all Flashcards
(142 cards)
1
Q
adding value
A
the difference between the price of the finished products and the cost of inputs involved in making it
2
Q
adding value benefits
A
charge higher prices
different to competitors
focus on target market more closely
3
Q
adding value drawbacks
A
cost may be more than value added
price may restrict sales
competition may restrict price
elasticity make price changes hard to accept
4
Q
primary sector
A
gathering of raw materials
5
Q
secondary sector
A
turning raw materials into goods
6
Q
tertiary sector
A
servuces
7
Q
quaternary sector
A
research
8
Q
stakeholder
A
any individual or organisation that has an interest in the activities and decision making of a business
9
Q
sole trader advantages
A
less paperwork
be your own boss
make all decisions
no conflict
low barriers to setup/closing
10
Q
sole trader disadvantages
A
unlimited liability
hard to raise finance
higher tax
business is owner and will suffer if owner ill etc
11
Q
partnership advantages
A
more ideas
little paperwork
more likely to raise finance
specialist skills
12
Q
partnership disadvantages
A
unlimited liability
more conflict
bound to decisions
complicated to sell
13
Q
LTD advantages
A
shares just family and friends
limited liability
be own boss
easier to raise finance
14
Q
LTD disadvantages
A
more paperwork
companies house, others can see
time consuming to set up
may require outside help to manage its finances
15
Q
PLC advantages
A
raise finance through shares
shareholders have limited liability
economies of scale
16
Q
PLC disadvantages
A
require min £50,000 setup
include more detail in reports
greater risk of takeover
more complex accounting requirements
17
Q
franchiser advantages
A
brand
carefully select applicants
franchiser controls products/brand
may not have to spend money to expand
18
Q
franchiser disadvantages
A
not in full control
always small risk
possible conflict
major supporting costs
19
Q
franchisee advantages
A
lower risk
marketing done for you
training/advice
easier to raise finance
established brand and product
20
Q
franchisee disadvantages
A
shared profit
fees
less independence
cannot sell firm without permission
fixed period
stuck in contract
21
Q
cooperative
A
a business owned and run by its members
22
Q
cooperative advantages
A
usually limited liability
legally straightforward to establish
higher quality of service likely
loyal customers
23
Q
cooperative disadvantages
A
limited capital
possible weak management
slower decision making
employees want more
24
Q
business sizes
A
small- 50
medium- 50–>250
large- 250–>
25
merger
2 businesses join to make a new business
26
takeover
one business takes control of another
27
joint venture
agreement between 2 participants, a new entity is formed
28
strategic alliance
agreement between 2 parties to meet an agreed goal whilst remaining independent
29
aim
overall target, long term plan
30
mission statement
overriding goal of the business/reason for existence written in a statement to stakeholders
31
corporate objectives
objectives that cover a range of key areas in the business set at a corporate level
32
functional objectives
objectives specific to the functions of the business
33
individual targets/business unit
objectives more focused on individuals
34
market orientated
a business that prioritises the needs and desires of the market/consumers
35
product orientated
business focused solely around n products alone
36
job production
products are made for specific requirements of the customer
37
batch production
many similar items produced together, each batch goes through one stage of production at a time
38
flow production
continuous production process
39
cell production
mass production where it is split into teams for each component
40
PERT
O+P+(Lx4) / 6
41
total float
amount of time that the activity can be delayed without delaying finish time
42
total float calculation
LFT — duration — EST = TF
43
Free float
amount activity can be delayed without delaying the next
44
free float calculation
EST(next) — duration — EST(this) = FF
45
purchasing economies of scale
buy larger quantities
46
financial EOS
cheaper loans
47
managerial EOS
more specialist managers
48
technological EOS
purchase more effective capital
49
marketing EOS
more effective marketing
50
risk bearing EOS
spread risk (e.g. diversifying)
51
concentrated EOS
skilled labour or suppliers nearby etc
52
information EOS
easy access of data
53
infrastructure EOS
gov build facilities
54
productivity calc
output/input
55
labour productivity
output/employees
56
capacity utilisation
percentage of total productive capacity that a business is achieving
57
capacity utilisation calc
actual output/potential output x100
58
stock control
the process and controls used by a business to ensure that it has sufficient stock for its purpose
59
lead time
time between order and delivery
60
benefits of holding stock
meet demand
fluctuations in demand
EOS (sell extra units for less)
unexpected orders
seasonal changes
delay from suppliers
61
cost of holding stock
storage
opportunity cost
depreciation
security
admin
insurance
stock lose value
62
average stock calc
max stock+min stock / 2
63
JIT
company receives goods just in time for when they are needed
64
JIT benefits
reduced costs
eliminate waste
less tied up capital
less buildup of work in progress
keep up with demand
65
drawback of JIT
lose out on EOS
highly dependant on suppliers
no room for mistakes
need specialist systems
66
lean production
cutting waste and improving quality
67
kaizen
constant improvements/small changes
68
ergonomics
changing work environment to fit the limitations of employees
69
TQM
long term success through customer satisfaction, continuous improvement in employees ability
70
Jidoka
automation, machines stop working when defects are detected
71
kanban
JIT
72
kitemark
checking quality of safety products
73
ISO 9000
international standards on quality assurance
74
zero defects
everything done right first time
75
internal standards
set of guidelines in certain areas of a business
76
reshooting
returning production and manufacturing back to the companies original country
77
offshoring
basing some of a companies processes over seas to take advantage of lower costs
78
outsourcing
hiring a party to perform services or create goods
79
benefits of reshoring
certainty around delivery and quality
minimise supply chain risks
collaborate with home suppliers easy
communication
80
benefits of offshoring
lower manufacturing costs
higher skilled workers
free trade
target markets
spare capacity over seas
81
subcontracting
part of production is undertaken by another firm
82
plan do review
plan- establish objectives
do- implement plan
review- evaluate the process
83
contingency planning
planning for unexpected outcomes to minimise the impacts
84
crisis management
process which an organisation goes through to deal with an event that threatens the business
85
3 elements of crisis management
management response- asses severity
operational response- implement contingency plan
communication response- contact stakeholders
86
ansoff matrix
assess the risk of growth strategies
87
ansoff- market penetration
existing products in existing markets
least risk, least reward/loss
don’t need market research
88
ansoff- product development
new products in existing markets
effective market research
existing customers
first to the market better
89
ansoff- market development
existing products into new markets
when existing markets are declining
more risky that P development
existing products may not suit market
90
ansoff- diversification
new products into new markets
risky
no experience
no EOS initially
91
porters five forces
threat of new entrants
degree of rivalry
threat of substitutes
bargaining power of suppliers
bargaining power of buyers
92
forecasting
use of existing data to predict future trends
93
qualitative forecast
based on opinions
94
delphi technique
experts asked opinions on likely outcomes, an average opinion is taken
95
trade credit
buy stock now and pay later
96
factoring
sell debt to a third party to find cash flow
97
hire purchase
make instalments before purchasing the good
98
debentures
long term debt lent by business
99
venture capital
investment in a high risk project
100
business angel
invests in new/growing businesses
101
consistency
accounts produced the smae
102
realisation
when ownership changes not when payment is taken
103
materiality
judgements need to be realistic
104
going concern
assume operating as normal
105
prudence
not overstating finance
106
matching
dates used to record transactions when it takes place
107
objectivity
information is realistic and reported in a non biased way
108
fixed cost
stays the same regardless of output level
109
variable cost
changes depending on output level
110
unit cost calc
total cost / total output
111
break even point
when total revenue = total cost
112
margin of safety
difference between sales and break even point
113
break even point calc
fixed cost / price - variable cost
114
contribution calc
price - variable cost
115
contribution
how many products needed to sell in order to cover fixed costs and then make a profit
116
total contribution calc
contribution x number sold
117
standard costing
expected cost of the production of a good/service
118
cost centres
specific part of the business where costs can be identified and allocated with ease
119
profit centres
seperately identifying profit, costs and revenue
120
absorption coating
all fixed costs absorbed by different cost centres
121
payback period calc
initial investment - return until you reach positive number, then divide needed cash to get 0 by the year it will become positive and x 12
122
ARR
revenue - investment / years
———————————————— x100
initial cost
123
Net present value
cash flow x discount factor for each year, add all present values together and then minus the initial investment
124
sales budget variance analysis
actual>forecast = favourable
forecast>actual = unfavourable/adverse
125
expenditure variance analysis
forecast>actual = favourable
actual>forecast = unfavourable/adverse
126
zero budgeting
all budgets set to zero, managers justify the need for funds
127
causes of cash flow problems
low profit
too much production capacity
excess stock
allowing too much credit
overtrading
seasonal demand
128
working capital
= current assets - current liabilities
129
fixed/non-current asset
used over and over, stays the same
130
current asset
used once, changes all the time
131
liabilities
what you owe
132
depretiation
an accounting estimate of the fall in the value of a fixed asset over time
133
reasons for depretiation
wear and tear
outdated tech
out of fashion
trends
not brand new/used by someone else
134
net book value
cost of machine minus depreciation
(end of the year
135
accumulated depreciation
added up over the years
136
residual value
value at the end of life
137
straight line method
reduces equally every year of its life
138
reducing balance method
constant percentage of depreciation
139
advantages of straight line method
amount of depreciation is low at start
lower depreciation = higher value asset
low depreciation = profits appear higher
easier to calculate
suitable for small businesses
140
disadvantages of straight line method
estimate of residual value is required
assume the life of the asset is known
lower at start may be misleading
repairs and maintenance will be needed
141
reducing balance method advantages
realistic, more depreciation at start
no estimate required
receive larger tax benefit early on
142
reducing balance disadvantages
higher initial depreciation lowers value
above reason mean borrowing against assets is harder
some assets don’t lose value quickly
more complicated
