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3.1 What is Business? Flashcards

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1
Q

What is a business?

A

An organisation to provide goods and services on a commercial basis to customers

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2
Q

What is a business objective?

A

A short term goal in order to meet the businesses aims and missions

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3
Q

What is profit?

A

The money left over after all costs are taken away from all the money that’s come into the company

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4
Q

What are the benefits of businesses?

A
  • Employment
  • Drives innovation
  • New products
  • Pay taxes on profits
  • Creates wealth providing returns on investment
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5
Q

What is meant by growth?

A

a stage where the business reaches the point for expansion and seeks additional options to generate more profit

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6
Q

What is meant by survival?

A

Keeping the business operating for a certain amount of time

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7
Q

What is meant by cash flow?

A

The movement of cash into and out of a business

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8
Q

What is a social objective?

A

Objectives that relate to the interaction of individuals, groups and institutions within society

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9
Q

What is meant by ethical objectives?

A

Objectives that could have an impact on morals and principles.

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10
Q

What is a mission statement?

A

The over-riding goal of the business and the reason for its existence

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11
Q

What is the difference between an objective and a mission?

A

Objectives are small tasks that work towards the overall mission of the business

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12
Q

Why do businesses set objectives?

A
  • Motivation
  • Organisation
  • Provide a target
  • Provide a clear focus for decision making
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13
Q

What is the calculation for profit?

A

Profit = Revenue - Total costs

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14
Q

What is the calculation for Revenue?

A

Revenue = Number of Sales x Selling Price

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15
Q

What is the calculation for fixed costs?

A

Fixed costs = Total costs - (Variable costs x Units produced)

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16
Q

What are fixed costs?

A

Costs that are the same each month regardless of how much stock is produced or sold

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17
Q

What is the calculation for Variable costs?

A

Variable cost = (Direct labour costs + Direct raw material cost + Variable manufacturing overhead) / Number of units produced

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18
Q

What are variable costs?

A

Costs that change each month depending on how much of the product is produced and sold

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19
Q

What is the calculation for total costs?

A

Total costs = Total fixed costs + Total variable costs

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20
Q

What are total costs?

A

The sum of expenses a company needs to manufacture a specific level of output

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21
Q

What is the reason for revenue?

A

Helps businesses to measure profits with a specific period of time

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22
Q

What is the reason for variable costs?

A

To see how much expenses change based on how much a company sells or produces

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23
Q

What is the reason for total costs?

A

Helps product managers to evaluate their overall profit margin

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24
Q

What is meant by demand?

A

The amount of product that customers are prepared to buy (measured in volume or value)

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25
What is meant by revenues?
The amount of a product that customers actually buy from a firm
26
What are the two ways to increase revenue?
Increase quantity sold Achieve higher selling prices (Or both)
27
What are semi-fixed costs?
Costs which change once a certain level of output is reached (administrative salaries, rent)
28
Why are costs important?
- Thing that drains away the profits - Determines a good or bad profit margin - Main cause of cash flow problems - Change as output or activity change
29
Why is profit important to a business?
- Return on Investment - Reward for taking risks - Key source of finance - Measure of the businesses success - Motivating factor or incentive
30
What is a sole trader?
A business which is owned and run by one person
31
What are some examples of sole traders?
Plumbers, Electricians
32
What are the advantages of being a sole trader?
+ Total control over the business + Cheap and easy to set up + Keep all of the profit +Business affairs are kept private +No income tax up to £12,500
33
What are the disadvantages of being a sole trader?
- Unlimited liability - Can be difficult to raise finance as banks are unwilling to loan large amounts of money - Problem continuing if sole trader retires or dies - Nobody to cover in the event of absence or illness
34
What is a partnership?
A business with two or more owners of the company
35
What are some examples of partnerships?
GoPro, Redbull
36
What are the advantages of being a partnership?
- Spreads the risk across more people - Partner may bring money and resources to the business - Partner may bring other skills and ideas - Increased credibility with potential customers and suppliers - Shared pressure and responsibility
37
What are the disadvantages of partnerships?
- Have to share profits - Less control over the business as an individual - Disputes over workload - Problems if partner disagrees over direction of business
38
What is a Franchise?
When a franchisor grants a licence to a franchisee to allow another business to trade using the brand/business format
39
What is an example of a Franchise?
McDonald’s
40
What are the advantages of a franchise?
- A classic growth strategy for a proven business format - Enables quicker geographical growth - Option to open locations operated by franchisor
41
What are the disadvantages of a franchise?
- Cost to buy a franchise - Have to pay a percentage of revenue to the business - Have to follow the franchise model (less flexibility)
42
What is a private limited company?
A business owned by its shareholders, run by directors and where liability of the shareholders for the debts of the company is limited.
43
What are some examples of private limited companies?
Photographers, Lawyers
44
What are the advantages of being a private limited company?
- Owner can retain control - More able to raise money -Limited liability
45
What are the disadvantages of being a private limited company?
- Must be registered with the registrar of companies - High set up costs - Harder to motivate and control workers
46
What is a public limited company?
A company that is able to offer shares to the public. They don’t have to but they can.
47
What is an example of a public limited company?
Amazon
48
What are the advantages of a public limited company?
- Better access to capital - Liquidity - Easily make acquisitions - More prestigious profile
49
What are the disadvantages of being a Public limited company?
- Financial markets will govern the value of the company - Greater public scrutiny of financial performance/actions
50
What is a private sector organisation?
An organisation run by individuals rather than being government controlled
51
What is a public sector organisation?
An organisation controlled and funded by the government
52
What is a non profit organisation?
A business with a purpose of doing something other than making a profit.
53
What is a social enterprise?
Businesses that are focused on their mission and exist to tackle social or environmental issues
54
What is unlimited liability?
The potential risk that sole traders and partnerships face, being liable for the debts of the business
55
What is limited liability?
When shareholders are only liable for the money that have invested
56
What is an incorporated business?
A company with separate legal entity. The owners of the company are shareholders
57
What are dividends?
Payments made to the shareholders by the company from earned profits, they are paid per share and there are no requirements to pay
58
What is capital growth?
They increase value in the business, reflected in an increase in share price, no guarantee that shareholding will increase
59
What is a share?
The individual part of the issued share capital - more shares = more power
60
What is a share price?
Determined by supply and demand Falling share price indicates excess supply
61
What is a shareholder?
The legal owner of limited companies, owns a percentage in the form of shares
62
What internal factors increase share price?
- Financial performance - Dividend policy - Relationship with Key investors - Management reputation
63
What external factors influence share price?
- State of the economy - Company is a target takeover
64
What is stock market floatation?
Share issued on the stock exchange for the first time
65
What is demand?
How much of a goods or service consumers are willing to pay for. For a business demand turns into revenue
66
What is competition?
How other companies affect the demand
67
What is GDP?
Gross domestic profit - measures the value of the output in the economy - value used to assess changes in economic growth
68
What is an interest rate?
The reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed
69
Who determines the rate of interest?
The bank of England
70
What happens when interest rates fall?
- cost of loans / debt is reduced - consumer confidence increased - disposable income rises - business investments boosted
71
What happens when interest rates increase?
- cost of borrowing rises - repayment of debts - slow in the housing market - contraction in retail credit - currency could get stronger - UK export is more expensive
72
What is a demography?
Concerned with the size and composition of the population
73
What are the problems with an aging population?
- less people able to work - more pressure on part time and labour jobs - higher amount of money spent on pensions and the NHS
74
What is a real income?
Measures the amount of disposable income available to consumers (e.g households and individuals)
75
What are the impacts a business can have on the environment?
- sustainability - a green supply chain - minimising packaging - promoting environmental policies - complying with environmental laws - carbon emissions - waste disposal
76
What are some benefits to businesses after environmentally friendly actions?
- Lower cost of raw material - longer life assets that are recycled or repaired - trading opportunities with organisations that use environmentally friendly suppliers - improved customer goodwill
77
What do businesses need to look at when assessing how environmentally friendly they are?
- Use of raw materials, water and other resources - Energy use - Waste and Pollution - Impact on employees and the local community
78
What is meant by fair trade?
Trade between companies in developed countries and producers in developing countries in which fair prices are paid to the producers

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