AS Level Business chapter 1: Business and its environment MCQs with answers

By Team Megalecture · Updated 4 Nov 2026

85 exam-style questions on Business and its environment, each with the answer and a short explanation. Ten of them are below to try. The chapter test draws ten fresh questions each time and is marked the moment you finish, with your score by topic.

85 questions · 5 topics · 10 per test

Test this chapter freeAll AS Level Business chapters

What chapter 1 covers

Ten Business and its environment questions with answers

Try each one, then open the answer. These ten stay the same; the test draws new ones every time.

1. Which event would most likely lead a firm to change its main objective from growth to survival?

  1. A
    a rise in the firm's market share in its main market
  2. B
    the launch of a new and very successful product
  3. C
    a takeover of a smaller rival by the firm
  4. D
    a sudden fall in demand caused by a recession
Show answer

Answer: D. Objectives change with circumstances. A serious fall in demand threatens the firm's finances so survival takes priority.

2. How does a strategic alliance differ from a merger?

  1. A
    the firms create a single company with one board
  2. B
    one firm buys most of the shares in the other
  3. C
    one firm sells the other firm's products under its brand name for a fee
  4. D
    the firms cooperate on a project but stay separate companies
Show answer

Answer: D. In an alliance the businesses keep their own ownership and independence, whereas in a merger they combine.

3. A sole trader is considering converting to a private limited company. Which is a likely advantage?

  1. A
    the accounts no longer have to be prepared
  2. B
    the owner keeps full control of decisions without consulting anyone
  3. C
    the owner's personal assets are protected by limited liability
  4. D
    the business can sell shares to the public on a stock exchange
Show answer

Answer: C. Limited liability is the main attraction, and it also makes raising capital from selling shares easier. However, the company must follow more legal rules, and shares are not offered to the public.

4. Which three areas make up the triple bottom line?

  1. A
    economic, ethical and legal
  2. B
    financial, technical and marketing
  3. C
    economic, social and environmental
  4. D
    social, political and technological
Show answer

Answer: C. The triple bottom line judges success by financial, social and environmental performance instead of only profit.

5. A family partnership needs $500,000 for new equipment and wants outside investors, who do not want to be responsible for the firm's debts. Which change of ownership best suits this?

  1. A
    become a sole trader and borrow from relatives
  2. B
    convert to a private limited company and sell shares
  3. C
    remain a partnership and admit investors as unlimited partners
  4. D
    become a co-operative owned by its customers
Show answer

Answer: B. A company can sell shares to investors, whose liability is limited to the amount they invest. Unlimited partners would be personally responsible for the firm's debts.

6. Which is a limitation of a business plan for a start-up?

  1. A
    it cannot be used to support an application for a bank loan
  2. B
    it depends on forecasts that may prove wrong
  3. C
    it stops the business from ever changing its objectives
  4. D
    it can be written without doing any market research at all
Show answer

Answer: B. Plans are built on estimates of sales and costs, so unexpected changes can make them inaccurate. A plan is meant to help obtain finance, and it can be revised.

7. Which feature distinguishes a public limited company from a private limited company?

  1. A
    its owners have limited liability if it goes into liquidation
  2. B
    it is a separate legal entity from those who own it
  3. C
    its shares can be traded on a stock exchange
  4. D
    its shareholders receive dividends out of the profit made
Show answer

Answer: C. Both types of company have limited liability and separate legal identity. Only a plc can sell its shares to the general public.

8. What is the main purpose of a business plan for a start-up?

  1. A
    to guarantee that the business will make a profit in the first year
  2. B
    to replace the need for a cash-flow forecast after start-up
  3. C
    to record the profit already earned in the first year of trading
  4. D
    to persuade lenders and investors and to set targets
Show answer

Answer: D. A plan sets out the idea, market and finances so that banks and investors can judge it, and gives the owner targets to measure progress. It cannot guarantee profit.

9. Which is a responsibility of employees as stakeholders?

  1. A
    setting the long-term objectives of the whole business
  2. B
    deciding the level of dividend paid to shareholders
  3. C
    carrying out the duties in their contracts with care
  4. D
    arranging the finance needed for the firm's expansion
Show answer

Answer: C. Employees are expected to perform their agreed duties. Setting objectives and dividends is the job of managers and directors.

10. A retailer changes its payment terms so that suppliers are paid after 90 days instead of 30 days. What is the most likely reaction of the suppliers?

  1. A
    they will reduce their prices to keep the retailer's business
  2. B
    they will pay the retailer for the delay
  3. C
    they may raise prices, reduce credit or find other customers
  4. D
    they will not be affected by the change
Show answer

Answer: C. Slower payment harms the suppliers' cash flow, so they may react by raising prices or supplying elsewhere.

Start the chapter testAbout the AS Level Business test

Read the notes for this chapter

Ways to practise this chapter

Business and its environment: questions students ask

How many Business and its environment MCQs are there?

85, each with the answer and a short explanation, across 5 topics: Enterprise, Business structure, Size of business, Business objectives, Stakeholders in a business. Every chapter test draws ten of them, so you can take it many times.

Is the AS Level Business chapter 1 test free?

Yes. The test, the answers and the explanations are free and need no sign-up. Sign in only if you want your scores kept across devices.

How is the chapter test marked?

The moment you press Finish: your score, the right answer and an explanation for every question, and the ones you got wrong saved in My mistakes to retry.

Keep going

Chapter 2: Human resource management →All chaptersStuck? Ask a question