Which is NOT a way of measuring the size of a business?

profit. A large business can make a loss, so profit says nothing reliable about size.

Why might capital employed be a poor measure for a hairdressing chain?

It uses many workers and little expensive equipment. A labour-intensive business looks small by capital even if it is large.

Which is a problem caused by rapid growth?

difficulty controlling the business. More people, sites and layers make a business harder to manage.

A firm has 12 employees and sales of $90 million. Which measure makes it look large?

value of sales. Its sales are very high for so few workers.

How can the owner of a growing business keep it under control?

by delegating decisions to managers. One person cannot decide everything once the business is large.

Measuring size, and the problems of growing · Cambridge IGCSE Business Studies

In plain words

Is a business big or small? It depends what you count. A software company may have few workers and enormous sales. A farm may cover a huge area and employ ten people.

Growing brings benefits, and it also brings a new set of problems that many businesses do not survive.

5 things to know

Ways to measure size: the number of employees, the value of output or sales, and the capital employed (the money invested in the business).
Profit is not a measure of size: a huge business can make a loss and a small one a large profit.
Each measure has limits. Employee numbers mislead for firms that use machines instead of people, and sales value misleads for firms selling a few very expensive items.
Problems of growth: the business becomes harder to control and communication slows down, there may not be enough finance, and expanding too fast can leave it short of cash.
Ways round them: delegate decisions to managers, improve communication, and grow at a pace the finances can support.

Tips and tricks

Never give profit as a way of measuring size. It is the standard wrong answer, and the syllabus rules it out.
Use more than one measure. A business can be the largest by employees and not the largest by sales.

5 questions, about 2 minutes.

It lands in your notebook with its questions as flashcards.

Measuring size, and the problems of growing: 5 questions and answers

These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.

Which is NOT a way of measuring the size of a business?
- number of employees
- value of sales
- capital employed
- profit (the answer)
A large business can make a loss, so profit says nothing reliable about size.
Why might capital employed be a poor measure for a hairdressing chain?
- It uses many workers and little expensive equipment. (the answer)
- It has no customers.
- It makes no sales.
- It employs nobody.
A labour-intensive business looks small by capital even if it is large.
Which is a problem caused by rapid growth?
- lower costs for each unit
- difficulty controlling the business (the answer)
- easier communication
- more time for the owner
More people, sites and layers make a business harder to manage.
A firm has 12 employees and sales of $90 million. Which measure makes it look large?
- number of employees
- value of sales (the answer)
- number of managers
- number of shops
Its sales are very high for so few workers.
How can the owner of a growing business keep it under control?
- by making every decision personally
- by delegating decisions to managers (the answer)
- by stopping all communication
- by borrowing as much as possible
One person cannot decide everything once the business is large.

5 questions

Tap an answer and you’ll see straight away whether it’s right, and why.

Worksheet

3 questions, 8 marks. Write your answers on paper, then check them.