Business - Ch.1 Exploring the World of Business & Economics Flashcards
Introduction to the book titled Business (33 cards)
What is ‘free enterprise’?
The system of business, in which individuals decide what to produce, how to produce it, and at what price to sell it, is called free enterprise.
What is a definition for ‘business’?
Business is the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs.
What does a business need to do to be successful?
To be successful, a business must perform three activities:
* It must be organized,
* it must satisfy needs, and
* it must earn a profit.
To be organized, what four resources must be combined?
For a business to be organized, it must combine four kinds of resources:
* material,
* human,
* financial, and
* informational.
What are examples of materials resources organized by business?
Business must organize materials such as raw material for manufacturing as well as buildings and machinery.
What are human resources organized by business?
Human resources are the people who furnish their labor to the business in return for wages.
What are financial resources organized by business?
The financial resource is the money required to pay employees, purchase materials, and generally keep the business operating.
What are information resources organized by business?
Information is the resource that tells the managers of the business
how effectively the other three resources are being combined and used.
What are three major categories of business?
businesses are usually organized as one of three specific types.
* Manufacturing businesses process various materials into tangible goods.
* Service businesses produce services, such as haircuts, legal advice, or tax preparation.
* Marketing Intermediaries buy products from manufacturers
and then resell them.
What is the main objective of a business firm
The ultimate objective of every firm must be to satisfy the needs of its customers.
When firms lose sight of their customers’ needs, they are likely to find the going rough. However, when businesses understand their customers’ needs and work to satisfy those needs, they are usually successful.
What is ‘sales revenue’ in business?
A business receives money (sales revenue) from its customers in exchange for goods or services.
What is meant by ‘business expenses’?
A business must pay out money to cover the expenses involved in doing business.
What is meant by ‘profit’?
Profit is what remains after all business expenses have been deducted from sales revenue.
If the firm’s sales revenues are greater than its expenses, it has earned a profit.
What is meant by ‘loss’ in business?
A negative profit, which results when a firm’s expenses are greater than its sales revenue, is called a loss.
A business cannot continue to operate at a loss for an indefinite period of time. Management and employees must find some way to
increase sales revenues and reduce expenses to return to profitability.
If some specific actions are not taken to eliminate losses, a firm may be forced to file for bankruptcy protection.
What is meant by ‘stakeholders’ in business?
The term stakeholders is used to describe all the different people or groups of people who are affected by the policies, decisions, and activities made by an organization.
Although many people—especially stockholders and business owners—believe that profit is literally the bottom line or most important goal for a business, many stakeholders may be just as concerned about a firm’s social responsibility record.
Although stockholders and business owners sometimes argue that the money that a business contributes to charitable causes could have been used to pay larger dividends to stockholders or increase the return on the owners’ investment, the fact is that most socially responsible business firms feel social responsibility is the right thing to do and is good for business.
What is meant by the ‘risks of business ownership’ and
Profit is also the payment that business owners receive for assuming the considerable risks of business ownership.
One of these is the risk of not being paid. Everyone else—employees, suppliers, and lenders—must be paid before the owners.
A second risk that owners undertake is the risk of losing whatever they have invested into the business.
The profit earned by a business becomes the property of its owners.
Thus, in one sense, profit is the reward business owners receive for producing goods and services that consumers want.
A business that cannot earn a profit is very likely to fail, in which case the owners lose whatever money, effort, and time they have invested.
What is the significance of a nation’s economic system?
To satisfy society’s needs and make a profit, a business must operate within the parameters of a nation’s economic system.
What is meant by ‘economics’?
Economics is the study of how wealth is created and distributed.
By wealth, we mean “anything of value,” including the products produced and sold by business.
How wealth is distributed simply means “who gets what.”
What is ‘scarcity’ in economic terms?
Scarcity means “lack of resources”—money, time, natural
resources, and so on—that are needed to satisfy a want or need.
Business firms, governments, and to some extent society must decide what is most important. Each group must deal with scarcity when making important decisions
What are the two economic perspectives?
Experts often study economic problems from two different perspectives: microeconomics and macroeconomics.
Define ‘microeconomics’.
Microeconomics is the study of the decisions made by individuals and businesses.
Define ‘macroeconomic’.
Macroeconomics is the study of the national economy and the global economy.
Macroeconomics examines the economic effect of national income, unemployment, inflation, taxes, government spending, interest rates, and similar factors on a nation and society.
What determines the type of economic system that a nation has?
The decisions that individuals, business firms, government, and society make, and the way in which people deal with the creation and distribution of wealth determine the kind of economic system, or economy, that a nation has.
What are two ways that economic systems of the world have differed?
The economic systems of the world have differed in essentially two ways:
1. The ownership of the factors of production and
2. How they answer four basic economic questions that direct a nation’s economic activity.
