GCSE Business: Enterprise and Ownership

Ownership is the part of the course where the words sound harmless and the consequences are not, so these questions put a figure on each one.

A sole trader's repair shop owes ten thousand pounds and holds two thousand in assets. Unlimited liability is what happens next: the owner and the business are the same person in law, so the remaining eight thousand is his, and his own possessions can be used to pay it. Set beside that, a shareholder in a private limited company whose supplier is owed money, where the answer has to be precise — she risks what she put in, and the company's debts do not vanish, they simply are not hers.

A designer turning work away considers a partner, and the answer names three costs rather than one: half the profit, the end of deciding anything alone, and liability for commitments the partner makes in the firm's name. The most consequential wrong answer is that a partnership is a separate legal person like a company, because it is not, and the partners remain personally liable.

The franchise question carries a calculation and a judgement in the same options. Six per cent of two hundred and fifty thousand pounds is fifteen thousand, and what it buys is an established name and support, at the price of running the business somebody else's way. Two of the wrong answers pair the right arithmetic with the wrong picture of the agreement, so the sum alone does not get you there.

Then the ordinary distinctions that carry marks. Wanting to be the most popular shop in town is an aim; five thousand pounds of net profit by the end of December is an objective, because it can be measured and it has a date. Leaving a salary to open a bakery trades a certain income for a chance of profit and independence, with no option offered that treats the decision as either foolish or safe. A business plan clarifies the owner's own thinking and lets the lender price the risk, and it guarantees nothing.

The last three are worked. Asking friends and family whether they would buy is a biased sample, and the reason is that they want to be supportive. Rent of four hundred pounds a month plus materials of three pounds for each of two hundred items is one thousand pounds, with the fixed-only and variable-only figures both available for anyone who stops early. And a business showing a profit that cannot pay Friday's electricity bill is the difference between profit and cash flow put as something that actually happens.

Every business and person described is invented. No real company or brand is named. Nothing is reproduced from any exam board specification, past paper or mark scheme.

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• Say what unlimited liability means for an owner whose business cannot pay
• State exactly what a shareholder risks, and what limited liability does not do
• Weigh a partnership including liability for a partner's commitments
• Calculate a franchise royalty and say what it buys and what it restricts
• Tell an aim from an objective by measurement and date
• State the risk and the reward in leaving a salary to start a business
• Say what a business plan does for the owner and for the lender
• Name the specific flaw in asking friends and family
• Total fixed and variable costs correctly
• Explain how a business can be profitable and short of cash at the same time

Ten invented businesses and decisions: a repair shop owing ten thousand pounds against two thousand of assets, a shareholder in a failed company, a designer turning work away, a franchisee on six per cent of two hundred and fifty thousand pounds, a cafe owner with a hope and a target, an accountant opening a bakery, a lender asking for a plan, a florist asking her friends, a stall paying rent and buying materials, and a profitable business facing Friday's electricity bill. Twelve flashcards carry the vocabulary — sole trader, partnership, private limited company, unlimited and limited liability, franchise, franchisee, aim, objective, fixed and variable costs, cash flow.