A business can use the 'volume of output' as a key indicator to assess whether its current production facilities are adequate. If the business consistently struggles to meet demand due to limited production capacity, it signals a need for expansion. Here are two specific examples:

1. Increased Customer Demand: If a company experiences a significant and sustained increase in customer demand for its products, leading to a backlog of orders, the volume of output will likely be exceeding the current capacity. This indicates the need to expand production facilities (e.g., adding a new production line, increasing shift hours, or relocating to a larger factory).

2. Missed Sales Opportunities: If a business regularly experiences situations where it cannot fulfill orders due to insufficient production volume, it is missing out on potential sales revenue. This demonstrates that the current production capacity is a constraint and expansion is necessary to capitalize on these opportunities. For example, a bakery consistently selling out of its daily bread before closing time.

By monitoring the volume of output and comparing it to demand, businesses can proactively identify and address potential bottlenecks in their production processes.

Answer: Measuring the size of a sole trader business presents unique difficulties compared to larger entities. The very nature of a sole trader – being owned and run by one person – makes objective measurement challenging. Here's why:

• Lack of clear financial data: Sole traders often don't separate personal and business finances. This makes it difficult to isolate business revenue, costs, and assets. Example: Income from the business might be mixed with personal income, obscuring the true financial performance of the business itself.
• No employee count: A sole trader typically doesn't have employees, so a common measure of size (number of employees) is irrelevant. Example: Even if the sole trader outsources work, the number of outsourced workers isn't directly attributable to the sole trader's size.
• Difficult to assess asset value: The assets of a sole trader might be personal assets used for the business (e.g., a home used as an office) or specifically purchased for the business. Determining the business-related value of these assets is complex. Example: The value of a computer used for the business is difficult to separate from the value of the computer as a personal asset.
• Revenue can be misleading: A sole trader's revenue might be low but the business could be highly profitable and have significant long-term potential. Revenue alone doesn't fully reflect the business's scale or impact.

'Capital employed' is a measure of the total investment a business has made in its operations. It represents the funds used to purchase assets like buildings, machinery, and equipment. Comparing capital employed allows for a more comprehensive assessment of business size than just looking at sales or employee numbers. A business with a higher capital employed generally has a larger and more complex operation.

Example Calculation:

Significance: In this example, Business B has a capital employed of £800,000, compared to Business A's £400,000. This suggests that Business B has made a significantly larger investment in its operations, likely indicating a larger scale of operations, more complex processes, and potentially a greater level of risk. It also implies a greater level of financial commitment and potentially higher potential for growth, although this is not guaranteed.