paying the national minimum wage to employees

Explanation

The correct answer is "paying the national minimum wage to employees." This statement suggests that paying the national minimum wage to employees does not provide Wagamama with a competitive advantage. This implies that Wagamama may have other factors that contribute to its growth and success, such as cooking all food fresh to order and having a relatively short average stay of customers.

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15.

Virgin Active Holdings Ltd, a well-known private leisure chain of health clubs, is considering how to position a new health club in a city centre. Which of the following might be described as a method of market positioning?
- Market mapping
- Market orientation
- Market segmentation
- Market sampling
Correct Answer

A. Market mapping

Explanation

Market mapping can be described as a method of market positioning. It involves visually representing the competitive landscape of a market by plotting different brands or products based on their attributes or characteristics. This helps businesses understand their position relative to competitors and identify gaps or opportunities in the market. By analyzing market mapping, Virgin Active Holdings Ltd can determine how to position their new health club in the city center to differentiate it from existing competitors and attract their target customers.

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16.

Sandwell Sheds Ltd has fixed costs of £1000 per month and it sells sheds at an average price of £200. Average variable costs per shed are £160.What is Sandwell Sheds Ltd’s break-even level of output per month?
- 25 sheds
- 50 sheds
- 250 sheds
- 800 sheds
Correct Answer

A. 25 sheds

Explanation

Sandwell Sheds Ltd's break-even level of output per month can be calculated by dividing the total fixed costs by the contribution margin per unit. The contribution margin per unit is the difference between the average price and the average variable cost per shed. In this case, the contribution margin per unit is £200 - £160 = £40. Dividing the total fixed costs of £1000 by the contribution margin per unit of £40 gives us 25 sheds. Therefore, Sandwell Sheds Ltd's break-even level of output per month is 25 sheds.

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17.

Mike and Carol Clare, husband and wife former owners of Dreams, the UK bed company, decided to sell the company in March 2008. Which of the following is the most likely reason to explain their sale of the business?
- To work fewer hours
- To increase risk taking
- To become more dependent
- To reduce capital to set up another business
Correct Answer

A. To work fewer hours

Explanation

The most likely reason for Mike and Carol Clare to sell their business, Dreams, is to work fewer hours. Selling the business would allow them to step away from the day-to-day operations and responsibilities, giving them more leisure time and reducing their workload.

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18.

In November 2009, it was reported by the BBC that the world population of 6.5 billion is expected grow to 9 billion by 2100 and, as a result, a shortage of world food supplies is expected.
- Level of technology
- Growth in consumer incomes
- Advertising to consumers
- Fashion, tastes and preferences
Correct Answer

A. Level of technology

Explanation

The correct answer is "Level of technology". This is because advancements in technology can greatly impact food production and distribution. With improved technology, farmers can increase their crop yields and reduce waste. It can also lead to the development of more efficient and sustainable farming methods. Additionally, technology can improve transportation and storage systems, ensuring that food reaches consumers in a timely manner. Therefore, the level of technology plays a crucial role in addressing potential food shortages caused by population growth.

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19.

In 1995, Laban Roomes prepared a business plan for his business, Gold Genie. Each of the following statements about a business plan is true, except
- It is a legal requirement for a new business
- It helps to predict profits and liquidity
- It can be modified once written
- Usually it includes sections on finance, staffing and marketing
Correct Answer

A. It is a legal requirement for a new business

Explanation

A business plan is not a legal requirement for a new business. While it is highly recommended and beneficial for a new business to have a business plan, it is not mandatory by law. A business plan helps to predict profits and liquidity, can be modified once written, and usually includes sections on finance, staffing, and marketing.

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20.

In 2004, Paul Lindley set up a children’s healthy drinks and snacks company known as Ella’s Kitchen. Paul spent the first 18 months developing and positioning his product.Which one of the following would Paul have been most likely to use when positioning Ella’s Kitchen products?
- Transport cost information
- Cash-flow forecasting
- A knowledge of competitors’ products
- Business development grants from the local council
Correct Answer

A. A knowledge of competitors’ products

Explanation

Paul Lindley would have been most likely to use a knowledge of competitors' products when positioning Ella's Kitchen products. This would involve understanding what other companies in the market are offering in terms of healthy drinks and snacks for children. By knowing his competitors' products, Paul could identify any gaps in the market and differentiate Ella's Kitchen products by offering something unique and appealing to his target audience. This knowledge would also help him determine the pricing, packaging, and marketing strategies for his products in order to stand out from the competition.

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21.

In 2011 the combined market share of Tesco, ASDA, Sainsbury's and Morrisonssupermarkets was 75%.This is best described as
- A monopoly
- An oligopoly
- Monopolistically competitive
- Perfectly competitive
Correct Answer

A. An oligopoly

Explanation

The correct answer is an oligopoly. This is because an oligopoly refers to a market structure where a few large firms dominate the market. In this case, Tesco, ASDA, Sainsbury's, and Morrisons supermarkets collectively hold a significant market share of 75%. This indicates that these four companies have substantial control and influence over the industry, suggesting an oligopolistic market structure.

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22.

Mike and Carol Clare, husband and wife former owners of Dreams, the UK bed company, decided to sell the company in March 2008. Which of the following is the most likely reason to explain their sale of the business?
- To work fewer hours
- To increase risk taking
- To become more dependent
- To reduce capital to set up another business
Correct Answer

A. To work fewer hours

Explanation

The most likely reason for Mike and Carol Clare to sell their business, Dreams, is to work fewer hours. Selling the company would allow them to step away from the demands and responsibilities of running a business and have more leisure time.

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23.

The opportunity cost of an entrepreneur setting up a business, such as a florist, is
- The tax on profit
- Lost earnings from employment
- The risk of business failure
- The cost of advertising to attract customers
Correct Answer

A. Lost earnings from employment

Explanation

The opportunity cost of an entrepreneur setting up a business, such as a florist, is the lost earnings from employment. This means that by choosing to start a business, the entrepreneur is giving up the potential income they could have earned if they had remained employed. This cost is significant as it represents the financial sacrifice and potential stability that the entrepreneur foregoes in order to pursue their business venture.

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24.

In winter 2009, the Metro newspaper reported, ‘the demand for luxury goodsfrom the upmarket British fashion brand Mulberry was soaring, despite the poorUK economic climate’.The most likely explanation for this was
- Because of the weaker pound
- An increase in unemployment
- High levels of inflation
- High interest rates
Correct Answer

A. Because of the weaker pound

Explanation

The most likely explanation for the soaring demand for luxury goods from Mulberry, despite the poor UK economic climate, is because of the weaker pound. When the pound is weaker, it makes luxury goods more affordable for international customers, as their currency can buy more with less money. This can lead to an increase in demand for luxury brands like Mulberry, as they become more attractive and accessible to foreign buyers.

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25.

Bannantynes Leisure, a chain of health clubs founded by entrepreneur DuncanBannantyne, is often affected by external economic influences.Which of the following might be regarded as the least significant externaleconomic influence for Bannantynes?
- Interest rates
- The balance of payments
- Unemployment rates
- The rate of inflation
Correct Answer

A. The balance of payments

Explanation

The balance of payments refers to the record of all economic transactions between a country and the rest of the world. It includes trade in goods and services, as well as financial transactions. While the balance of payments is an important indicator of a country's economic health, it is not directly relevant to Bannantynes Leisure, a chain of health clubs. Bannantynes is primarily affected by factors such as interest rates, unemployment rates, and the rate of inflation, which directly impact consumer spending and the overall economic climate within the country.

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26.

Throughout 2007, the UK experienced a gradual decline in interest rates.Which of the following is the most likely consequence for a small electricalretailer?
- Spending on stock decreases
- Staff wages are increased
- Borrowing increases
- Average cost of stock increases
Correct Answer

A. Borrowing increases

Explanation

As interest rates decline, it becomes cheaper for businesses to borrow money. This means that a small electrical retailer is more likely to take advantage of lower interest rates and borrow more money to invest in their business. This could be used to expand their stock, improve their store, or invest in new equipment. Therefore, the most likely consequence for a small electrical retailer when interest rates decline is that their borrowing increases.

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27.

The value of the £ (pound sterling) fell against the euro in late 2008 and 2009.This change would have most likely benefited British
- Tourists holidaying in France and Spain
- Exporters who sold their products in countries using the euro
- Consumers, because overall the inflation rate fell as a result
- Importers, because they were able to improve their profit margins
Correct Answer

A. Exporters who sold their products in countries using the euro

Explanation

The correct answer is "exporters who sold their products in countries using the euro." When the value of the pound sterling falls against the euro, it means that British exporters can sell their products to countries using the euro at a more competitive price. This makes their products cheaper for foreign buyers, which can increase demand and boost export sales.

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1
28.

In the summer of 2011, Thorntons chocolate company may have required externalfinance to develop its online retail sales.Which one of the following is an example of external finance?
- Selling assets
- Debentures
- Retained profits
- Sales revenue
Correct Answer

A. Debentures

Explanation

Debentures are a form of external finance because they are a type of long-term borrowing that a company can obtain from investors or creditors. Unlike retained profits, which are generated internally by the company, debentures involve raising funds from external sources. Selling assets and sales revenue are also not examples of external finance, as they involve using internal resources or generating income from the company's operations.

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29.

In the BBC series ‘Theo’s Adventure Capitalists’, Theo Paphitis argued that the most important entrepreneurial characteristic behind success is calculated risk-taking. Each of the following is involved in calculated risk-taking, except:
- There can be unanticipated competition
- All entrepreneurs use their own money
- Setting up in business requires judgement
- The economic climate may change
Correct Answer

A. All entrepreneurs use their own money

Explanation

The correct answer is "all entrepreneurs use their own money." This is because not all entrepreneurs use their own money to start or fund their businesses. Some entrepreneurs may seek external funding from investors, venture capitalists, or banks. Using their own money is just one of the possible sources of funding for entrepreneurs, but it is not a characteristic of calculated risk-taking.

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30.

In 2000, Johngir Saddiq established Big Johns. This chain of 15 fast food outlets in the Midlands uses market segmentation. Market segmentation can help enterprises like Big Johns to:
- Identify the contribution from a range of products
- Reach a desired margin of safety
- Identify a potential market niche
- Distinguish between gross profit and operating profit
Correct Answer

A. Identify a potential market niche

Explanation

Market segmentation is a strategy that involves dividing a market into distinct groups of consumers with similar characteristics and needs. By using market segmentation, enterprises like Big Johns can identify a potential market niche, which refers to a specific segment of the market that has unique needs and preferences. By targeting this niche, Big Johns can tailor their products and marketing strategies to better meet the demands of this specific group of customers, potentially leading to increased sales and customer loyalty.

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31.

Founded in London in 1982, Rubicon manufactures Exotic Tropical Drinks. It wasset up by two ex-employees of an international soft drinks company, after theyundertook product trials.Each of the following is a way to turn a product trial into a repeat purchase, except
- Market mapping
- High operating profit margins
- Product differentiation
- Word-of-mouth advertising
Correct Answer

A. High operating profit margins

Explanation

High operating profit margins refer to the profitability of a company's operations, which is not directly related to turning a product trial into a repeat purchase. Market mapping involves analyzing and understanding the target market, product differentiation focuses on creating unique features or benefits to stand out from competitors, and word-of-mouth advertising relies on positive recommendations from satisfied customers, all of which can contribute to turning a product trial into a repeat purchase.

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1
32.

The Consumers’ Association makes extensive use of sampling.Which one of the following statements about sampling is incorrect?
- Samples that are too large may waste time
- Samples that are too small may lead to inaccurate results
- Sample methods are determined by the researcher
- Sample sizes always increase with the size of the population
Correct Answer

A. Sample sizes always increase with the size of the population

Explanation

The statement "Sample sizes always increase with the size of the population" is incorrect. Sample sizes do not necessarily increase with the size of the population. The size of the sample is determined by various factors such as the desired level of precision, the variability in the population, and the available resources. In some cases, a smaller sample may be sufficient to provide accurate results, while in other cases a larger sample may be necessary. Therefore, the size of the sample is not solely dependent on the size of the population.

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33.

Lannon’s Limos Ltd, a car hire company based in Peterborough, generated thefollowing financial accounts in December 2012. £sTotal revenue1 250 000Cost of sales600 000Fixed costs350 000Contribution650 000
- £900 000
- £600 000
- £350 000
- £300 000
Correct Answer

A. £300 000

Explanation

The correct answer is £300,000. This is the amount of profit generated by Lannon's Limos Ltd in December 2012. Profit is calculated by subtracting the total costs (cost of sales and fixed costs) from the total revenue. In this case, the total revenue is £1,250,000, the cost of sales is £600,000, and the fixed costs are £350,000. Therefore, the profit is £1,250,000 - £600,000 - £350,000 = £300,000.

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34.

) Sussex Skaters, a niche manufacturer of skateboards in Brighton, generated thefollowing financial accounts in 2012. £Fixed costs 12 500 Total revenue250 000 Contribution per unit50Variable costs50 000Calculate the break-even level of output for Sussex Skaters in 2012.
- 200
- 250
- 1 000
- 5 000
Correct Answer

A. 250

Explanation

The break-even level of output can be calculated by dividing the fixed costs by the contribution per unit. In this case, the fixed costs are £12,500 and the contribution per unit is £50. Therefore, the break-even level of output for Sussex Skaters in 2012 is 250 units.

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35.

Business Link offers owners of new, small businesses practical advice on its website.Business Link states each of the following about cost-plus pricing, except
- It guarantees that a profit is made
- It is usually expressed as a percentage of the cost which is added to the cost
- It can ignore the image of a business and its market position
- It can sometimes ignore hidden costs
Correct Answer

A. It guarantees that a profit is made

Explanation

Cost-plus pricing is a pricing strategy where a fixed percentage is added to the cost of a product or service to determine the selling price. Business Link states that cost-plus pricing can ignore the image of a business and its market position, it can sometimes ignore hidden costs, and it is usually expressed as a percentage of the cost added to the cost. However, it does not guarantee that a profit is made. Profit is dependent on various factors such as market demand, competition, and overall business performance.

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36.

Lloyds TSB Bank plc advises its business customers to prepare a contingency plan.Which one of the following is most likely to reduce uncertainty for a business?
- Market research
- Government intervention
- Macroeconomic change
- Exchange rate movements
Correct Answer

A. Market research

Explanation

Market research is most likely to reduce uncertainty for a business. By conducting market research, a business can gather information about its target market, customer preferences, competitors, and industry trends. This information can help the business make informed decisions, identify potential risks and opportunities, and develop effective strategies. Market research provides valuable insights that can minimize uncertainty and increase the chances of success for a business.

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37.

GAME Group plc, the high street retailers of computer games in the UK,experienced an increase in sales in 2007 to £807m (up 24%). Gross profit was£218m (up 25%) and operating profit £33m (up 175%).Which of the following is the operating profit margin of GAME Group plc in 2007?
- 27.01%
- 4.09%
- 15.13%
- 150%
Correct Answer

A. 4.09%

Explanation

The operating profit margin is calculated by dividing the operating profit by the sales and then multiplying by 100. In this case, the operating profit is £33m and the sales are £807m. So, the calculation would be (33/807) * 100 = 4.09%. Therefore, the correct answer is 4.09%.

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38.

Ruth Badger, star of the BBC series ‘The Apprentice’, has argued that the most important characteristic of a successful entrepreneur is ‘having the right attitude’. Which of the following is least likely to be a characteristic of a successful entrepreneur?
- Resilience
- Creativity
- Cautiousness
- Hard working
Correct Answer

A. Resilience

Explanation

Resilience is least likely to be a characteristic of a successful entrepreneur. While resilience is generally seen as an important trait, Ruth Badger's argument that the most important characteristic is having the right attitude suggests that other qualities may be prioritized. This implies that resilience may not be as crucial for success as the other options listed.

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39.

Between 2009 and 2011, the annual rate of CPI inflation was above the UKgovernment’s target range.Which one of the following could be an effect of higher inflation rates for UKmanufacturer’s, such as JCB Ltd?
- Fall in cost of supplies
- Reduction in real wages for its staff
- Increase in exports
- Increase in recruitment
Correct Answer

A. Reduction in real wages for its staff

Explanation

Higher inflation rates can lead to a reduction in real wages for staff members of UK manufacturers like JCB Ltd. This is because as the general price level increases, the purchasing power of wages decreases. If wages do not increase at the same rate as inflation, employees will effectively be earning less in real terms. Therefore, a reduction in real wages for staff can be an effect of higher inflation rates.

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40.

Richard Beddard and Stuart Woodhouse own and operate a healthcarepartnership offering alternative medical treatment in the West Midlands. Thepartners choose not to maximise profits.This is most likely because Richard and Stuart
- Prefer to run a business which is unprofitable
- Run a business which is unethical
- Have many competitors
- Put other objectives before profit
Correct Answer

A. Put other objectives before profit

Explanation

Richard Beddard and Stuart Woodhouse choose not to maximize profits because they prioritize other objectives over profit. This suggests that they have other goals or values that they prioritize, such as providing alternative medical treatment or making a positive impact on people's health. By putting other objectives before profit, they may prioritize the well-being of their patients or the quality of their services over maximizing financial gains.

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41.

Amazon, iTunes and Argos are all online retailers that stock a wide range ofproducts.An increase in online retailing has led to a decrease in
- The number of consumers
- Choice of products
- Prices of products
- Consumer knowledge
Correct Answer

A. Prices of products

Explanation

An increase in online retailing has led to a decrease in prices of products. This is because online retailers often have lower overhead costs compared to physical stores, allowing them to offer products at lower prices. Additionally, online retailers can easily compare prices with competitors and adjust their prices accordingly to attract more customers. As a result, consumers have more options to choose from at lower prices when shopping online.

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42.

In December 2009, it was reported that Ferrero chocolates, imported from Italy,are available only in niche shops in India.Which of the following is not true about niche markets?
- Prices tend to be high
- Supply tends to be low
- The number of consumers tends to be low
- Effective demand tends to be high
Correct Answer

A. Effective demand tends to be high

Explanation

Niche markets are characterized by a specific target audience or a specialized product. Prices tend to be high in niche markets because the products cater to a specific demand and may have unique features or qualities. Supply tends to be low because niche products are often produced in limited quantities to maintain exclusivity. The number of consumers tends to be low because niche markets target a specific segment of the population. However, effective demand tends to be low in niche markets because the product may not have broad appeal and may only be desired by a small group of consumers.

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43.

High street retailer, Marks and Spencer, has become more market orientated inrecent years.Each of the following is a likely benefit of market orientation, except
- Sales revenue increases
- Advertising costs might fall
- Customer loyalty increases
- Producers can sell what they want
Correct Answer

A. Producers can sell what they want

Explanation

Market orientation refers to a business approach that focuses on understanding and meeting the needs and wants of customers. This approach involves conducting market research, analyzing customer preferences, and tailoring products and services accordingly. The benefits of market orientation include increased sales revenue due to better understanding of customer needs, reduced advertising costs as targeted marketing is more effective, and increased customer loyalty through personalized offerings. However, the statement "producers can sell what they want" contradicts the concept of market orientation, as it implies a disregard for customer preferences and a focus on producer-driven decisions.

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44.

Neil’s Nuts, a newly established market trader of dried fruit and nuts inWalthamstow, London, successfully entered the market in January 2011.This was most likely because of a low
- Margin of safety
- Pricing strategy
- Sales volume
- Potential profit
Correct Answer

A. Pricing strategy

Explanation

The correct answer is pricing strategy. Neil's Nuts successfully entered the market in January 2011, which suggests that their pricing strategy was effective. A pricing strategy is crucial for a business to attract customers and generate sales. If Neil's Nuts had set their prices competitively or offered discounts, it would have likely attracted customers and helped them establish a foothold in the market. A well-planned pricing strategy can contribute to the success of a business by ensuring that prices are set at a level that maximizes profit and attracts customers.

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45.

Jim and Jean Richards are proprietors of a small, established, independentgrocery store in Cornwall. They are planning to expand their stock levels.Which one of the following would be the most suitable method of finance forthe activity above?
- Debentures
- Issue of share capital
- Trade credit
- Commercial bank loan
Correct Answer

A. Trade credit

Explanation

Trade credit would be the most suitable method of finance for the activity of expanding stock levels for Jim and Jean Richards' grocery store. Trade credit refers to the practice of buying goods or services now and paying for them later, usually within a specified period of time. This would allow the Richards to increase their stock levels without immediately needing to pay for the additional inventory. It is a common method of financing for businesses that have established relationships with suppliers and can negotiate favorable payment terms.

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46.

Tony Bates is a self-employed painter and decorator based in Nottingham. Belowis an extract from his Profit and Loss Account, period ending 31 December 2011.What was Tony’s operating profit margin? £s£sSales120 000 Cost of sales30 000 Gross Profit 90 000Expenses50 000
- 75%
- 33.3%
- 25%
- £40 000
Correct Answer

A. 33.3%

Explanation

Tony's operating profit margin can be calculated by dividing his operating profit by his sales and multiplying by 100. In this case, Tony's operating profit is the difference between his gross profit and expenses, which is £90,000 - £50,000 = £40,000. His sales are £120,000. Therefore, his operating profit margin is (£40,000 / £120,000) * 100 = 33.3%.

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47.

Facebook began as a social networking site for university students in the USA andwas reported to be worth in excess of $2,000 million in September 2007.Which of the following is the most likely source of the $500,000 start-up capitalfor Facebook owner Mark Zuckerberg?
- A Commercial Bank
- Debenture Company
- Venture Capitalist
- Trade Creditor
Correct Answer

A. Venture Capitalist

Explanation

The most likely source of the $500,000 start-up capital for Facebook owner Mark Zuckerberg is a Venture Capitalist. Venture capitalists are investors who provide funding to start-up companies with high growth potential in exchange for equity or ownership in the company. In the early stages of Facebook, it is common for entrepreneurs to seek funding from venture capitalists to support their business and help it grow. This investment from a venture capitalist would have provided the necessary capital for Facebook to expand and become the successful social networking site it is today.

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2
48.

Paul McQuillan is a self-employed electrician based in Barnsley, South Yorkshire.Most of his contracts involve rewiring houses. Paul’s fixed costs are £400 permonth, average variable costs per house are £500. If Paul charges his customers £600 per house, how many contracts per monthdoes Paul need to complete to break even?
- 2
- 3
- 4
- 5
Correct Answer

A. 4

Explanation

Paul's fixed costs are £400 per month, and his average variable costs per house are £500. If he charges his customers £600 per house, he would make a profit of £100 per house (£600 - £500). To break even, Paul needs to cover his fixed costs, so he would need to complete 4 contracts per month (4 * £100 = £400) to cover his fixed costs and make no profit or loss.

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49.

Prices in the computer games console market are affected by both supply and demand factors.An increase in which one of the following is most likely to lead to a decrease in the price of computer games consoles?
- The salaries of console designers
- The rate of sales tax
- The supply of components for manufacturing consoles
- Promotional costs of computer games console retailers
Correct Answer

A. The supply of components for manufacturing consoles

Explanation

An increase in the supply of components for manufacturing consoles is most likely to lead to a decrease in the price of computer games consoles. When there is an increase in the supply of components, it means that there are more resources available for manufacturing consoles. This can lead to a decrease in production costs, which can then be passed on to consumers in the form of lower prices. As a result, the increased supply of components can contribute to a decrease in the price of computer games consoles.

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1

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