3.1 What is business Flashcards
(46 cards)
What are the 5
main business aims/objectives
Survival
cash flow
profit
growth
social and economic objectives
give an example of two business aims/objectives conflicting with eachother
social and ethical objectives may clash with aims of profit
being ethical may increase costs in turn reducing profit
what is a mission statement
a qualitative statement of an organisations overall mission or purpose
why are mission statements used
- provide a clear goal/ sense of direction
- to communicate to stakeholders
- create a sense of identity and a unique selling point
- enables a business to set clear goals to achieve its mission
- review it a business has achieved its goals
what are corporate aims
the medium-long term goals that will enable a business to achieve its mission
what are corporate objectives
short term goals that will enable the company to achieve their aims
what are functional objectives
specific targets set for each functional area in
why do businesses use smart objectives
to make the aim clear
what does SMART objectives stand for
Specific Measurable Agreed Realistic Time
why do business set goals/objectives
- stepping stones to fulfill a purpose
- provide clear targets for employees to work towards
- provide a framework for decision making
- motivational
- used to judge progress against
- provides incentives/pay structure
define profit
Profit is the difference between total revenue and total costs
what is the calculation/formula for PROFIT
profit = total revenue - total costs
P= TR-TC
define revenue / sales turnover
Revenue is the income received from an organisations activities
what is the calculation / formula for revenue
Total revenue = Price per unit X quantity of unit sold
TR= P x Q
define variable costs
Variables costs are costs that change directly in proportion to output
what is the calculation / formula to work out total variable costs
total variable costs = variable costs per unit X output
TVC= VCPU x O
name 4 examples of variable costs
raw materials
packaging
wages of staff e.g overtime
power
define fixed costs
fixed costs are costs that remain constant in the short run regardless of the output
give some examples of fixed costs
salaries
rent/rates
marketing
vehicles
heating/lighting
define total costs
total costs are all costs of production incurred by a business
what is the calculation/formula for total costs
total costs = variable cost+fixed cost
why is profit important for a business
contributes to long term survival of a business
attractive for stakeholders
it’s a measure of success
profit is a motivator for staff
a guide for future investment
used for ethical/social purposes
a source of finance
define legal structure
Legal structure refers to the ownership of a business
what does the legal structure of a business determine
- legal liability of a business
- sources of finance available
- degree of risk to owners
- responsibilities and rights of decision makers
- legal requirements for record keeping and publishing accounts
- tax and National insurance payments
