IGCSE Enterprise: Specimen Questions with Answers 9 - 10 of 49

Glide to success with Doorsteptutor material for Bank-PO : get questions, notes, tests, video lectures and more- for all subjects of Bank-PO.

Passage

Case Study -1

Starting a business in Haiti takes 12 procedures and more than three months. Formal registration of a company is so complicated that the process cannot be completed without using the services of third parties — lawyers and notaries. Company statutes are often drafted by an attorney, then need to be certified by a notary before being submitted for incorporation. The result is an additional cost burden for entrepreneurs trying to navigate the complex process to enter the formal sector. In New Zealand, by contrast, an entrepreneur can complete the entire process of company formation in just a few hours through a single online procedure. The burdensome nature of these entry regulations is surely one of many reasons underlying the fact that Haiti has far fewer registered companies relative to population size — only 4 per 100,000 people in 2012, compared with 1,020 per 100,000 people in New Zealand. Formalization has many benefits. Formally registered companies tend to have greater profits, investments, and productivity, while their employees benefit from social security and other legal protections. Yet, in many economies around the world, entrepreneurs continue to face excessively burdensome entry regulation. Formalizing a business may involve multiple interactions with government agencies and with third-party private professionals whose services are either required by law or desirable because of regulatory complexity.

Main Findings

  • Most of the cost of starting a business comes from the fees of third-party professionals such as lawyers and notaries.
  • Entrepreneurs use third-party services in business start-up mostly because the process is too complex.
  • Economies with greater third-party involvement in business incorporation tend to have more businesses operating in the informal sector. They also tend to have less accessible laws and regulations and less efficient systems of civil justice.
  • Notary services are used in business start-up in 76 of the 189 economies covered by Doing Business.
  • Latin America and the Caribbean has the largest share of economies where legal services are used in the start-up process.

Question 9 (8 of 12 Based on Passage)

Edit

Write in Short

Short Answer▾

In many economies around the world, entrepreneurs continue to face excessively burdensome entry regulation. Answer the following-

Explain the risk of failure of an enterprise.

Explanation

Business risk is influenced by various factors which includes fluctuations in sales of the product, change in unit price of the commodity, cost of production, or overall change in the functioning of the economy and government regulations

  • Operational Risk: Operational risk are faced by the firms in carrying out the business operations. These risks include- Non-compliance of contracts by buyers or suppliers, irregular supply chain, Quality issues etc.
  • Financial risk: Financial risk are in the form of fluctuation in the currency rate, interest rates, fall in the stock prices, increase in the interest rate etc.
  • Technological risk: Technological risk incorporates the risk of failure of new technology, security threat, rapid change in technology etc.
Failure of New Technology

Question 10 (9 of 12 Based on Passage)

Edit

Write in Short

Short Answer▾

In many economies around the world, entrepreneurs continue to face excessively burdensome entry regulation. Answer the following-

While starting a business who all are stakeholders in it?

Explanation

Stakeholder is any group, party or individual who has an interest in the business organization and results of its actions. Different type of stakeholders has different type of interest in the business. Some of the stakeholders are-

  • Customers: Customers are the main stakeholders in a business as they are influenced by the quality of services and products offered by the organization. Example- passengers flying on airplane have their lives in company՚s hand while flying.
  • Employees: Employees have a direct stake in a company. They earn income and get other monetary and non-monetary benefits. They may also have safety and health interest in the business. Example- Transportation, mining oil, gas, construction etc.
  • Investors: Investors include both shareholders and debtholders. Shareholders invest in the business in the form of capital and they expect higher rate of return on the capital invested.
  • Governments: Governments are also major stakeholders in the business as they collect taxes from the business. Government gets benefit in the form of overall increase in GDP of the country.

Developed by: