Business Growth & Decline Flashcards
(24 cards)
Issues:
= Loss of
- Jobs in economy
- Production from business
- Confidence
Issues for Stakeholder in Event of Liquidation - Society/Economy
Issues:
- Lowest priority (unless special circumstance)
Issues for Stakeholder in Event of Liquidation - Shareholders
Issues:
- Loss of jobs
- Have the right to be paid after secured creditors + liquidator fee
Issues for Stakeholder in Event of Liquidation - Employees
Issues:
- Only payed if they have legal claim and/or money left over from payment of higher priorities (secured creditors, employees, Liquidator fee)
Issues for Stakeholder in Event of Liquidation - Unsecured Creditor
Issue:
- Possibility of loss of personal assets to pay debts, directorship, fines or imprisonment
Issues for Stakeholder in Event of Liquidation - Directors/Owner’s
Factors:
- Failure to adapt to changes in external environment
- Outputs become ‘outdated’
- Failure to respond to or increase in competition
- Lack of capitalisation due to decline in profits and poor management of operational costs
(all stems from poor management)
Factors Contributing to Business Decline
Close down business in orderly way, making money by selling off what’s left (only when business not too small), and paying creditors. Liquidator is appointed to do this.
Liquidation
Someone appointed to see what can be done with business, if the business can not continue (be saved) it goes into liquidation, feature of incorporated companies.
Voluntary Administration
Cessation forced by others. Can go through Voluntary Administration or Liquidation
Involuntary Cessation
Process:
1. Board and owner’s decide to shut
2. Pay debts and obligations to secured and unsecured creditors
Process of Voluntary Cessation
Cessation by own accord: retirement, fulfilled purpose
Voluntary Cessation
Company merges or acquires with another company in the same industry, to increase market share and control of market.
Horizontal Integration
Expands operations by taking control of their suppliers. Increases efficiency and reduces cost
Backward Vertical Integration
Expands operations by taking control of retailers who sell their product, move closer to consumers by selling to them directly.
Forward Vertical Integration
1 company purchases another (can keep the company under same brand name - brand recognition)
Acquisition
2 companies join to become a single entity to strengthen market presence
Merger
Influence:
- Responsible for success of business, based off decisions + management surrounding business operations.
Main Stakeholders & Influence - Managers & Owners
Influence:
- Ultimately responsible for success of a business, based on their preferences and decisions.
Main Stakeholders & Influence - Consumers
Influence:
- Possess voting rights on major business decisions, can also request/pressure things from business/board.
Main Stakeholders & Influence - Shareholders
Influence:
- Quality of business outputs and operations
Main Stakeholders & Influence - Employees
Influence:
- Expect organisation to do certain things/actions (i.e. protect the environment)
Main Stakeholders & Influence - Society/General Public
Any individual or group who has an interest in or is affected by the activities of a business
Stakeholder
Creditor that has to gain legal claim over what the business owes them, different from secured creditor as they have priority claims over assets
E.g. Suppliers
Unsecured Creditor
Creditor that has legal claim + high priority - e.g. banks have collateral - as they can close the business down, as the business has a legal obligation to give them what they are owed.
Secure Creditor
