UNIT 1 : THE BUSINESS
ENVIRONMENT Question and answers
correctly solved 2026
BUSINESS ACTIVITIES - correct answer ✔Tasks completed by a business to achieve its objectives, e.g.
buying, selling and producing products or services.
RETAIL CUSTOMERS - correct answer ✔Customers who buy finished products, e.g. frozen peas from a
supermarket.
BUSINESS CUSTOMERS - correct answer ✔Businesses that purchase products or services from another
business.
UNLIMITED LIABILITY - correct answer ✔When the owners of a business are personally liable for all
debts incurred by the business if the business itself does not have the funds to repay them.
LIMITED LIABILITY - correct answer ✔When the owners of a business are liable for the debts incurred
by the business only to the value of their investment in the business.
DISECONOMIES OF SCALES - correct answer ✔When a business becomes too large, the cost per unit
may increase and the business may become more inefficient, e.g. communication becomes slower as
more employees join the hierarchy.
BUSINESS AIMS - correct answer ✔A summary of what the business wants to achieve in the future.
RECESSION - correct answer ✔A period of economic decline where demand and output fall.
, ECONOMIES OF SCALE - correct answer ✔Cost advantages gained when the size of a business
increases, e.g.suppliers may offer discounts to those placing larger orders.
UNIQUE SELLING POINT (USP) - correct answer ✔A specific factor that makes a business stand out
from its competitors, e.g. excellent customer service.
FUNCTIONAL AREA - correct answer ✔A division of a business where employees have similar roles,
skills and expertise, e.g. marketing function, human resource function.
STATEMENT OF FINANCIAL POSITION - correct answer ✔A summary statement on a particular date
that shows a business's assets, liabilities and owner's equity.
INCOME STATEMENT - correct answer ✔A financial statement that shows the revenue and expenses a
business has received and paid over a period of time; the statement will show the profit the business
has made during this time.
CASH FLOW FORECASTING - correct answer ✔Estimating the expected cash inflows and outflows for a
period of time in the future to identify likely surpluses or shortages.
PRICING STRATEGY - correct answer ✔The method used to determine the price of a product/service,
taking into consideration the market, competitors pricing, customer incomes, etc.
DISCIPLINARY PROCEDURE - correct answer ✔A specified process for dealing with alleged employee
misconduct, e.g. poor performance.
GRIEVANCE PROCEDURE - correct answer ✔A specified process for dealing with a complaint made by
an employee about their treatment at work, e.g. discrimination or receiving lower pay than stated in
their employment contract.
FLAT STRUCTURE - correct answer ✔A company structure containing few levels.
ENVIRONMENT Question and answers
correctly solved 2026
BUSINESS ACTIVITIES - correct answer ✔Tasks completed by a business to achieve its objectives, e.g.
buying, selling and producing products or services.
RETAIL CUSTOMERS - correct answer ✔Customers who buy finished products, e.g. frozen peas from a
supermarket.
BUSINESS CUSTOMERS - correct answer ✔Businesses that purchase products or services from another
business.
UNLIMITED LIABILITY - correct answer ✔When the owners of a business are personally liable for all
debts incurred by the business if the business itself does not have the funds to repay them.
LIMITED LIABILITY - correct answer ✔When the owners of a business are liable for the debts incurred
by the business only to the value of their investment in the business.
DISECONOMIES OF SCALES - correct answer ✔When a business becomes too large, the cost per unit
may increase and the business may become more inefficient, e.g. communication becomes slower as
more employees join the hierarchy.
BUSINESS AIMS - correct answer ✔A summary of what the business wants to achieve in the future.
RECESSION - correct answer ✔A period of economic decline where demand and output fall.
, ECONOMIES OF SCALE - correct answer ✔Cost advantages gained when the size of a business
increases, e.g.suppliers may offer discounts to those placing larger orders.
UNIQUE SELLING POINT (USP) - correct answer ✔A specific factor that makes a business stand out
from its competitors, e.g. excellent customer service.
FUNCTIONAL AREA - correct answer ✔A division of a business where employees have similar roles,
skills and expertise, e.g. marketing function, human resource function.
STATEMENT OF FINANCIAL POSITION - correct answer ✔A summary statement on a particular date
that shows a business's assets, liabilities and owner's equity.
INCOME STATEMENT - correct answer ✔A financial statement that shows the revenue and expenses a
business has received and paid over a period of time; the statement will show the profit the business
has made during this time.
CASH FLOW FORECASTING - correct answer ✔Estimating the expected cash inflows and outflows for a
period of time in the future to identify likely surpluses or shortages.
PRICING STRATEGY - correct answer ✔The method used to determine the price of a product/service,
taking into consideration the market, competitors pricing, customer incomes, etc.
DISCIPLINARY PROCEDURE - correct answer ✔A specified process for dealing with alleged employee
misconduct, e.g. poor performance.
GRIEVANCE PROCEDURE - correct answer ✔A specified process for dealing with a complaint made by
an employee about their treatment at work, e.g. discrimination or receiving lower pay than stated in
their employment contract.
FLAT STRUCTURE - correct answer ✔A company structure containing few levels.
