Business Studies Preliminary Revision (Year 11) Flashcards
(191 cards)
1
Q
Define External Influences
A
Influencing factors outside of the business’s control.
2
Q
Define Economic As An Influence (External)
A
Economic influence is the effect fluctuations in the market have on the performance of the business.
3
Q
Define Social As An Influence (external)
A
How the publics perception, preferences and trends change over time.
4
Q
Define Internal Influences
A
Influencing factors that the business has control over
5
Q
Define Business Culture As An Influence (Internal)
A
The set of behavioural and procedure norms that can be observed within a company.
6
Q
Define Geographic As An Influence (External)
A
The surrounding physical and surrounding area of a business.
7
Q
Define Location As An Influence (Internal)
A
A company’s physical resources such as their location, equipment and facilities.
8
Q
Define Products As An Influence (Internal)
A
The good or service the business is producing
9
Q
Importance Of A Business Plan on Success Or Failure
A
Reveals areas of strength and weakness, opportunities and threats, and shows the owner the probability of success.
10
Q
Define Business Plan
A
A written summary and evaluation of the business idea, including the company’s future goals and strategies to achieve them.
11
Q
Define Sources Of Finance
A
Where the business accumulates their money from to fund business activities.
12
Q
Define Short-Term Borrowing
A
Funds that will be repaid within 12 months.
13
Q
Define Long-Term Borrowing
A
Funds borrowed for periods longer then 12 months.
14
Q
Characteristics, Advantages And Disadvantages Of An Overdraft
A
Characteristics:
Short-term borrowing
helps with short-term liquidity issues such as seasonal sales fluctuations.
Advantages:
- Interest is only charged on the amount used
- No regular payments (paid as used)
- Acts as a flexible line of credit (convenient)
Disadvantages:
- Requires high agreed limits and some security
- Variable interest rates can lead to unpredictable costs
- Often have higher interest rates than other forms of credit.
15
Q
Characteristics, Advantages And Disadvantages Of Commercial Bills
A
Characteristics:
- Borrower receives sum immediately with interest at a future date.
- Flexible in terms of interest and repayment periods
- Secured against assets
Advantages:
- Large amounts available for short-term financing.
- Flexible repayment terms
Disadvantages:
- Secured against business asset (risk)
16
Q
Define An Overdraft
A
When businesses are allowed to overdraw their account up to an agreed limit in order to cover temporary cash shortfalls.
17
Q
Define Commercial Bills
A
Short-term loans are issued by financial institutions for larger amounts, usually over $100,000 for 30 to 180 days.
18
Q
Characteristics, Advantages And Disadvantages Of A Mortgage
A
Characteristics:
- Used to finance property purchases
- Property cannot be sold or used as security for further borrowing until repaid
- Can be paid over a period of up to 30 years
- Repaid with interest through regular payments over an agreed period.
Advantages:
- Suitable for long-term asset purchase
- Lower interest rates compared to unsecured loans
- Owns the asset at the end of the payment period
- Allowed to use asset while paying it off
Disadvantages:
- Long-term commitment and significant interest over time
- Property tied up as collateral
- Interest rates can be variable
19
Q
Characteristics, Advantages And Disadvantages Of Factoring
A
Characteristics:
- Provides immediate funds within 48 hours (up to 90% receivables)
- Improves cash flow gearing
Advantages:
- Immediate access to funds (convenience)
- No need to worry about the collection process
- Access to cash quickly
Disadvantages:
- Business does not receive the full amount of accounts.
- Greater risk due to potential unpaid debts
- Devalues current assets and therefore liquidity
20
Q
Define Factoring
A
Selling accounts receivable (owed money) at a discount to a firm that specialises in collecting accounts receivable.
21
Q
Define Unsecured Notes
A
A long-term loan that isn’t secured against an asset.
22
Q
Define Mortgage
A
A loan secured against the property of the borrower
23
Q
Define Debentures
A
A long-term loan issued by a company for a fixed rate of interest.
24
Q
Unsecured Characteristics, Advantages And Disadvantages Of Unsecured Notes
A
Characteristics:
- Higher interest rate due to increased risk for lender
Advantage:
- Useful for raising funds without collateral
Disadvantage:
- higher interest costs
- Greater risk for investors
25
Characteristics, Advantages And Disadvantages Of Debentures
Characteristics:
- Fixed interest payments
- Secured by the company assets (tangible)
- The amount of profit made by the company doesn't have an effect on the. rate of interest
Advantages:
- Predictable interest payments
- No impact on company profits
Disadvantages:
- Long-term commitment
- Fixed interest regardless of the companies performance
26
Characteristics, Advantages And Disadvantages Of Leasing
Characteristics:
- Two types: Operating (short-term - cancellable) or financial (long-term - non-cancellable)
Advantages:
- lower cost compared to other financial methods
- Maintains control of ownership
- 100% financing (no deposit)
- Leasing payments are tax-deductible
- Includes maintenance, insurance and financing methods
- Allows use of an asset without purchase
Disadvantages:
- Higher interest charges
- Long-term commitment to financial leasing
- Don't own assets at the end of the leasing period
27
Define Leasing
Payments for the use of equipment owned by another company.
28
Define Private Equity
Money invested in a private company not on the ASX (used to raise capital for future expansion or investment in the business).
29
Define Shares
Raising funds by selling part ownership of a company
30
Characteristics, Advantages And Disadvantages Of Shares
Characteristics:
- Only available to companies
- Publically listed companies can issue shares on the Australian Securities Exchange (ASX) through an initial public offering (IPO)/ going afloat.
Advantages:
- Access to significant capital
- Increase public profile
Disadvantages:
- Expensive and complex process
- Lose part ownership of company
31
Define Private Investors
Attracting investors with a strong business plan, while not being on the Australian Securities Exchange (ASX).
32
Characteristics, Advantages And Disadvantages Of Private Investors
Characteristics:
- Investors contribute funds for a share of the profits and equity.
- Investors often provide support and advice.
Advantages:
- Access to larger amounts of capital
- Valuable business advice and support
Disadvantages:
- Loss of full control over the business
- Investors have a say in business operations.
33
Define Debt Finance
short or long-term borrowing of money from external sources (e.g. mortgage, unsecured notes, debentures, or overdrafts).
34
Define Equity Finance
Funds contributed by the business owners either internally or externally (e.g. retained profits or shares).
35
What are the skills of management?
Interpersonal, communication, strategic thinking, vision, problem-solving, decision-making, flexibility, adaptability to change, and reconciling the conflicting interests of stakeholders.
36
What Are The 3 Management Approaches
Classical, Behavioural and Contingency
37
How to increase staff involvement
Innovation, motivation, mentoring, training.
38
Define Behavioural Approach (Management Approach)
Management as leading, motivating, communicating, teams/ flat organisation structure, democratic leadership style.
39
Define Classical Approach (Management Approach)
Management as planning, organising and controlling, hierarchical organisation structure, autocratic leadership style.
40
Define Contingency Approach (Management Approach)
Adapts to changing circumstances (mix of classical and behavioural management approaches).
41
Define cash flow statement
A financial statement that shows how cash entered and exited a company during a set period (categorised by operating, investing or financing activities).
42
Causes for resistance to change in employees (inertia)
Deskilling, acquiring new skills, loss of career prospects/ promotional/ job opportunities/ securities, Transferring to new teams/ locations.
43
Define Balance Sheet
A statement of a business's assets, liabilities and capital (What the business owes and owns).
44
Deinfe Income Statement/ Profit And Loss Statement
A financial report that shows a company's revenues, expenses and net profit or loss over a given time.
45
Target Market
Males aged 25-45 (Demographic - Gender, Psychographic - Lifestyle)
46
How Many Employees Are In A SME?
Small - 5-19
Medium - 20-199
Legal Structure - Size, Ownership and Finance
47
What Is The Marketing Mix
Product, Price, Place, Promotion
48
What Is The Extended Marketing Mix?
(Product, Price, Place, Promotion)
Process, Physical evidence, People.
49
Define HR
Human Resources (HR) is the department within a business that is responsible for employees.
50
What Are The Stages Of The HR Process?
1) Acquisitions (Identifying staffing needs, recruitment, selection) - e.g. external/ internal recruitment.
2) Development (Training, development) - e.g. job rotation or mentoring.
3) Maintenance (Monetary and non-monetary benefits) e.g. pay rate and bonuses or work conditions and fringe benefits.
4) Separation (Voluntary and involuntary)
51
What Are The Transforming And Transformed Resources In The Production Process? (Operations)
Transformed:
M - Materials
I - Information
C - Customers
Transforming:
H - Human Resources
F - Facilities
52
What Are The 3 Quality Management Strategies?
Quality Control (QC) - Reactive - Inspections at various points in the production process e.g. The Chef at HBE checking each burger before it goes out.
Quality Assurance (QA) - Proactive - Internationally established standards.
Quality Improvement (QI):
Continuous Improvement (CI) - e.g. Quality circles.
Total Quality Management (TQM) - Every staff prioritising quality.
53
What Are The Different Marketing Target Markets?
Demographic - Population, characteristics (e.g. Age, gender, occupation, income)
Geographic - Where they live
Psychographic - Personal characteristics (Lifestyle, personality, motives)
Behavioural - Loyalty to a product
54
What Are The Different Pricing Strategies?
Premium pricing - High prices are charged for luxurious items.
Penetration pricing - Set prices low to enter the market and gain market share (can increase price later when a customer base is established).
Skimming pricing - Setting prices high initially to make the item appear luxurious, then later lowering the price to appeal to a wide market.
55
Business Culture Influence On HBE
Emphasis on 'fun' environment/ gym membership provided/ details kept between managers = staff retention = attracting higher skilled workers = increased staff turnover time = decreased the expense of hiring and training = more profits.
56
Location on HBE
High visiblity/ lots of foot traffic = more sales = more revenue = more stock = more profit - more employees = expansion.
Limited seating = limited customers at one time = change in operation (QR ordering/ timing) = more revenue if done correct = more profit.
57
What are the different pricing strategies?
- Premium pricing
- Penetration pricing
- Skimming pricing
- Competition pricing
58
What are the the different pricing stratergies used to calculate the price?
Cost-based: a pricing method derived from calculating the total cost of producing or purchasing a product and then adding a mark-up for profit (see figure 8.27).
Market-based: a method of setting prices according to the interaction between the levels of supply and demand — whatever the market is prepared to pay.
Competition-based: choosing a price that is either below, equal to or above that of the competitors.
59
How do you calculate COGS?
COGS = Opening stock + Purchases - Closing Stock
60
How do you calculate Gross Profit
Gross Profit = Revenue - COGS (Cost Of Goods Sold)
61
What are the different sources of information?
- Small business association
- Solicitors for business registration and legal advice
- Internet sites operated by industry groups
- Accountants who have an interest in the business owner's industry and want to provide advice, not just complete tax returns
- Australian Bureau of Statistics
- Bank managers
- Websites that provide a starting point for business and have links to information
- Government assistance programs
- Trade associations for specific industry information
62
What is meant by casualisation of the workforce?
When a company shifts from employing full-time/ permanent staff to part-time/ casual staff. This reduces costs and increases flexibility of staff (less security for staff but higher pay).
63
Define ethical business behaviour?
Considering morals and externalities when making a decisions, rather then just profit (e.g. impact on the environment or future generations)
64
How to calculate the break-even point
Fixed cost (FC) ÷ (selling price per unit - variable cost per unit)
65
Describe the process of liquidation
The court may appoint an administrator who is an independent person appointed to run the business to determine if it can trade out of its problems and continue operating. If successful, the business may resume normal trading.
If unsuccessful, the business goes into liquidation. If a company is in financial difficulty, its shareholders, creditors or the court can put the company into liquidation. Liquidation, (winding up a company) occurs when an independent and suitably qualified person — the liquidator — is appointed to take control of the business with the intention of selling all the company's assets in an orderly and fair way in order to pay the creditors.
Some creditors will not be paid all the money they are owed but after creditors have been paid, any surplus cash is paid to the owners of the company.
66
Describe the process of bankrupcey
Bankruptcy can be either voluntary or involuntary, with either the business owner or a creditor applying to a court for a bankruptcy order to be made. The court then appoints a representative to collect any money owed to the business. This money, along with money raised from the sale of any assets of the business (as well as some personal assets of the owner), is then divided between the creditors.
67
What is a creditor
A person who the company owes money to
68
In which areas can a business respond to internal and external influences?
- Organisational structure
- Business culture
- Human resource management
- Operations management
69
Define services
Intangible tasks that are done for people
70
What is the nature of business?
- Quality of life
- Profit
- Employment
- Incomes
- Choice
- Innovation
- Entrepreneurship and risk
- Wealth
71
What are the 4 ways businesses can be classified?
- Size
- Geography (local, national, global)
- Industry
- Legal structure
72
What are the 4 legal structures a business can choose from?
- Sole Trader
- Partnership
- Public company (incorporated)
- Private company (incorporated)
73
What are the 4 classifications of business size?
- Micro (0-4)
- Small (0-19)
- Medium (20-199)
- Large (200+)
74
What is the primary sectors?
Involves the extraction and production of raw materials e.g. fishing or farming
75
What is the quaternary sector?
Businesses involved in the processing and transfer of information e.g. telecommunication, property, finance or education
75
What is the tertiary sector?
Businesses that provide a service
76
What are the different classifications of geographical spread?
- Local (Serves surrounding area)
- National (Operates in one country)
- Global (Based in one country but is present in other countries)
77
What is the quinary sector?
Services that have traditionally been performed in the home e.g. hospitality, tourism or childcare
78
What is the secondary sector?
Secondary - Involves processing raw materials (inputs) and producing outputs (value-adding process)
79
Explain what it means for a business to be incorporated
When a business is incorporated it becomes a company, meaning it is a separate legal entity from its owners (limited liability)
If not incorporated, it is a single legal entity and owners will face unlimited liability
80
Advantages and disadvantages of being a sole trader
Advantages:
- Full contorl over business decisions
- Simplicity (easy to set up and manage)
- Owner keeps all profits
- Flexibility (can adapt quickly to changes)
- Tax benefits (in some cases lower tax)
Disadvantages:
- Unlimited liability (owner personally liable)
- Limited resources (access to capital and resources)
- Limited skill/ experience (solely dependant on the owners knowledge and skills)
- Large workload as the owner bears all burden
- Continuity (business will cease if the owners dies or retires)
81
Advantages and disadvantages of being a partnership
Advantages:
- Shared responisility (less workload)
- Combined skills
- More capital (accumulated from both owners
- Simplicity
Disadvantages:
- Unlimimted liability (owner personally liable)
- Decison making and disputes (conflicts can arise between partners, potnetiall harming the buisness)
- Shared profits
- Limited continuity (business may disolve if one partner leaves)
82
Advantages and disadvantages of being a private company
Advantages:
- Limited liability/ sepetate legal entity (owners not personally liable)
- Continuity (company continues to exist even if an owner leaves)
- Access to capital (easier to raise capital through the sale of shares to a limited number of investors)
- Professional image (seen as more credible when a company)
Disadvantages:
- Complexity (more complex and expensive ot set up)
- Regulations (e.g. reporting and record-keeping requirements)
- Limited ownership/ decisions making (depends on number of shareholders)
- Profit sharing (profit is divided amongst shareholders in the form of dividends)
82
What type of business is Pty Ltd?
A private company
82
Advantages and disadvantages of being a public company
Advantages:
- Access to captial (raised from selling shares)
- Limited liability/ seperate legal entity (owner not personally liable)
- Contintuity (the business continues to exist regardless of changes in ownership)
- Credibility (percieved as more reliable to investors, suppliers and customers)
Disadvantages:
- Complexity (more complex and expensive establishment process)
- Regulations (extensive reporting, disclosure, and corporate governance requirements)
- Loss of control (if not managed, shareholders could have greater power then owners)
- Distribution of profit (profit is divided amongst shareholders in the form of dividends)
82
What type of business is Ltd?
A public company
83
What must be considered when deciding on a legal structure?
- Size
- Finance
- Ownership
84
What are dividends?
The profits a company distributes amongst their shareholders
85
What is the Environmental Protection Authority (EPA)?
Manage Australia's environmental protection laws to better protect nature, while supporting sustainable development.
86
What is NSW fair trading?
Promotes a fair marketplace for consumers and traders by maximising traders' compliance with regulatory requirements
87
What is ASIC?
Monitor and promote market integrity and consumer protection in relation to the Australian financial system and the payments system.
88
What tasks are performed by the local government?
Local Roads and Infrastructure - Maintaining local roads, footpaths, and public facilities.
Waste Management - Collection and disposal of household waste, recycling services.
Community Services - Managing libraries, community centers, and recreational facilities like parks and swimming pools.
Town Planning and Zoning - Regulating land use, building permits, and local development.
Public Health and Safety - Local health inspections, animal control, and ensuring safety in public spaces.
Water and Sewerage (in some areas): Providing local water supply and sewage management in rural or regional areas.
Local Economic Development - Supporting local businesses, tourism, and economic growth initiatives.
Environmental Management - Managing local environmental initiatives, such as parks, waste reduction programs, and community gardens.
88
What is ACCC?
Enforces the Competition and Consumer Act 2010 and other legislation, promoting competition, fair trading and regulating national infrastructure for the benefit of all Australians.
89
What tasks are performed by the state government?
Health Services - Managing hospitals, public health systems, and ambulance services.
Education - Administration of public schools, TAFE institutes, and some universities.
Transport - Overseeing public transport (buses, trains, ferries) and road infrastructure (roads, highways).
Police and Emergency Services - Managing state police, fire services, and emergency response systems.
Justice and Courts - Running state courts, prisons, and the administration of justice.
Housing and Infrastructure - Social housing programs, planning and development regulations.
Environment and Conservation - Managing national parks, environmental protection policies, and wildlife conservation within the state.
Water and Electricity - Regulating the supply of water and energy (electricity) within NSW.
90
Define stakeholder
Any individual or group who has interested in or is affected by the decisions of a company
91
What tasks are performed by the federal government?
Defence and National Security - Managing the Australian Defence Force and national security agencies.
Foreign Affairs and Trade - Conducting international relations, foreign aid, and trade agreements.
Immigration and Border Protection - Managing visas, immigration policies, and customs control.
Taxation - Collecting taxes through the Australian Taxation Office (ATO), including income tax and GST.
Social Security and Welfare - Administering welfare programs such as Centrelink, Medicare, pensions, and unemployment benefits.
Monetary Policy - Managing the nation's finances, currency, and banking regulation through the Reserve Bank of Australia.
National Laws and Courts - Overseeing federal courts, including the High Court of Australia, and enacting national legislation.
Environment - National environmental policies, including climate change, energy policy, and management of World Heritage Sites.
Education and Research - Funding and policy for universities, research institutions, and national education standards.
92
What is the difference between an internal and external stakeholder?
Internal stakeholder - Groups the business can influence directly
External stakeholders - Groups the business can not influence directly
93
What are some examples of an internal stakeholder?
- Owners/ shareholders
- Managers
- Employees
94
What are some examples of an external stakeholder?
- Government
- Customers
- Suppliers
- Competitors
- Society
- Creditors
- The environment
- Future generations
95
What are the different stages of the business life cycle?
- Establishment
- Growth
- Maturity
- Post-maturity (renewal or decline)
96
What are the advantages and disadvantages of being in establishment phase?
Advantages:
- Freedom of choice (high potential for creativity and innovation)
- Market positioning (ability to establish a strong brand)
- First-mover advantage (if you're early in the market, you can establish customer loyalty and set industry standards)
Disadvantages:
- High Risk (high chance of failure)
- Resource intensive (significant investment in terms of time, money and effort)
- Slow sales (initial sales may be slow)
97
What are the advantages and disadvantages of being in growth phase?
Advantages:
- Increased revenue (sales increase/ market share grow)
- Market expansion (opportunity to expand into new markets or segments, leading to higher profits)
- Economies of scale (production costs may decrease as volume increases, leading to higher profit margins)
Disadvantages:
- Increased compeititon (others may see your success and enter the market)
- Scaling challenges (rapid growth can straing resources, supply chains, workforce and management)
98
What is renewal in post-maturity?
Combats decline through assessing new opporutnities for the company. This often takes form in rebranding, starting new marketing campaigns or reviewing their product range.
98
What are the advantages and disadvantages of being in maturity phase?
Advantages:
- Stable revenue (sales and profits steady)
- Market leadership (well-established brand, most likely holding a significant market share)
- Efficiency (operations will be streamlined, leading to efficient production and distribution processes.
Disadvantages:
- Market saturation (highly competitive)
- Reduced innovation (focus often shifts to mainiting the status quo, limiting innovation)
- Price competition (to maintain market share, businesses may resort to price cuts, reducing profit margins).
99
What are on-costs?
A cost that an employer has when they employ someone, in addition to the cost of paying the person's salary or wages (e.g work health and safety requirements, long service leave, sick leave, superannuation, holiday pay, study leave, maternity and paternity leave, workers’ compensation, leave loading)
100
What is decline in post-maturity?
When sales, profit and revenue begins declining.
101
What is diversification?
Diversification is when a business merges or takes over a company in a completely unrelated industry (e.g. a bakery merges with a petrol station).
102
What is vertical integration?
When a business expands into different but related levels in the production or marketing of a product (e..g a bakery takes over a wheat farm)
103
What is horizontal integration?
When a business takes over another company who sells or makes similar products (e.g. a bakery merges or takes over another bakery)
104
What is an acquisition?
When one company purchases a portion or all of a companies shares or assets (buying out another company).
104
What is product obselescense?
When a product becomes outdated or no longer needed (e.g. dairy products which go out of date or iPhones where new ones are released)
105
What is a merger?
A business deal where 2 seperate companies combine to form 1 single legal entity/ 1 company.
106
What are externalities?
When business decisions have costs or benefits on an uninvolved third party or parties (can be negative or positive externalities)
106
What is gross profit?
The profit a company makes after deducting the costs directly associated with the production process.
106
What is net profit?
The real profit that the company eanrns after ALL expenses and taxes are sold
107
How do you calculate revenue? (a.k.a sales)
Number of products sold x price sold at
108
How do you calculate COGS? (Cost Of Goods Sold)
Opening stock + purchases - closing stock
109
How do you calculate Gross Profit?
Revenue - COGS
110
How do you calculate expenses?
Selling costs + Administrative costs + Financial costs
111
How do you calculate net profit?
Gross profit - expenses
112
What are the key features of an expansion in the economy?
- Increased consumer spending
- Business expectations are increasingly optimistic
- Increased business investment
- Sales and profits rising
- Unemployment falling
112
What are the key features of a contraction in the economy?
- Decreasing consumer spending
- Business expectations are increasingly pessimistic
- Decreasing business investment
- Sales and profits falling
- Unemployment rising
112
What is a recession?
When an economy experiences a contraction (GDP falls) for 2 consecutive quarters (6 months)
112
What are S.M.A.R.T
Specific
Measurable
Achievable
Realistic
Time-bound
112
What are the 2 types of business goals?
- Financial goals (e.g. market share or profit maximisation)
- Non-financial goals (e.g. environment or social)
113
What is Corporate Social Responsibility? (CSR)
When businesses make decisions for the good of society (beyond just making profit). This helps improve reputation.
114
What are the different ways to improve staff involvement?
- Innovation
- Motivation
- Mentoring (1 on 1)
- Training
115
What are the four key business functions?
- Operations
- Finance
- Marketing
- HR (Human Resources)
116
Define operations
The function of a business responsible for producing goods and/ or services.
117
What are inputs?
The resources used in the transformation process
118
What is the transformation (production) process?
The conversion of inputs (resources) into outputs (goods or services).
119
Define marketing
The function of a business responsible for raising awareness for a company and its products, ensuring they have every chance of being considered by consumers in a competitive market.
120
What are the 3 market segments?
- Total market
- Market segments
- Market niche
Note: When identifying a target market a company can either use a mass marketing approach (appeal to the total market), market segmentation approach (appeal to segments in the market) or Niche marketing approach (appeal to a niche market).
120
What are the different pricing strategies by a business? (after the price has already been calculated)
- Premium pricing (charging high prices to create the perception of it being luxury/ valuable)
- Penetration pricing (initially setting prices low in order to gain market share, then raising prices later)
- Skimming pricing (when a company initially sets a high price for a new product, then gradually lowers it e.g. new Iphone)
- Competition pricing (setting prices in comparison with your competitors)
- Loss-leader (selling one product at a loss in order ot attract more customers).
121
What are the 3 pricing strategies used to calculate a product price?
- Coast-based (calculating the cost of producing the product, then adding a profit margin)
- Market-based (setting prices based on what the market is willing to pay i.e. supply and demand)
- Competition-based (choosing a price either below, equal or above competitiors)
121
What is the difference between retailers and wholesalers?
Retailers - Companies that sell mainly to customers and determine final selling price of the product.
Wholesaler - Companies that purchase products in bulk from producers and resell mainly to businesses, the government and other retailers.
122
What are the 2 components of finance?
- Accounting (e.g. financial reports)
- Source of finance (e.g. debt or equity)
123
Define finance
The function of a business responsible for tracking a companies revenue, current funds, spending and financial performance over a period of time.
124
What is meant by the term liquidity?
Refers to the amount of cash a business has access to and how readily it can convert its assets into cash so that debt can be paid.
124
What are the 3 financial statements and their role?
- Income statement (summary of revenue and expenses)
- Balance sheet (what the business owns and owes and the owner’s ‘investment’ in the business at a point in time)
- Cash flow statement (flow and cash in and out of the business)
125
How often is each financial statement conducted?
Cashflow statement - Weekly or monthly (regular)
Income statements - Monthly, quarterly or yearly
Balance sheet - Quarterly
126
Why are financial records important?
- Liquidity (pay back debts quickly)
- Budgets (to predict and plan when to pay bills)
127
What are the 3 classifications of cash in a cash flow statement?
Cash from operating activities - inflows and outflows relating to the main activities of the business (supply of goods and services)
Cash from investing activities - relating to the purchase and sale of non-current assets and investments
Cash from financing activities - relating to the acquisition and repayment of both debt and equity finance
128
What is the formula displayed on a balance sheet?
Assets = Liability + Owners equity
129
How many owners can each legal structure have?
Sole-trader - 1
Partnership - 2 to 20
Incorporated company - Unlimited
129
What are the different types of separation?
Voluntary:
Retirement - When an employee leaves their job after reaching a certain age or after a certain number of years of service, typically with a pension or retirement benefits.
Resignation - When an employee chooses to leave their job voluntarily, usually with a notice period. This is typically due to personal reasons, career changes, or other opportunities.
Voluntary Redundancy - When an employee agrees to leave their job as part of a company’s redundancy program. This is often offered as a choice to reduce the workforce, with compensation or severance packages provided.
Involuntary:
Retrenchment - A term often used in some countries to describe the process of reducing the number of employees, usually due to economic conditions or organizational changes. It is similar to redundancy but can sometimes imply a more drastic or immediate measure.
Dismissal - When an employee is terminated from their job by the employer, often due to performance issues, misconduct, or violation of company policies.
Involuntary Redundancy - When an employee is made redundant without their consent. This typically occurs when a company needs to reduce its workforce due to financial reasons or structural changes, and affected employees do not have a choice in the matter.
*Redundancy can be voluntary or involuntary* -
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What are the 4 steps to managing change effectively?
1) Identify the need for change (watch, interpret, react) - This is done through business information systems (BIS) e.g. business reviews
Operations - collect data about production costs and production schedules
Marketing - gather data measuring sales, product development and customer satisfaction
Finance - collect data about financial transactions and measure cash flows
Human Resource (HR) - record staff absences, training requirements and overtime payments
2) Setting achievable goals
- Vision statement
- S.M.A.R.T Goals
- SWOT Analysis
- Situation analysis
3) Resistance to change (inertia)
Ways to reduce inertia:
- 2-way communication
- Avoid threats
- Positive feedback
- Build trust
- Articulate purpose of change
- Change agents (someone who influences others to change)
4) Management consultants
Outsource management to gain an objective view and develop a plan to help the business adapt appropriately
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What is an SME?
Small to medium enterpirse
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When is an SME considered a failure?
If incorporated - declared bankrupt
If unincorporated - Going into liquidation
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What are the 5 common keys to SME's success?
- Entrepreneurial abilities
- Access to information
- Flexibility
- Focus on market niche (helps deliver a higher level of service)
- Reputation
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What are the 9 influences on ESTABLISHING a SME (establishing, not influences once it is operational such as economic, social etc.)
- Personal qualities
- Sources of information
- The business idea (competition)
- Establishment options (new, existing, franchise)
- Market (goods and/or services, price location)
- Finance (source and cost)
- Legal (business name, zoning health and other regulations)
- Human resources (Skills and costs - wages and non-wages)
- Taxation (federal, state, local rates and charges)
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What are the personal qualities important for new business owners?
- Qualifications
- Skills
- Motivation
- Entrepreneurship
- Cultural background
- Gender
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What are the reasons someone might not establish a new business?
- Can be lonely
- Can be stressful
- Under constant pressure
- Long hours
- Changes to family/ lifestyle
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What are small business associations? (source of information)
What it is - Organisations that support small businesses through advocacy, networking, resources, and education.
Benefit - Provides valuable guidance on how to start, run, and grow a business, including advice on regulations, compliance, and funding opportunities. They also offer networking opportunities and represent the interests of small businesses in policy-making.
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What are solicitors for business registration and legal advice? (source of information)
What it is: Legal professionals who specialize in advising businesses on legal matters, including business registration, contracts, intellectual property, and compliance with laws.
Benefit: Ensures that businesses comply with all legal requirements, helping avoid costly legal issues in the future. They also help with structuring the business correctly (e.g., sole proprietorship, partnership, company) and drafting important contracts.
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What are internet sites operated by industry groups? (source of information)
What it is: Websites run by associations or collectives within a specific industry, offering news, resources, and updates on industry-specific regulations or trends.
Benefit: Provides current, relevant information about industry trends, regulations, and best practices. These sites often include research, case studies, and news relevant to that particular industry.
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What is the Australian Bureau of Statistics (ABS) data? (source of information)
What it is: Australia's national statistical agency that provides key data on economic, social, population, and environmental trends.
Benefit: Provides reliable, up-to-date data that helps businesses make informed decisions based on economic and industry trends, market analysis, and demographic insights.
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What are accountants who have an interest in the business owner's industry and want to provide advice not just complete tax returns? (source of information)
What it is: Accountants who not only offer tax services but also specialise in advising business owners within a specific industry.
Benefit: These accountants offer more personalised advice that aligns with the unique financial challenges and opportunities in a specific industry. This could help with budgeting, cash flow management, and long-term financial planning.
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Define and what are the uses of bank managers? (source of information)
What it is: Senior officials in banks who provide financial advice to businesses, help with obtaining loans, and manage banking services for the company.
Benefit: Offers advice on business finance options, including loans and overdrafts, and can help the business owner with financial planning. They may also offer insights into managing cash flow and investing surplus capital.
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What are government assistance programs (source of information)
What it is: Programs run by local, state, or federal governments that provide financial, training, and advisory support to businesses.
Benefit: Helps businesses through grants, tax incentives, training programs, and business advisory services. These programs are designed to stimulate business growth and assist in overcoming specific challenges like funding and market access.
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What are websites that provide a starting point for business and have links to information sites? (source of information)
What it is: Websites that aggregate and provide links to useful resources for starting and managing a business (e.g., government websites, industry information, business planning tools).
Benefit: Acts as a starting point for entrepreneurs to access a wide range of business tools and information, saving time by providing comprehensive resources in one place.
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What are trade associations for specific industry information? (source of information)
What it is: Organizations that represent businesses in a particular industry, providing resources, advocacy, networking, and industry-specific updates.
Benefit: Keeps businesses updated on industry trends, standards, and regulations. They also provide networking opportunities and serve as a platform for industry-specific advocacy and training.
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What are the 3 establishment options for a business?
- Starting from scratch
- Buying an existing business
- Buying a franchise
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Define starting a business from scratch
Identifying a gap in the market and creating a new business from the ground up.
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Define buying an existing business
Purchasing a business that's already operational and has systems and staff in place.
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Define buying a franchise
Purchasing the rights to sell using the brand, trademark, operations and products of an already existing business (franchiser)
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What are the circumstances, benefits and disadvantages of starting a business from scratch?
Situation:
- Recognised a gap in the market
- Market growth has meant existing customers can't be supplied
- Opportunity to create something unique (innovation)
Advantages:
- Freedom to set up business as you wish
- The owner determines pace of growth and change
- If money is limited, can begin on a smaller scale
- No goodwill which the owner needs to pay
Disadvantages:
- High risk - some uncertainty
- No previous business reputation
- Time constraints (need to develop customer base to pay credit)
- Start-up period may be slow
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What are the circumstances, benefits and disadvantages of buying an existing business?
Situation:
- Question why business is for sale
- Accounts/ value needs to be checked
Advantages:
- Good business history (leads to a higher chance of success)
- Instant income (sales to existing sales)
- Equipment available to use
- Stock acquired and available to sell
- Existing employees bring knowledge
- Seller may offer advice and training
- Finance is easier to obtain due to the track record
Disadvantage:
- Existing images and policies are hard to change (reputation proceeds)
- What is the value of goodwill? How much should you pay for it?
The previous owner's personality and contacts were lost when the business was sold
- Some employees resent change
- Difficulty with existing contacts (suppliers, landlords, etc.)
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What are the circumstances, benefits and disadvantages of buying a franchise?
Situation:
- Fewer teething problems
- Receive the benefits of a successful business formula (for a fee)
- Established trademarks
- Well-recognised name
Advantages:
- Franchisor often provides training
- Investment risk may be lower
- Equipment, premises design usually established and operational
- Advertising campaigns often exist
- Franchisee doesn't need business exposure
- Volume buying = cheaper stock
Disadvantages:
- Goals of the franchisor and franchisee may not be compatible
- The franchisee often has to purchase stock from the franchisor
- Franchisor controls operations
- Threat of franchise termination
- Profits shared with franchisor
- Franchisor can charge a service fee for advice
- Contracts may be biased in favour of the franchisor
- Franchise must share the burden of the franchisor's business mistakes
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What are the 3 questions business owners must ask before starting a business?
- What goods or services will be sold?
- What is the most suitable price for these goods or services?
- What is the most appropriate location for the business?
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Define zoning
Dividing areas into subsections reserved for different purposes
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What are the main sources of employees for a business?
- Temporary/ casual service
- School, universities or TAFE
- Internal searches
- Word of mouth
- Private employment/ recruitment agencies
- Australian Jobseeker
- Advertisement in the media
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What is company tax?
Also known as corporate tax, is a tax imposed by the federal government on the taxable income of businesses.
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What is GST (Goods and services tax)?
A tax imposed on most goods and services sold (generally 10%). This is collected by businesses and then distributed to the government (a federal tax).
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What is Payroll Tax?
Payable on wages paid by an employer to their employees on payrolls that exceed $1.2 million at a rate of 4.85 per cent (NSW/ state government)
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What is land tax?
A tax on land owned by individuals or businesses over a certain value (in 2018 it was $629 000 or more).
Land used for primary production or an individual’s primary residence is exempt from land tax (local or state government)
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What is a business plan?
A business plan is a written summary and evaluation of the business idea. It sets out the desired goals and direction of the business, as well as how it will maintain its focus (the first step of any business is to have a business plan)
It enables the owner to :
- think through all the facets of a new business
- examine strategies relative to management, marketing, finance, operations and human resources. (the KBF’s)
The business plan identifies:
- areas of strength and weakness, opportunities and threats, and
- shows the owner the probability of success.
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What are the advantages of developing a business plan?
- Help test the viability of the business
- Assist the business to be proactive rather than reactive
- Assist in maintaining the business operations, especially focusing attention on the goals and objectives
- Indicates the owner's ability and level of commitment
- Forces the small business owner to justify his or her plans and actions
- Identifies the business's strengths and weaknesses
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Define a SWOT analysis and what its purpose is
A strategic planning and management technique used to help a person or organisation identify strengths, weaknesses, opportunities and threats.
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Define vision
What the owner sees for their business in the future (captured in the vision statement which is written to inspire the businesses stakeholders)
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What are the 3 types of goals?
Strategic goals - Long-term, broad, determined by senior management (years)
Tactical objectives - Mid-term, determined by middle management, specific (months)
Operational objectives - Short-term, determined by front-line management, specific (days/ weeks)
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What is the difference between commercial and social goals?
Commercial goals - Goals centred around the business success (e.g. profit, market share, growth and diversification, share price)
Social goals - Goals centred around benefiting society (e.g. community service, provision of employment, social justice, ecological sustainability)
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How is long-term growth achieved?
- Product innovation and quality
- Strategic alliances
- Mergers
- Takeovers
- Support programs
- Productivity and efficiency
- Market expansion
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What are personal goals?
The goal of an individual (e.g. higher income or greater financial security)
*This will often complement the business goals of growth and diversification)
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What is the difference between a vision, goal and objective?
A vision is the hope for the business in the future, the goal is a more specific statement and the objective is a very specific statement.
e.g.
Vision - To be a company of choice in the alternate energy sector
Goals - To be the market leader in alternate energy sales
Objective - To increase sales by 10% each year
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What is forecasting?
Forecasting refers to trying to predict what will happen in the future to facilitate effective forward planning.
This involves giving financial projections for sales, output, expenses, quantity and/or quality of resources, time, growth or market share.
Forecasting tools include break-even analysis and cash flow projections
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What is resource allocation?
The efficient distribution of resources to successfully meet the goals that have been established.
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What are break-even analyses?
A graph used to determine the total number of sales needed for a business to make profit and surpass their 'break-even point'.
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What are cash flow projections?
A statement that shows predicted cash flow in the future (different to a cash flow statement which shows the current or past cash flow that has actually take place, not a prediction)
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Define monitoring
The supervision of the work as it progresses to ensure that it is on-target and on-schedule to meet the milestones and achieve the strategic goals of the business.
*you can monitor sales, budgets and profits
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Define evaluating
Involves analysing the activities undertaken that determine the effectiveness and efficiency of management. This can lead to corrective action being taken.
*you can evaluate sales, budgets and profits
