Lesson 3.1.2
3.1.2 Understanding different business forms Quiz: AQA Business, Unit 1
20 questions
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Lesson 3.1.2, Understanding different business forms: 20 multiple choice questions for the AQA Business (7132), Unit 1: What is business?, written with Revision Ninja.
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The 20 questions
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A sole trader's liability for business debts is best described as which of the following?
- Unlimited only once the business has more than 50 shareholders
- Unlimited, so the owner's personal assets can be used to pay business debts
- Limited to a capital base of at least 50,000
- Limited to the owner's investment in the business
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Which statement about private limited companies is correct?
- Their shareholders are always the directors of the company
- Their shares cannot be offered to the general public on a stock exchange
- Their shares must be listed on the FTSE 100 index
- Their shares are traded freely on a recognised stock exchange
-
Which feature is characteristic of a public limited company?
- It cannot raise finance from shareholders
- It must be owned by the government for at least ten years
- It may have no more than 50 shareholders
- It can offer shares to the public and have them traded on a stock exchange
-
Market capitalisation is calculated as:
- Net profit divided by the number of shareholders
- Total share capital raised at the initial share issue
- Total dividends paid to shareholders in a year
- Number of shares in issue multiplied by the current share price
-
A dividend is best described as:
- Money paid to employees as a share of annual profit
- A loan repayment made to banks from retained profits
- A tax paid by the business on its total revenue
- A share of profit paid to shareholders, usually expressed per share
-
A social enterprise is best described as:
- A business that trades to achieve social or environmental aims and reinvests most of its profit into those aims
- A sole trader that shares its profits equally with its staff
- A charity that relies entirely on donations and grants
- A government body that provides public services free at the point of use
-
Public sector organisations are best described as:
- Owned by shareholders and funded mainly by share capital
- Owned by a trust and funded by membership fees
- Owned by a partnership and funded by bank loans
- Owned and controlled by central or local government and funded mainly by taxation
-
A sole trader's business owes 40,000 to suppliers, but its business assets are worth only 25,000. What may the owner have to pay from personal savings?
- The full 40,000 regardless of the business assets
- The 15,000 shortfall, because the liability is unlimited
- Only the 5,000 of capital originally invested
- Nothing, because liability is limited to the business assets
-
A public limited company has 2,000,000 shares in issue and a share price of 3.50. What is its market capitalisation?
- 1,750,000
- 7,000,000
- 5,500,000
- 3,500,000
-
A company distributes 600,000 of profit as dividends across 4,000,000 shares. What is the dividend per share?
- 24p per share
- 15p per share
- 6.67p per share
- 1.50p per share
-
A family business is considering becoming a private limited company. What is the main advantage of this change over a sole trader?
- Shareholders' liability is limited to the amount they have invested
- Directors are no longer required to file accounts
- Owners no longer have to pay corporation tax
- Shares can be sold on the London Stock Exchange immediately
-
A public limited company announces a profit warning and its share price falls from 4.00 to 3.20. What is the percentage fall?
- 32%
- 8%
- 25%
- 20%
-
A business announces a profit warning, meaning profits will be lower than expected. What is the most likely effect on its share price?
- It rises, because a profit warning signals higher dividends
- It stays the same, since profit warnings do not affect investors
- It rises, because the company must issue more shares
- It falls, as investors expect lower future profits and dividends
-
A registered charity that makes a surplus would normally do which of the following?
- Keep the surplus as personal income for its directors
- Distribute the surplus to shareholders as dividends
- Pass the surplus to a government department
- Reinvest the surplus in its charitable aims rather than distributing it to owners
-
A firm changes from a family-owned sole trader to a public limited company. Which change in objectives is most likely?
- Objectives no longer need to be measured
- Objectives are set entirely by the government
- Objectives become entirely social, with no profit focus at all
- Objectives may shift towards short-term share price performance and returns to shareholders
-
Which is the strongest argument for a sole trader to incorporate as a limited company?
- Incorporation guarantees higher profits and lower costs
- Incorporation removes all tax obligations from the owner
- Limited liability protects personal assets, although incorporation adds costs such as filing accounts
- Incorporation means the owner can no longer be held responsible for any decisions
-
A company issues 500,000 new shares at 4 each. What total finance is raised?
- 2,000,000
- 4,000,000
- 125,000
- 500,000
-
Which is a key drawback of becoming a public limited company?
- Market capitalisation falls to zero automatically on listing
- Loss of control and greater disclosure requirements, with pressure from shareholders for short-term results
- Shares can no longer be sold by existing investors
- Dividends must be paid at a fixed rate every month
-
Why might a share price rise even though a company's profit has fallen?
- Share prices depend only on the number of directors
- Investors may expect future growth or see the shares as undervalued, so expectations can outweigh current profit
- Falling profits always increase share price because of lower tax
- Share prices rise whenever revenue falls because costs drop instantly
-
Which statement about public sector organisations is most accurate?
- They have shareholders who vote at annual general meetings
- They always make a surplus to pay dividends
- They cannot be funded by taxes
- They may pursue social objectives such as providing services for all, not only profit
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