Lesson 3.1.2

3.1.2 Understanding different business forms Quiz: AQA Business, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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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

  1. 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

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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%

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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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