2. Private Enterprise Flashcards
What is a private enterprise?
A private enterprise is just another term for a business
What is a private enterprise?
A private enterprise is just another term for a business, typically created to generate wealth.
What are the two main types of industries in private enterprise?
- Manufacturing: Produces physical goods by adding value to materials.
- Service: Provides intangible services for a fee.
What is a business model?
A plan for the successful operation of a business, identifying sources of revenue, customer base, products/services, and financial details.
Define ‘Sales Revenue.’
The financial inflow from selling goods or services.
What is ‘Cost of Goods Sold (COGS)’?
The total cost of inputs (raw materials) and process costs (such as energy and labor) required to produce a product.
What is the formula for Gross Profit?
Gross Profit = Sales Revenue - Cost of Goods Sold (COGS)
What is ‘Added Value’ in business?
The difference between sales revenue and input costs.
What is the main source of financial input in a business?
Sales revenue.
What is the difference between ‘Price’ and ‘Cost’?
- Cost: The money spent to obtain or produce something.
- Price: The amount the market is willing to pay for it.
What is the ‘Value Chain’ concept?
A model introduced by Michael Porter describing the activities a business performs to deliver a valuable product or service.
What are the common legal forms of business ownership?
- Sole Trader
- Partnership
- Limited Company
- Private Limited Company (Ltd)
- Public Limited Company (PLC)
What is a limited company?
A company where owners’ liability is limited to their investment, and shareholders are not liable for company debt.
What are shares?
Ownership units in a company that give voting rights and profit-sharing opportunities to shareholders.
How does business size relate to its structure?
- Micro: Small, locally based, often single-owner.
- Small: National-level management, small teams.
- Medium: Central organization with international presence.
- Large: Global operations with semi-autonomous divisions.
What are the two types of business managers?
- Strategists: Define objectives and overall strategy.
- Doers: Manage resources to implement the strategy.
What is ‘Management by Objectives’ (MBO)?
A strategic model where managers and employees agree on specific goals and systematically measure success.
What are Peter Drucker’s eight business objectives?
- Market Standing
- Innovation
- Productivity
- Physical & Financial Reserves
- Profitability
- Worker Performance & Attitude
- Manager Performance & Growth
- Public Responsibility
What is market standing?
A company’s position in the market, often measured by market share.
Why is innovation important in business?
It drives competitiveness, increases market share, and improves long-term success.
How is productivity measured?
- Labour Sales Productivity = Sales revenue ÷ Number of employees
- Labour Profit Productivity = Operating profit ÷ Number of employees
What are key components of financial reserves?
- Employee numbers & skills
- Capital assets (e.g., machinery)
- Intellectual property (IP)
- Financial funding (e.g., retained profits, loans, venture capital)
What is ‘Return on Capital Employed’ (ROCE)?
ROCE = Net Profit ÷ Capital Employed, measuring how effectively a company uses its capital.
Why is worker performance important?
Satisfied and motivated workers contribute to productivity, efficiency, and innovation.
