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Business Studies GCSE > Business In The Real World > Flashcards

Business In The Real World Flashcards

1
Q

What is a business?

A

• A business is an organisation
which trades to make money,
these come in all shapes and sizes

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2
Q

What is a product?

A

• A product is anything that is
capable of satisfying
customer needs, it is
tangible and can be
touched

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3
Q

Examples of products

A

• Examples:
– Cars
– Washing machines
– Nail varnish
– X box consoles
– Mobile phones

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4
Q

What is a service?

A

• A service is an act that a business person carries
out for you in exchange for money

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5
Q

Examples of a service

A

– Dental treatment
– Accountancy
– Travel agents
– Gardening
– Cleaning
– Hairdresser

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6
Q

What are the four factors of production?

A

Land
Labour
Capital
Enterprise

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7
Q

What is land?

A

• Land– somewhere to produce the goods e.g. a farm

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8
Q

What is labour?

A

• Labour– people to work in the business e.g. farm
workers

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9
Q

What is capital?

A

• Capital– money to get the business started

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10
Q

What is enterprise?

A

• Enterprise– This is the drive or motivation from
the owners to start a business

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11
Q

What is opportunity cost?

A

When making
important
decisions in
business, the
cost of not
selecting an
alternative is
an opportunity
cost

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12
Q

What are the four reasons for starting a business?

A
  • To produce goods
  • To supply a service
  • To distribute products
  • To fulfil a business opportunity
  • Providing a good or service to benefit others
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13
Q

What is social enterprise?

A

• A social enterprise is a business which
has the objective of trading to help
people or the planet, rather than
making a profit

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14
Q

What are the three types of business?

A

Primary sector
Secondary sector
Tertiary sector

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15
Q

What is the primary sector?

A

-The primary sector
extracts raw materials
from the planet

In the primary sector
goods such as; wheat
and barley could be
grown on farms
Other goods could be
collected such as;
strawberry picking or
fishing

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16
Q

What is the secondary sector?

A

In the secondary
sector goods are
manufactured from raw
materials into finished
goods

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17
Q

What is the tertiary sector?

A

The tertiary sector is
all the support services
for business

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18
Q

What is enterprise?

A

• This can be defined as: A company or
business. It also can mean a complex project

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19
Q

What is an entrepreneur?

A

• An entrepreneur can be defined as: A person
who starts a business and takes on financial
risk in the hope of making a profit

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20
Q

What are the four characteristics of entrepreneurs?

A

Hard working
Initiative
Organised
Risk taker

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21
Q

What are inflation rates?

A

• Inflation is: The rate
of increase in prices
for goods and services
– If these go up in the
UK then raw materials
required to make
goods may increase
– This will increase the
costs of the business
– This will have an
impact on profit

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22
Q

What are interest rates?

A

Interest rates are the cost of borrowing
UK interest rate: This is set by the Bank of England. When
this rises the cost of borrowing increases
A rise interest rates will impact a business because if they
have loans or overdrafts these will now cost them more
Also their customers may now have less money as the
cost of their borrowing has increased, so sales may suffer

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23
Q

What are unemployment rates?

A

• The rate of unemployment in
the UK is those people without
a job who have been actively
seeking work in the past 4
weeks and are available to
start work in the next 2 weeks.
• More unemployed means that
a business will have more
applicants per job that they
advertise
• More unemployed also means
that many households will be
on lower incomes so sales and
profits may fall

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24
Q

What are exchange rates?

A

• Exchange rates are: the cost of one currency expressed in
terms of another e.g. $ to £
• Exchange rates change when the demand for a currency
goes up or down. Demand could change for many reasons,
such as increased business activity or rising interest rates in
a country
• If the pound is strong (increases) then a business that
imports will find that the goods become cheaper, however
if they export the goods will become dearer (SPICED)

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25
Q

What are employment laws?

A

• The National Living Wage is
higher than the National
Minimum Wage - workers
get it if they’re over 25.
• The Government’s National
Living Wage was introduced
on 1 April 2016 for all
working people aged 25
and over, and is set at £7.20
per hour.

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26
Q

What are health and safety laws?

A

• Health and Safety at work Act
1974
• All workers have a right to work in
places where risks to their health
and safety are properly controlled
• Health and safety is about
stopping you getting hurt at work
or ill through work
• The employer is responsible for
health and safety, but the
employees must help

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27
Q

What are consumer laws?

A

Consumer Rights Act 2015
Goods must be; as
described, fit for purpose
and satisfactory quality
This will have an impact on
costs for a business as they
need to make sure the goods
are “satisfactory quality”

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28
Q

What is a sole trader?

A

▪ A sole trader is a business
which has only one owner
▪ Also known as a sole
proprietor

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29
Q

What are examples of a sole trader?

A

• Small shop
• Plumber
• Electrician
• Cleaner
• Hairdresser
• Website designer

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30
Q

What is unlimited liability?

A

This means that the
business and the owner are
ONE legal entity.
In short if a customer sues
the business, they will in
fact sue the owner
If the business gets into
debt, the owner gets into
debt

31
Q

What is a partnership in business?

A

• Partners are all joint
owners of the business
• The partners of the
business may do decision
making themselves or they
may employ manager

32
Q

What are examples of partnerships?

A

• Doctors
• Dentists
• Accountants
• Solicitors
• Vets

33
Q

What is limited liability?

A

Limited liability protects a business owner’s personal
funds from being used to pay business debts.

34
Q

What is private limited company?

A

• Shares cannot be bought by the public, the share
issue is limited (hence the ltd) to friends and
family who can buy shares in the business
• Owners control who buys the shares
• Minimum 2 people – no maximum

35
Q

What is a public limited company?

A

• Shares can be bought and sold by
anyone on the Stock Exchange
• Can expand by selling more shares
• Limited liability

36
Q

What is not-for-profit?

A

• A not-for-profit organisation is one that has
the objective of something other than making
a profit (but it still might make a profit)
• They are dedicated to a social cause
• Surplus revenue is used to further their
mission, and is not paid to shareholders
• They have limited liability

37
Q

What is survival?

A

• In its first year of trading, a start-up
business may aim to just survive

38
Q

What is survival as an objective?

A

• The objective is to reach
a sustainable level of
sales that allows the
business to reach its
break-even point

39
Q

What is profit maximisation?

A

• Profit is total revenue (revenue into a
business) minus total costs (costs out of a
business)

40
Q

What are two ways a business to maximise profit?

A

– Increase revenue into the business
– Reduce costs out of the business

41
Q

What is growth?

A

• As businesses trade and develop
over time, the objectives may
change and they owners may wish
to grow the business

42
Q

What is growth domestic?

A

• The business may wish
to increase the number
of shops or outlets that
they have in the UK
(this is the domestic or
home market)

43
Q

What is international growth?

A

• The business may wish
to expand into other
countries, for example
Europe (this is the
international market)

44
Q

What is market share?

A

• A business may aim to increase their market
share. This is the percentage of sales held by
a business in a market.

45
Q

What is customer satisfaction?

A

• Some businesses will
need to set customer
satisfaction objectives
to meet a quality
standard

46
Q

What are social objectives?

A

• Social enterprises are
businesses trading for social
or environmental purposes
• Many commercial
businesses would consider
themselves to have social
objectives, but social
enterprises are distinctive
because their social and/or
environmental purpose is
absolutely central to what
they do
• Unlike a charity, they relay
on trade not donations to
make the money

47
Q

What are ethical objectives?

A

• Ethics is the principal of
knowing right decisions
from wrong ones in
business
• Having ethical
objectives is expensive
and will cost the
business money

48
Q

What is shareholder value?

A

• Shareholder value is; where shareholders, in a
business, earn a return from their investment
which is greater than their required rate of
return
• This means the business may make decisions
to buy or sell goods just to maximise the
amount of money they can give back to their
shareholders, possibly at the expense of ethics
or the environment

49
Q

What is the purpose of setting objectives?

A

(a) Setting business objectives gives specific
targets by which business performance can be
measured
(b) Setting objectives can be used to motivate
workers to be more productive
(c) Setting objectives clarifies business direction
and aids decision making

50
Q

What is the role of objectives?

A

• Objectives can help to keep the owner and
the employees all working towards
common goals
• Objectives help the owner keep an eye on
profitability, costs and profit margins

51
Q

Why dont all businesses have the same objectives?

A

A. Business size will have an impact on objectives
B. Level of competition faced will also change the
objectives
C. Type of business; sole trader, partnership, ltd or
plc

52
Q

What are not for profit objectives?

A

• Social enterprises, e.g. Big Issue VIDEO
• These types of organisations might have these
objectives:
– Aim to tackle the effects of poverty
– Provide jobs and tackle unemployment
– Help children with a social need
– Tackle the issue of an aging population
– Help the homeless
– Education and training initiatives

53
Q

What is a stakeholder?

A

• A stakeholder is defined as anyone who has an
interest in a business and is affected by the
actions of the business

54
Q

What are owners?

A

• Role; to start and run a
business to make a
profit
• Objectives; to get a
good return on any
money they have
invested in the business

55
Q

What are employees?

A

• Role; to work in a
business in return for
wages
• Objectives; To have job
satisfaction, to have job
security so they can pay
their bills, to get
promoted

56
Q

What are customers?

A

• Role; to buy goods or
services from the
business
• Objectives; to get a
good choice of goods or
services, to get value for
money, to get quality
products at low prices,
to have the opportunity
to buy innovative
products

57
Q

What is the local community?

A

• Role; For those who live
near a business who may be
affected by its operations
• Objectives; They want the
business to provide jobs,
they want the business to
operate in an ethical way,
they may also want them to
buy from local suppliers and
to not pollute the local
atmosphere

58
Q

What are suplliers?

A

• Role; to provide the
business with goods or
services that they might
need
• Objectives; they want to
charge high prices to
make a profit, they want
customer loyalty with
repeat orders, they also
want payment on time,
they may also want larger
orders

59
Q

What is a possible stakeholder conflict?

A

• Employees want
higher wages but
owners and
shareholders don’t
want to pay higher
wages, as this will
raise costs and
therefore impact
profit

60
Q

What is cost of premises?

A

• Cost of rent for shops in
town centres and
shopping centres will be
higher than elsewhere
• Premises are often the
second largest cost after
wages
• Small businesses that can
start from home can
make a huge cost saving

61
Q

What is the cost of grants?

A

• Some businesses may
decide to open in a
certain location because
they have been given a
government grant
• Government grants do
not need to be paid back,
they are given to
businesses to encourage
them to set up in areas
which have high
unemployment

62
Q

Why is labour a location factor?

A

• Adequate supply of
cheap and skilled labour
is necessary for
businesses
• Some businesses may
move to areas of high
unemployment so there
is a large pool of
applicants for any jobs
they advertise

63
Q

What is proximity to materials?

A

• A business start-up will need to think about its
location in terms of proximity to materials
• The closer a business can be to the raw
materials it needs for production, the lower the
costs of production will be

64
Q

What is a business plan?

A

• A document which sets
out the future plans for a
business
• It is how an entrepreneur
will explain how they will
turn their idea into a
successful business
• The entrepreneur may
then show the plan to a
bank to ask for a business
loan

65
Q

What are the purposes of a business plan?

A

• To help set up a new business
• To help the business raise finance
• To help the business to set objectives
• To outline how functions of the business will be
organised

66
Q

What is fixed costs?

A

• Fixed costs are costs that do NOT vary with the level of
business
• These are all running costs of the business that do not
fall into variable costs. These are costs that you need to
pay no matter how much goods or services you
produce.

67
Q

What is variable costs?

A

• Variable costs are costs that DO vary
with the level of trade
• These are the direct costs associated
with the production of the
goods/services which will be sold
• This will include the cost of the
materials used to produce the
goods/services, along with the direct
labour cost

68
Q

What are total costs?

A

• Total costs is calculated when all your fixed
and variable costs are added together

69
Q

What is sales revenue?

A

• Money into your business through sales is
called sales revenue
• This will be cash paid by customers for your
goods

70
Q

What is the formula ro calculate sales revenue?

A

• Sales revenue is calculated when you multiply the
price of the goods by the quantity you have sold

71
Q

Whatbp are the two main types of profit?

A

Gross profit
Net profit

72
Q

What is gross profit?

A

Gross profit (GP) is sales revenue
(SR) minus variable costs (VC)

73
Q

What is net profit?

A

Net profit (NP) is sales revenue (SR)
minus fixed (FC) AND variable costs
(VC)

74
Q

What is the net profit formula?

A

Np = SR = (FC + VC)

Business Studies GCSE (2 decks)

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