Size of business: Practice Questions

Which of the following is a common method used to measure the size of a business?

A government is evaluating the size of businesses in the manufacturing sector. Why might using 'capital employed' be a more appropriate measure than 'number of employees' for this comparison?

A conglomerate merger occurs between a hotel chain and a commercial aircraft manufacturer. Which of the following best describes a primary motive for this type of external growth?

What is meant by the term internal (organic) growth?

A manufacturing firm is considering which metric to use to compare its size against a competitor in the same industry. Why might market capitalization be a less reliable measure of size than capital employed for a company that is not listed on a public stock exchange?

State two limitations of using the 'number of employees' as the sole method for measuring the size of a business.

Explain why using sales turnover to compare the size of a retail business with a high-end jewelry boutique and a discount grocery chain might be considered an inappropriate method of measurement.

A technology firm has 600 employees but a significantly lower market capitalisation than a rival firm with only 60 employees. Explain why number of employees can be an unreliable method for measuring size of business when comparing firms across different industries.

A regional government is evaluating two firms in the textile industry to provide a growth grant. The following data has been collected:

Firm X: 120 employees, \$1.5 million annual revenue, \$800,000 capital employed.
Firm Y: 45 employees, \$4.2 million annual revenue, \$3.5 million capital employed.

(a) Explain two different methods used in the data above to measure the size of a business.
(b) Analyze why using only the number of employees as a measure of size might lead to an incorrect conclusion about which firm is larger.

A successful family-owned bakery is planning to expand. The owners are choosing between organic growth by opening new branches or external growth through a horizontal merger with a local competitor.

(a) Explain the strengths and weaknesses of a family business during a period of growth.
(b) Evaluate whether a horizontal merger is a better strategy for the bakery than organic growth, considering the impact on economies of scale and corporate culture.