Business Concepts and Entrepreneurship

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Questions and Answers

What distinguishes a salary from a wage?

A salary is paid based on hourly work.

A wage is typically paid annually.

A salary is a fixed amount paid on a regular basis. (correct)

A wage is a fixed amount paid to permanent employees.

Which of the following describes dividends?

A tax imposed on company earnings.

Fixed payments to employees.

Cash reinvested into the company's growth.

A portion of a company’s profit distributed to shareholders. (correct)

What is a key characteristic of entrepreneurship?

Immediate and guaranteed profits.

Operating a business without any financial investment.

Delegation of decision-making to stakeholders.

Assuming risks in hopes of earning financial returns. (correct)

How does innovation relate to existing products?

It involves improving on already existing items. Signup and view all the answers

Which statement best describes quality of life?

It measures the overall well-being of an individual, incorporating material and non-material benefits. Signup and view all the answers

What is required for a business name that is not simply the owner's name?

Registration through ASIC is necessary Signup and view all the answers

Which of the following is a type of zoning that local governments use?

Commercial Signup and view all the answers

What does the Public Health Act 2010 (NSW) regulate?

Safe and suitable food for human consumption Signup and view all the answers

What does the Competition and Consumer Act 2010 protect against?

Deceptive or misleading practices Signup and view all the answers

What percentage of private sector employment is attributed to the SME sector?

68.3% Signup and view all the answers

Which of the following is NOT a requirement for food safety regulations under the Public Health Act?

Employee qualification standards Signup and view all the answers

Which of the following is NOT considered a key to SME success?

Innovation in technology Signup and view all the answers

What is the most common cause of SME failure?

Managerial inexperience and incompetence Signup and view all the answers

How can SMEs enter the global market?

By participating in joint ventures Signup and view all the answers

Which of the following factors does NOT influence the establishment of an SME?

Market demand Signup and view all the answers

What is the failure rate of SMEs within the first three years of operation?

60% Signup and view all the answers

Which statement best defines what happens when an SME is declared bankrupt?

The assets are distributed to creditors Signup and view all the answers

Which group is likely experiencing an increase in business establishment?

Women in the workforce Signup and view all the answers

What is the purpose of training employees in a business?

To help them learn to perform their jobs more effectively Signup and view all the answers

Which of the following best defines corporate social responsibility?

The accountability of business practices towards the community and environment Signup and view all the answers

What does the current ratio measure in a business?

The liquidity of current assets to cover current liabilities Signup and view all the answers

What is a common law contract primarily used for?

To cover employees not under existing awards or agreements Signup and view all the answers

Which term refers to the process of finding and attracting candidates for job vacancies?

Recruitment Signup and view all the answers

What does the 'debt to equity ratio' indicate in a business?

The financial leverage and long-term solvency of the business Signup and view all the answers

Which type of training is focused on preparing employees for future responsibilities?

Development Signup and view all the answers

What does a corporate code of conduct typically aim to establish?

Standards for ethical behavior among employees and managers Signup and view all the answers

What does the term 'retirement' refer to in the context of employee separation?

When an employee voluntarily leaves the workforce Signup and view all the answers

What is the primary purpose of a business plan?

To test business viability Signup and view all the answers

Which strategy involves keeping production costs low to lower product prices?

Cost leadership Signup and view all the answers

What critical factor is essential for the success of a business manager?

Skill in managing employees Signup and view all the answers

Which element is NOT typically included in a business plan?

Assessment of competitors Signup and view all the answers

To sustain competitive advantage, which strategy might a business employ?

Lobbying for exclusive contracts Signup and view all the answers

Which aspect of management is becoming increasingly important in modern business?

Team dynamics Signup and view all the answers

What is a common challenge when using leading edge technology?

Potential for choosing inappropriate products Signup and view all the answers

Which option best describes the impact of economic conditions on business?

Businesses must manage changes in economic conditions Signup and view all the answers

How can a business avoid overextension of financial resources?

By opting for leasing instead of purchasing Signup and view all the answers

What role does trend analysis play for small and medium enterprises (SMEs)?

It helps predict future changes Signup and view all the answers

Study Notes

Incomes

Income is money received for services provided to businesses.
Wage refers to payments received by employees, typically made weekly, fortnightly, or monthly.
Salary is a fixed regular payment made to permanent employees, often monthly.
Shareholders own parts of a company through share ownership.
Dividends are portions of a company's profit shared among shareholders.

Choice

Choice involves selecting among various alternatives.
Businesses frequently offer a diverse range of products to cater to consumer preferences.

Innovation

Innovation entails improving existing products or services.
Inventions refer to the development of entirely new products or services.
Small and Medium Enterprises (SMEs) usually demonstrate a favorable attitude towards innovation.

Entrepreneurship and Risk

An entrepreneur is an individual who starts and manages a business and assumes associated risks to earn profits.
Common risks faced by entrepreneurs include losing invested money, long working hours, slow business initiation, and incurring debts.

Wealth

Increased production leads to higher wealth generation.
Wages and salaries, along with products, contribute to the wealth of individuals and households.

Quality of Life

Quality of life encompasses overall well-being and combines material and non-material benefits.
Businesses have a responsibility to address consumer needs to enhance quality of life.

Types of Businesses

Classification of Business Size

Micro businesses are small, typically with few employees, and often generate minimal revenue.

Liquidity

Liquidity refers to a business's cash availability and ability to convert assets to cash to cover debts.
Current Ratio = Current Assets ÷ Current Liabilities; a ratio of 2:1 is a standard benchmark.
Insufficient liquidity indicates a lack of short-term financial capability to cover debts.

Solvency/Gearing

Solvency measures a business's ability to pay long-term debts.
Debt to Equity Ratio = Total Liabilities ÷ Owner’s Equity.
The accounting equation represents that Assets = Liabilities + Owner’s Equity.

Human Resources

Recruitment

Recruitment focuses on attracting suitable candidates for job vacancies, influenced by the business's size and position type.
Selection criteria may include applications, testing, interviews, and background checks.

Training

Training aims to enhance employee effectiveness and efficiency through improved knowledge and skills.
Development prepares employees for future responsibilities, promoting long-term skill enhancement.

Employment Contracts

Awards set minimum employment conditions.
Enterprise Agreements are negotiated arrangements between employers and employees/groups.
Common Law Contracts apply to employees not covered by awards or agreements.

Separation

Redundancy occurs when a job role is eliminated.
Retrenchment refers to employee dismissal due to a lack of work.
Dismissal results from unacceptable employee behavior leading to termination.

Ethical Business Behavior

Many businesses strive to be viewed as responsible corporate citizens.
The triple bottom line assesses economic, environmental, and social business performance.
Business ethics include fair practices, decent workplace relations, and truthful communications.
A Corporate Code of Conduct establishes ethical standards and guidelines for employees.

CSR refers to transparent and accountable business actions respecting people, communities, and the environment.

Economic Contribution of SMEs

SMEs contribute significantly to the economy, accounting for 55.8% of GDP and 68.3% of private sector employment.
SMEs often outperform larger companies in exporting.
They play a vital role in research and development (R&D).

Success and/or Failure in Businesses

A high failure rate exists in businesses, with 60% failing within three years.
Key factors influencing SME success include flexibility, reputation, market focus, entrepreneurial skills, and information access.
Common failure reasons involve managerial incompetence, lack of capital, and inadequate planning.

Influences in Establishing a Small to Medium Enterprise

Personal Qualities

No specific qualifications are necessary for operating SMEs, although relevant experience and training are beneficial.
Motivation, risk assumption, and cultural background also influence entrepreneurial ventures.

Sources of Information

Various support services, both free and paid, exist to aid businesses.
Professional advisors and government agencies offer essential guidance and resources.

Legal Considerations

Business names must be registered through ASIC, while trademarks are needed for protection.
Local government zoning can affect business premises acquisition and development.

Health and Other Regulations

Compliance with health and safety regulations, such as the Public Health Act 2010, is essential for food businesses.
The Competition and Consumer Act 2010 protects against deceptive practices and regulates business conduct.

Importance of a Business Plan

A business plan assesses viability, guides proactive management, and highlights the owner's commitment.
Effective plans include clear goals, strategies for success, and controls for performance measurement.

Management

Effective management involves collaboration with employees to reach business objectives.
Employee satisfaction, external recruitment, and skills audits enhance success.

Trend Analysis

Analyzing trends helps predict and prepare for future changes, supporting SME success.

Identifying and Sustaining Competitive Advantage

Competitive Advantage strategies include cost leadership through low production costs and differentiation through unique offerings.
Long-term success depends on maintaining competitive edges against rivals.

Avoiding Overextension of Resources

Financial strategies include leasing assets, careful financial planning, and gradual growth strategies.
Efficient inventory management and utilizing technology instead of labor help prevent overextension.

Using Technology

Modern technology promotes efficiency and productivity, essential in contemporary business operations.
E-business refers to broader internet-based operations, while e-commerce specifically includes online buying and selling.

Economic Conditions

Businesses must adapt to economic changes and potential risks, impacting consumer behavior, sales, and profitability.
Economic cycles affect overall business performance through periods of growth (boom) or decline (recession).

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Description

This quiz covers essential topics in business, including income types, choice in the marketplace, innovation, and the fundamentals of entrepreneurship. Explore key definitions and concepts that are crucial for understanding how businesses operate and make decisions. Test your knowledge on the relationship between risk and entrepreneurial success.