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3.1 What Is A Business? Flashcards

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1
Q

What is mission?

A

A qualitative statement of the business aims

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2
Q

What is aim?

A

A long term plan from which business objectives are derived

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3
Q

What is an objective?

A

A target which must be achieved in order to realise the stated aims

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4
Q

What is a mission statement?

A

A mission statement defines the company’s business, its objectives and its approach to reach these objectives

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5
Q

What is a business?

A

A business is an organisation that exists to provide goods and services on commercial basis to customers

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6
Q

What are goods?

A

They are physical or tangible products e.g. Cars

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7
Q

What are services?

A

They are intangible products e.g. Insurance

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8
Q

Why does a business exist?

A

They are formed by entrepreneurs and are subsequently developed if they manage to get beyond the survival stage.
Profit is also key in a business

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9
Q

What is the transformation process?

A

When you take resource inputs and transform them into goods and services

Inputs -> transformation process -> outputs

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10
Q

What is the role of an entrepreneur?

A

Play a key role in the formation and the development of the business:
Spot a business opportunity
Take risks (calculated) to gain possible future returns
Create growth

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11
Q

What are the 4 broad business sectors?

A

Primary - extraction of natural resources

Secondary - production of finished goods and components

Tertiary - providing service

Quaternary - providing information

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12
Q

What does adding value mean?

A

Creating value by transforming the inputs into business activity so that then what is created is greater than the costs involved

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13
Q

What is the difference between unincorporated & incorporated?

A

A key distinction needs to be made between businesses formed as a company (incorporated) and those that are not

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14
Q

What is unincorporated?

A

The owner is the business - no legal difference

Unlimited liability

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15
Q

What is incorporated?

A

There is a legal difference between themselves and the business
Owners (shareholders) have limited liability

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16
Q

What is a sole trader?

A

This is the most common way of setting up a business
Just one person owning it
They can employ people but those employers don’t share the ownership of the business
Crucially - a sole trader has unlimited liability

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17
Q

What are the advantages of being a sole trader?

A 
Quick & easy to set up
Simply to run
Make all the decisions
Easy to close and shutdown 
Get all profits
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18
Q

What are the disadvantages of being a sole trader?

A

Full personal liability - “unlimited liability”
Business is the owner of the owner becomes ill the business could go down and maybe shutdown
Pay higher tax rate than a company

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19
Q

What are the advantages of limited liability?

A

Protects the shareholders
Easier to raise finance
Stable from structure

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20
Q

What is a public limited company? PLC

A

A public limited company is simply a more specialist type of limited company
Shares may be quoted and traded on a public stock market (don’t have to be)
Usually have more shareholders because shares are done publicly

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21
Q

What is a private limited company? LTD

A

Shares can’t be shared publicly only between family

Bigger than sole traders or partnership but still small

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22
Q

What is partnership?

A

2-20 people setting up a business
Each is self employed & takes shares of profits, personally responsible for any depts
Business can still continue to run if someone dies, becomes seriously ill, bankrupt or resigns

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23
Q

What is public sector?

A

An organisation that doesn’t want to make a profit (cut costs)
Owned by government to help the community

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24
Q

What is privatisation?

A

This is when the government sells an organisation to an organisation in the private sector e.g. Royal Mail

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25
What is a private sector?
It is there to maximise profits Expand business Improve quality
26
What is charity aims?
Help people Maximise collections for cash Recruit more helpers
27
What are the external environment features that effect a business?
P - political - competition E - economic - spending & income S - social - taste & fashion T - technology - new production L - legal - minimum wage, living wage, health & safety E - ethical/environment - pollution & emissions
28
What is fair trade?
Better price, decent working conditions & fair trading terms for farms and workers
29
What is innovation?
New product or method
30
What are demographic factors?
There are a number of major demographic changes which have created new opportunities and threats for firms They include: The population increasing More women working
31
What is interest rate?
The cost of borrowing money and the return for lending it
32
What does demand mean?
The amount of a particular good or service that consumers or organisations want and are able to afford to purchase
33
What are the market conditions?
``` Level of sales Sales growth Price levels Strength of rivals Market shares ```
34
What is market capitalisation?
Multiply the share price by number of shares sold | Value the stock market places on the whole business
35
What does profit mean?
This is the prime object of most firms 2 ways of increasing profit are: Increasing sales revenue Decreasing cost
36
What are classifying cost?
Costs are the money paid out by firms
37
What are the principal reasons for classifying costs?
To assess the impact of changes in output on the costs of production To calculate the costs of making a particular product in a multi-product company
38
What is real incomes?
Real incomes measure the amount of disposable income available to consumers
39
What is dividends?
Dividends is a payment made to shareholders by the company from earned profits Normally no requirement to pay dividends, but most quoted companies do
40
What is a share?
A share is an individual part of the total issued share capital of a company
41
What is a share price?
A share price is the price paid to acquire ownership of that share When the shares are first issued the price is the "issue price"
42
What does market capitalisation represent?
The total market value of the issued share capital of the capital
43
How do you work out market capitalisation?
Share price (per share) X number of shares issued
44
What are some of the factors within the company's control?
Financial performance Dividend policy Relationship with key investors Management reputation
45
What are some of the factors outside the company's control?
State of the economy | Alternative investment's in the company's sector
46
What is real incomes?
Real incomes measure the amount of disposable income available to consumers
47
What is dividends?
Dividends is a payment made to shareholders by the company from earned profits Normally no requirement to pay dividends, but most quoted companies do
48
What is a share?
A share is an individual part of the total issued share capital of a company
49
What is a share price?
A share price is the price paid to acquire ownership of that share When the shares are first issued the price is the "issue price"
50
What is share capital know as?
Equity finance
51
What are the two methods of issuing new shares for a public company?
Flotation - share issued on stock exchange for the first time Right issue - fresh issue of new shares to existing shareholders
52
What is the definition of flotation?
The admission of the shares of a public company to a stock exchange and subsequent trading in those shares
53
What is a stakeholder?
A stakeholder is any individual or organisation who has a vested interest in the activities and decision making of a business A shareholder is one example of stakeholders
54
What is a shareholder?
Owner of a business May work as well Benefit directly from increases in the value of the business
55
Key stakeholders in a business can be grouped name the three groups
Internal - managers & employees Connected - customers, suppliers External - government
56
What does the matrix do?
Provides some guidance when making a decision, who is mostly listened to in a decision (Look in notes for the grid)
57
What are the purpose for business objectives?
The specific intended outcomes of business strategy End results of a programme of activities Targets that the business adopts in order to achieve its primary aims
58
What are the main purposes of business objectives?
Make a clear statement of what needs to be achieved Provide a focus for all business activity Help set targets for individual and group achievement
59
What does smart stand for?
S - specific - stated exactly what you want to achieve M - measurable - should be capable of reaching the target A - achievable - target should be realistic R - realistic - should be relevant T - time bound - targets set with a time frame
60
What is corporate objectives?
Corporate objectives are what a business as a whole wants to achieve
61
What are functional objectives?
The specific objectives set for the individual functional areas of a business, designed to support the achievement of corporate objectives
62
What are classifying costs?
Costs that are paid out by firms
63
What is a firm?
A business organisation -> limited liability, sells goods or services to make a profit
64
What are the two principals for classifying cost?
To access the impact of changes in output on the costs of production To calculate the costs of making a particular product in a multi-product company
65
What are the two types of costs?
``` Fixed costs (FC) - costs that do not vary directly with output in the short term run Variable costs (VC) - costs that vary directly with output in the short term run ```
66
How do you work out the total costs?
Sum of the fixed cost and the variable costs | FC + VC = TC
67
What are semi-variable costs?
These are costs that combine elements of fixed and variable costs
68
How do you work out the total revenue?
Price X quantity sold
69
What is a legal structure?
Is the legal definition of your business

Business (3 decks)

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