Business Flashcards
(165 cards)
1
Q
Define invention
A
The creation of new products or processes usually as a result of extensive research
2
Q
Define innovation
A
The practical application of an idea or invention into a good or service that customers will pay for
3
Q
Define risk
A
Any situation which brings exposure
4
Q
Give examples of risks a business may face
A
Failure, financial loss and lack of security
5
Q
What is the general rule of thumb when it comes to how many years a business will operate with no profit?
A
3 years
6
Q
What should a business owner avoid doing when starting a business?
A
Putting too much money, into the business, that they can’t afford to lose
7
Q
Why is lack of security a risk for business?
A
Being self employed means there is no regular income, not set hours, no assets paid for (cars and houses) and no holiday days
8
Q
List some non-financial rewards from business success
A
Being a household name, winning awards, growing their business and create ne opportunities
9
Q
List some financial rewards from business success
A
Profit, business sucess and independence
10
Q
Why could being independent be seen as good?
A
Make your own hours, providing jobs to others, a sense of achievement and doing something you’re passionate about
11
Q
True or False? Risk is unavoidable
A
True
12
Q
Before making a decision what must a business do?
A
Balance the risk of any decisions against the potential rewards (risk reward assessment)
13
Q
Define business
A
An individual or organization whose aim is to satisfy the needs or wants of consumers by providing goods and/or services that they will buy
14
Q
What are the three purposes of business activity?
A
To meet customer needs, produce goods/services and to add value and give a reason to buy
15
Q
Define a market orientated business
A
A business that provides products because consumers want them
16
Q
What do market orientated businesses look for?
A
Gaps in the market
17
Q
What are the four customer needs?
A
Price, quality, convenience and choice
18
Q
Define price
A
The amount that someone is willing to pay for a good or a service
19
Q
Define quality
A
The percieved standard of a good or a service
20
Q
Define convenience
A
How easy it is for a customer to obtain a product or service
21
Q
Define choice
A
Refers to giving customers a number of options
22
Q
What is the best way to get customers to buy?
A
Know who the customers are
Identify what those customers needs are
23
Q
Define market research
A
The organised gathering, recording and analysis of data in order to better understand the behaviour of customers
24
Q
Why do business undergo market research?
A
Identify a gap in the market
Inform business decisions
Reduce the business risks
Understand customer needs
25
What are the two methods of market research?
Primary and secondary research
26
Define primary research
New information collected first hand
27
Define secondary research
Existing information collected by someone else
28
Give examples of primary research
Surveys
| Focus groups Questionnaires
29
Give examples of secondary research
The internet, market reports and government reports
30
What is quantitative data?
Data expressed in quantities (stats)
31
What is qualitative data?
Data expressed in quality (opinions)
32
Define market segmentation
The process of dividing a market into smaller groups that contain consumers with similar needs, wants or characteristics
33
What are the ways a market can be segmented?
Behaviour
Geographical location
Demographic
Psychographical
34
Define a gap in the market
An unmet consumer need that provides an opportunity for businesses to increase their sales
35
What can a market map help identify?
The competition and how they compare
36
What is a unique selling point?
One way in which a business can gain a competitive advantage over other businesses
37
What two things must a business need?
Aims and objectives
38
What are business aims?
The long-term outcome that is desired from undertaking business activity
39
What are business objectives?
The short-term specific targets that are set to help a business achieve its overall aims
40
Give examples of financial aims?
```
Survival
Sales
Profit
Market Share
Financial Security
```
41
Define profit
The difference between the amount recieved for selling products and services and the cost of making or providing them
42
How could a business increase revenue?
Sale more
| Increase prices
43
Define market share
The proportion of sales within a market that are accounted for by a particular company or product
44
Give examples of non-financial aims?
Social (society improvement)
Personal satisfaction
Challenge
Independence
45
What makes aim and objectives differ?
The purpose of the business
The size of the business
The age of the business
46
Why is cash important to a business?
It's needed to pay suppliers, overheads and employees
47
Define insolvency
A situation where a business is not able to pay the debts that it owes
48
Define cash inflows
Cash that is coming into the business
49
Give examples of cash inflows
Sales
Loans
Grants
50
Define cash outflows
Cash that is leaving the business
51
Give examples of cash outflows
Materials
Rent
Wages
52
Define net cash flow
The difference between the cash flowing into an out of a business, over a given time period
53
What is the net cash flow formula?
Net Cash Flow = Inflow - Outflow
54
Define cash flow forecast
A financial document that estimates the amount of cash coming into and out of a business over a given period of time
55
What can a business do by producing a cash flow forecast?
Identify problems before they happen
Plan how to use excess cash
Compare their forecast to their actual cash flow to monitor the business
Support applications for any borrowing
56
What three things makes up a cash flow forecast?
Receipts, payments and net cash flow
57
Define receipts
Cash that the business expects to recieve
58
Define payments
Cash that the business expects to send
59
What is cash needed to spend on?
```
Stock
Premises
Staff
Equipment
Marketing
Overheads
```
60
Give examples of internal sources of finance
Personal Savings
| Retained Profit
61
Give examples of external sources of finance
```
Overdraft
Share Capital
Trade Credit
Crowd-funding
Loan
Venture Capital
```
62
What is retained profit?
Profit kept
63
What are the pros of retained profit?
No interest
| Doesn't have to be repaid
64
What are the cons of retained profit?
A new business won't have any
| Limited to how much previous profit has been retained
65
What is personal savings?
Cash invested by an owner
66
What are the pros of personal savings?
No interest
| Doesn't have to be repaid
67
What are the cons of personal savings?
Owner must be willing to invest the amount
68
What is an overdraft?
When a bank allows more money to be spent than there is in a bank
69
What are the pros of an overdraft?
Flexible
| Cheaper source of short-term finance
70
What are the cons of an overdraft?
High interest
Agreed in advance
Expensive if used over long-term
71
What is trade credit?
A source of finance provided by supplies where it allows goods to be paid for at a later date
72
What are the pros of trade credit?
Discounts for early payments
| Allows to "buy now and pay later"
73
What are the cons of trade credit?
It may not be available from all suppliers
| Additional charges may be incurred if payment not made on time
74
What is a loan?
An amount of money that is borrowed for a fixed period of time that must be paid back plus an agreed rate of interest
75
What are the pros of a loan?
Regular repayments help with budgeting
| Large purchases can be made
76
What are the cons of a loan?
Interest
| Lenders may ask for security
77
What is share capital?
The money raised by selling additional shares
78
What are the pros of share capital?
The money does not have to be paid back
| Large amounts can be made
79
What are the cons of share capital?
Only available in Ltd's or Plc's
Involves costs
Future profits have to be shared with more owners
Shares sold may earn value after sold
80
What is venture capital?
Money that is invested by specialist investors
81
What are the pros of venture capital?
Venture capitals provide experience and business contacts
| Large sum of money
82
What are the cons of venture capital?
Costs high
Danger of control of the business being lost
Loss profits
83
What is crowd-funding?
Money that is raised by a large number of people
84
What are the pros of crowd-funding?
Providing access to large amounts of money quickly
| Raising awareness of a new business or product
85
What are the cons of crowd-funding?
Providing cheap or free products costs money
| New product ideas could be copied unless properly protected
86
What factors affect which source of finance is appropriate?
Age of the business
| How long the finance is required for
87
Define short-term sources of finance
Finance required for 12 months or less
88
Give examples of short-term sources of finance
Overdrafts
| Trade credit
89
Define long-term sources of finance
Finance that is required for more than a year
90
Give examples of long-term sources of finance
```
Personal Savings
Loans
Venture Capital
Crowd-funding
Share Capital
Retained Profit
```
91
Define liability
Being legally responsible for any debts or financial commitments of a business
92
What are the two types of liability?
Unlimited and limited liability
93
What does unlimited liability mean?
The owner is responsible for all debts
94
What does limited liability mean?
The business is responsible for all debts, not the owner
95
Give examples of types of businesses
Sole Trader
Partnership
Limited Company
96
What are unincorporated businesses?
Businesses that are not a separate legal entity (legal action is taken against owner)
97
What are incorporated businesses?
Businesses that are a separate legal entity (legal action is taken against business)
98
What are the pros of sole traders?
```
Owner makes all decisions
Usually small - so little captial needed
Very easy to setup
Can respond quickly to changes in customer needs
Individualised services can be provided
Accounts can remain private
```
99
What are the cons of sole traders?
```
High costs
Difficult for the owner to take holidays
Long hours
Illness can cause problems
Unlimited liability
Extra capital may be hard to raise
```
100
What is the deed of a partnership?
An agreed legal document that outlines the rules by which a partnership will be run
101
What is included in a deed of partnership?
Who the partners are
How much each partner has invested
How profit is shared
The process when a partner leaves or joins
102
What is a limited partnership?
When at least one partner does not play an active role in the business
103
What are the pros of partnerships?
```
Easy to setup
Responsibilities are shared
Allows family ownership of the business
Acounts can remain private
Capital can be obtained from partners
Usually small - so need less capital
```
104
What are the cons of partnerships?
Possible disagreements
External capital may be difficult to obtain
Ordinary partners have unlimited liability
Possible legal costs of drawing up a deed
105
What are dividends?
Profit left over that is paid to shareholders
106
What are the pros of ltd's?
Shares can be sold
Limited liability
Finance can be raised by selling shares
Staff are likely to have specialist skills
Extra capital makes growth easier
Likely to have more staff so easier to cope with absences
107
What are the cons of ltd's?
Accounts are not private
Shares can only be sold privately
Profits shared
Decisions may take longer
108
What are the pros of franchising?
```
Free advertising
Easier to borrow
Most problems will have been overcome
Good chance of success
Training provided
Franchisor will provide support and help
```
109
What are the cons of franchising?
```
Can't make decisions
Cannot sell the franchise without the agreement of the franchisor
Have to pay royalties to the franchisor
Have to buy supplies from franchisor
Risk that franchise can be removed
```
110
What determines where a business chooses to locate?
The type of business activity
Proximity to resources and competitors
The nature of the permises required
111
What must a business locate close to?
It's competitors
It's labour
It's market
It's materials
112
What has the internet done to business location?
Removed the need of it
113
Why has the internet removed the need of business location?
It gave businesses access to a wider range of customers and removed the need for large physical presmises
114
What is marketing about?
Identifying your customers and then finding out what they want
115
What are the four p's?
Product
Price
Place
Promotion
116
What are methods of promotion?
Advertising
Branding
Sales Promotion
Public Relations
117
What does place refer to?
Where a product is sold and how it gets there
118
Define business plan
A formal document outlining what a business wants to achieve and how it intends to do be sucessful
119
What should a business plan include?
```
Marketing Mix
Business Idea
Market Research
Aims and Objectives
Financial Forecasts
Sources of Finance
Location
```
120
What two financial forecasts can be used in a business plan?
Break-even Calculations
| Cash Flow Forecast
121
Why should a business do businesses plan?
Survival
Finance
Risks
Objectives
122
What is the first priority for a business?
Survival
123
What are the reasons for a business to fail?
Poor Plans
Not Knowing The Market
Poor Financial Control
124
What is the most common cause of business failure?
Running out of cash
125
Define stakeholder
People or groups who have an interest in the activites of a business as they may be affected by them
126
Give examples of stakeholders
```
Customers
Suppliers
Owner
Employees
Local Authorities
```
127
What are the two types of stakeholders?
Internal and external stakeholders
128
Define an internal stakeholder
People or groups who are directly involved in the daily activites of a business
129
Define an external stakeholder
People or groups who are not involved in the daily activites of a business, but are affected by them
130
What actions may stakeholder groups take?
Protests
Boycotts
Negative Publicity
131
Give an example of stakeholder groups that may have conflict
Owners & Managers - Profit-related objectives
| Customers - Non-profit related objectives
132
How do businesses resolve conflict?
Identify the cause
Identify solutions
Negotiate
Agree on a solution
133
What are the benefits of meeting stakeholder needs?
Improved relationships
Access to a wider network of contacts
Improved reputation
134
What are the drawbacks of meeting stakeholder needs?
Time consuming
| Risk of upsetting other stakeholders
135
Where is technology used in business?
Payments
Social Media
Communication
E-commerce
136
How does technology affect sales?
Customers will:
Have more infomation
Have access to much wider range of products
Will share their experiences
137
How does technology affect costs?
Better technology means more efficient production so less staff but also equipment is expensive and staff will need training
138
How does technology affect marketing?
More customers
| More information, so firms need to be competitive
139
What is the purpose of legislation?
Consumer Protection
Employee Protection
Prevent Exploitation
140
What does the equality act prevent?
Gender, religious, sexual orientation, disability, race and age discrimination
141
Whats the impact of complying with laws?
Time costs
| Financial costs
142
Whats the impact of not complying with laws?
```
Fines
Legal costs
Loss of revenue
Cost of replacing products
Bad publicity
Difficulties in recruiting
```
143
Define economy
The production and consumption of goods and services within a country
144
What does the economic climate refer to?
Consumer Income
Business Confidence
Business Investment
Job Vacancies
145
What are the four different climates of the business cycle?
Recession
Recovery
Boom
Slump
146
What are the economic factors?
```
Interest Rates
Exchange Rates
Inflation
Unemployment
Taxation
```
147
Define interest rates
The amount charged by a lender for borrowing a sum of money
148
Who sets the base interest rate?
The Bank of England
149
How does interest affect consumers?
Higher mortgage payments
| Borrowing less money
150
How does interest affect business spending?
Reduce investment
Reduce production
Look to save money
151
Define exchange rate
The price of one currency expressed in terms of another currency
152
Define inflation
A general and sustained increase in price levels
153
How does inflation affect businesses?
Reduced sales
Lower investment
Lower wages
Harder to compete with foreign firms
154
Define unemployment
People who are able, available, willing and actively seeking work, but do not currently have a job
155
What are the positive effects of unemployment?
Larger pool of people - wider choice when recruiting
| Wage don't need to be as attractive
156
What are the negative effects of unemployment?
Incomes lower - less customer spending
157
Define taxation
A financial charge imposed by a government to fund various public expenditures
158
Give examples of taxes
```
Income Tax
Corporation Tax
Value Added Tax
National Insurance
Council Tax
```
159
Define direct tax
Tax paid directly to the government
160
Define indirect tax
Tax collected by other organisations and paid indirectly to the government
161
Give examples of direct uk taxes
Income tax and corporation tax
162
Give examples of indirect uk taxes
Value added tax and landfill tax
163
How does taxation affect bussines?
Reduction of profit - more money a business has to spend
| Reduction of revenue - less consumer income
164
How do business respond to changes in legislation?
Increase minimum wage -
Reduce staff
Increase prices
Stricter health and safety rules -
Withdraw products
Make changes to products
165
How do business respond to changes in economic climate?
Making changes to the product
Targeting different customers
Changing prices
