Business Goals

14 Grade 10 Business Studies questions on Business Goals, with worked marking schemes. 14 questions are available on this topic in full.

1. Question 1

   1 mark

   A hardware business ploughs back most of its profit into opening two new branches and buying delivery vans. In the short run, this decision is most likely to:

   A. lower the total costs of running the business

   B. reduce the amount of profit available to the owner now

   C. guarantee the business the largest share of the market within a month

   D. increase the owner's personal income immediately

   (1 mark)

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2. Question 2

   1 mark

   A sugar company installs a plant that treats its waste water before it is released into a nearby river, although the plant adds to the company's costs. This decision best illustrates the goal of:

   A. cost reduction

   B. profit maximisation

   C. increasing market share

   D. social responsibility

   (1 mark)

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3. Question 3

   6 marks

   A group of Grade 10 learners is starting a fresh fruit juice business within their school. Suggest three goals the group should set for its first year and give a reason for each.

   (6 marks)

   Marking scheme

   Any THREE goals; 1 mark for a suitable goal and 1 mark for a sound reason (2 marks each, max 6). Accept any well-reasoned goal, for example: 1. Cover all costs and avoid a loss by the end of the first term (1) - a new business must first survive before it can think of growing (1). 2. Build a regular group of satisfied customers by keeping the juice fresh and the handling hygienic (1) - in a small school market, repeat buyers and word of mouth are the main source of sales (1). 3. Save part of the surplus to buy a larger blender or a cool box (1) - this funds expansion from within and avoids borrowing (1). 4. Sell at a price learners can afford, for example Ksh 20 a cup (1) - customers have limited pocket money, so a high price would drive them to other sellers (1). 5. Keep accurate records of daily sales and purchases (1) - the group can then tell whether it is making a profit and can share earnings fairly (1). 6. Buy fruit from local farmers or the school garden (1) - it lowers transport costs and supports the surrounding community (1). A goal stated without a reason earns 1 mark only.

4. Question 4

   4 marks

   Explain two reasons why profit is an important goal for a privately owned business.

   (4 marks)

   Marking scheme

   Any TWO; 1 mark for the reason and 1 mark for the explanation (2 marks each, max 4). 1. Reward for risk taking (1) - the owner has put in capital that could have been lost, and profit compensates for that risk and for the effort of running the firm (1). 2. Source of funds for expansion (1) - profit ploughed back finances new stock, machinery or branches without borrowing (1). 3. Measure of performance (1) - comparing profit from season to season shows the owner whether the business is being run well (1). 4. Cushion against bad times (1) - reserves built from good seasons keep the firm going when sales fall (1). 5. Attracts lenders and investors (1) - a profitable record makes banks and partners willing to put money into the business (1). 6. Provides income for the owner (1) - the owner draws from profit to meet personal and family needs (1).

5. Question 5

   2 marks

   Distinguish between the main goal of a county water company and the main goal of a sole proprietor running a hardware shop.

   (2 marks)

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6. Question 6

   4 marks

   Outline four features of a well-stated business goal.

   (4 marks)

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7. Question 7

   1 mark

   A beach hotel in Malindi goes through a season with very few visitors. It lowers its room rates to a level that only covers its running costs so that it can keep its doors open and retain its workers until business improves. The goal the hotel is pursuing is:

   A. profit maximisation

   B. social responsibility

   C. survival

   D. growth

   (1 mark)

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8. Question 8

   4 marks

   State four goals, other than making a profit, that a business may set for itself.

   (4 marks)

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9. Question 9

   6 marks

   Explain three benefits a business gets from setting clear goals.

   (6 marks)

   Marking scheme

   Any THREE; 1 mark for the benefit and 1 mark for the explanation (2 marks each, max 6). 1. Gives the business direction (1) - the owner and the workers know what they are working towards and pull in the same direction (1). 2. Provides a yardstick for measuring performance (1) - actual sales or profit can be compared with the target to show whether the business is doing well (1). 3. Guides the use of resources (1) - capital, stock and labour are put where they help achieve the goal instead of being spread thinly (1). 4. Motivates employees (1) - a clear target to work towards, especially when linked to reward, raises effort (1). 5. Helps in planning and decision making (1) - the owner can judge whether a proposed step, such as opening a branch, moves the business nearer its goal (1). 6. Makes it easier to raise finance (1) - lenders and investors are more willing to fund a business that can state clearly what it intends to achieve and by when (1). 7. Coordinates the different sections of the business (1) - production, sales and finance work to one common target instead of conflicting plans (1).

10. Question 10

    4 marks

    Outline four ways in which a business's goal of rapid growth may conflict with its goal of maximising profit in the short run.

    (4 marks)

    Marking scheme

    Any FOUR distinct points, 1 mark each: 1. Expansion requires heavy spending on premises, vehicles, stock and staff, so costs rise immediately while the extra sales come later. 2. Profit has to be ploughed back into the business instead of being taken out by the owners. 3. Prices may be lowered to attract customers to new branches, which reduces the margin earned on each sale. 4. Borrowing to finance expansion adds interest charges that reduce the profit figure. 5. A new branch takes time to become known and may run at a loss before it breaks even. 6. Management attention is stretched, and mistakes made during expansion can raise costs further. (The balancing observation that current profit is sacrificed in the expectation of higher profit in the long run may earn 1 mark, but not more.) Max 4 marks.

11. Question 11

    1 mark

    A soft drinks firm supplies its brand to many more small shops across western Kenya and accepts a smaller profit on each crate so that its brand can account for a bigger proportion of all soft drinks sold in the region. The goal being pursued is:

    A. survival

    B. employee welfare

    C. profit maximisation

    D. increasing market share

    (1 mark)

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12. Question 12

    1 mark

    A tea factory in Nandi builds houses for its workers, enrols them in a medical scheme and pays for their training. The goal being pursued by the factory is:

    A. social responsibility to the surrounding community

    B. employee welfare

    C. profit maximisation

    D. increasing market share

    (1 mark)

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13. Question 13

    1 mark

    A county water company supplies water to households at a price set to cover its costs rather than at the highest price households would be willing to pay. The main goal of such a public enterprise is to:

    A. pay dividends to private shareholders

    B. provide an essential service to the public at an affordable price

    C. capture the water market in neighbouring counties

    D. earn the largest possible profit for the county government

    (1 mark)

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14. Question 14

    1 mark

    A restaurant in Eldoret replaces, free of charge, any dish a diner is unhappy with and asks diners to fill in a card on how they were served. The goal being pursued is:

    A. customer satisfaction

    B. increasing market share

    C. cost reduction

    D. employee welfare

    (1 mark)

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