ANSWERS

216872

ANSWERS1

2 3

CHAPTER REVIEW

1 2 3 4 5

ANSWERS

CHAPTER 1

1 2 3

ACTIVITY 1

1 2

ACTIVITY 2

1

2ANSWERS

diversify geographically and develop new products such as tablets and televisions. This means that it must ?nd new markets for its products and also develop new ones. Relying only on smartphones is likely to make the business vulnerable. Micromax has also decided to shift production of its smartphones from China to India. This might help to cut costs and make the business more pro?table. Finally, Micromax needs to sort out its internal problems so that established managers and new executives work together more efiectively. 4

ACTIVITY 1

1 The information shown by the graph in Figure 2.1 suggests that pro?t is very important to CFS. Between 2008 and

2015 pro?ts have grown from around EGP1110.2 million

to EGP 3901.7 million. This is a huge growth in pro?ts - over 250 per cent during the time period. The company also has a strong dividends policy which suggests that the shareholders' value high returns on their investments. Therefore, it is reasonable to conclude that CFS is a business that aims to maximise its pro?ts. 2 The pro?t from business activity belongs to its owners. In this case the owners of CFS are the shareholders. Since CFS has a strong dividends policy the shareholders will bene?t particularly from pro?t maximisation and the rapid growth in pro?ts between 2008 and 2015. However, some employees may also bene?t. For example, senior executives are likely to get bonuses which are related to pro?ts. Also, pro?table businesses can afiord to reinvest some of their pro?ts to help develop new products. This may bene?t consumers if attractive new products eventually reach the market.

ACTIVITY 2

1 Some people want to be 'their own boss' - they want to be in control. This is an important non-?nancial objective for many business owners, such as Omar Hassan. These entrepreneurs are driven by the desire to be independent and to take control of their own futures. The freedom to make all the decisions when running a business is very appealing. Some people often resent being told what to do at work. Omar was employed by a large hotel working in the kitchen. However, he did not like following instructions and being told what to do all day. He set up in business mainly because he valued independence very highly. He wanted to take complete control of his life and also thought might be aected by a decline in the construction industry, for example. This might happen if there is a recession or a reduction in government expenditure on building projects. To survive, businesses such as JCB must produce goods and services that satisfy customer needs. They must have clear objectives and recognise that the changing environment can bring both new opportunities and impose limitations. 6 The owners of most businesses hope to make a pro?t. This is one of the main reasons why people get involved in business ownership - they hope to make some money. In this case, the graph in Figure 1.2 shows that JCB saw pro?ts fall from £355 million in 2011 to £303 million in

2014. This is a 14.6% fall over the time period. Generally,

owners would prefer pro?ts to rise over a period of time as their business grows. However, sometimes this may not be possible. Businesses may struggle due to internal factors, such as poor management, or external factors, such as emerging competition or poor trading conditions. In this case, information suggests that the construction industry has struggled between 2011 and 2014 in some parts of the world. Consequently, since this is an external factor, JCB owners might be fairly satis?ed with the ?nancial performance of the business. At least it hasn't started to lose money.

CHAPTER 2

1 Micromax was a successful company in 2015 where it had overtaken Samsung as market leader in the sale of smartphones in India's rapidly growing market. However, a year later the business started to struggle. There were two main reasons for this: stifi competition from Samsung ofiering a new range of cheaper sets and Chinese low cost producers entering the market. The second reason appears to be an internal problem. Tensions between established managers and new executives are causing con?ict and instability. For example, it appears that a funding deal fell through which was crucial to the development of the company. 2 At the moment, Micromax is struggling to face up to threats from strong rivals in the market. It has also got internal problems that are damaging the progress of the company. Consequently, it could be argued that the main objective of the business at the moment is to survive. If Micromax cannot overcome the threat from strong competition and deal with its internal issues, the business may eventually fail.

ANSWERS1

2 3

CHAPTER REVIEW

1 2 3 4 5

ANSWERS

CHAPTER 1

1 2 3

ACTIVITY 1

1 2

ACTIVITY 2

1

2ANSWERS

diversify geographically and develop new products such as tablets and televisions. This means that it must ?nd new markets for its products and also develop new ones. Relying only on smartphones is likely to make the business vulnerable. Micromax has also decided to shift production of its smartphones from China to India. This might help to cut costs and make the business more pro?table. Finally, Micromax needs to sort out its internal problems so that established managers and new executives work together more efiectively. 4

ACTIVITY 1

1 The information shown by the graph in Figure 2.1 suggests that pro?t is very important to CFS. Between 2008 and

2015 pro?ts have grown from around EGP1110.2 million

to EGP 3901.7 million. This is a huge growth in pro?ts - over 250 per cent during the time period. The company also has a strong dividends policy which suggests that the shareholders' value high returns on their investments. Therefore, it is reasonable to conclude that CFS is a business that aims to maximise its pro?ts. 2 The pro?t from business activity belongs to its owners. In this case the owners of CFS are the shareholders. Since CFS has a strong dividends policy the shareholders will bene?t particularly from pro?t maximisation and the rapid growth in pro?ts between 2008 and 2015. However, some employees may also bene?t. For example, senior executives are likely to get bonuses which are related to pro?ts. Also, pro?table businesses can afiord to reinvest some of their pro?ts to help develop new products. This may bene?t consumers if attractive new products eventually reach the market.

ACTIVITY 2

1 Some people want to be 'their own boss' - they want to be in control. This is an important non-?nancial objective for many business owners, such as Omar Hassan. These entrepreneurs are driven by the desire to be independent and to take control of their own futures. The freedom to make all the decisions when running a business is very appealing. Some people often resent being told what to do at work. Omar was employed by a large hotel working in the kitchen. However, he did not like following instructions and being told what to do all day. He set up in business mainly because he valued independence very highly. He wanted to take complete control of his life and also thought might be aected by a decline in the construction industry, for example. This might happen if there is a recession or a reduction in government expenditure on building projects. To survive, businesses such as JCB must produce goods and services that satisfy customer needs. They must have clear objectives and recognise that the changing environment can bring both new opportunities and impose limitations. 6 The owners of most businesses hope to make a pro?t. This is one of the main reasons why people get involved in business ownership - they hope to make some money. In this case, the graph in Figure 1.2 shows that JCB saw pro?ts fall from £355 million in 2011 to £303 million in

2014. This is a 14.6% fall over the time period. Generally,

owners would prefer pro?ts to rise over a period of time as their business grows. However, sometimes this may not be possible. Businesses may struggle due to internal factors, such as poor management, or external factors, such as emerging competition or poor trading conditions. In this case, information suggests that the construction industry has struggled between 2011 and 2014 in some parts of the world. Consequently, since this is an external factor, JCB owners might be fairly satis?ed with the ?nancial performance of the business. At least it hasn't started to lose money.

CHAPTER 2

1 Micromax was a successful company in 2015 where it had overtaken Samsung as market leader in the sale of smartphones in India's rapidly growing market. However, a year later the business started to struggle. There were two main reasons for this: stifi competition from Samsung ofiering a new range of cheaper sets and Chinese low cost producers entering the market. The second reason appears to be an internal problem. Tensions between established managers and new executives are causing con?ict and instability. For example, it appears that a funding deal fell through which was crucial to the development of the company. 2 At the moment, Micromax is struggling to face up to threats from strong rivals in the market. It has also got internal problems that are damaging the progress of the company. Consequently, it could be argued that the main objective of the business at the moment is to survive. If Micromax cannot overcome the threat from strong competition and deal with its internal issues, the business may eventually fail.