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business own > Chap 1 - understanding business activities > Flashcards

Chap 1 - understanding business activities Flashcards

1
Q

Why do businesses exist

A

-fame
-profit
-trade/ exchange (buy & sell)
-customer satisfaction

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2
Q

Define economic problem

A

-people wants are unlimited
-resources are limited

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3
Q

Define value for money

A

-product/ service is worth the money

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4
Q

Define needs

A

-basic things needed for survival

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5
Q

Define wants

A

-things not needed for survival but for satisfaction

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6
Q

Define demand

A

-the need to satisfy wants and need

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7
Q

Define scarcity

A

-lack of sufficient products to fulfil the total wants of the population

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8
Q

Define opportunity cost

A

-next best alternative given up by choosing another option
-sacrifice something
-try to make as low as possible

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9
Q

2 types of outputs of business

A

-physical goods
-service

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10
Q

How do businesses function

A

-input
-transformation process
-output

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11
Q

What does transformation process need

A

-factors of production

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12
Q

what are factors of production

A

-land = natural resources
-Labor = people
-Capital = finance, equipment
-Enterprise = people who run the business (Board of Directors)

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13
Q

What do the Broad of Directors do

A

-controls business
-decide on major policies
-selects Chief executive officer (CEO)

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14
Q

what does Chief executive officer do (CEO)

A

-manage day-to-day business

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15
Q

Define specialisaiton

A

-people & businesses concentrate on what they are best at
-causes division of labor

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16
Q

define division of labor

A

-when production process is split into diff tasks & each worker performs the task
-form of specialisation
-increases production

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17
Q

advantages of division of labor

A

-increase efficiency & output
-less time wasted
-quicker and cheaper to train workers (less skills taught)

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18
Q

disadvantages of division of labor

A

-workers get bored = efficiency might fail
-productions stops if a worker is absent

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19
Q

what does the transformation process do

A

add value to input

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20
Q

define adding value

A

-difference btw selling price of a product & cost it’s bought in (materials & componenets)

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21
Q

diff. economic sectors

A

-Primary
-Secondary
-Tertiary

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22
Q

Define primary sector

A

-extracting natural resources (raw materials)

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23
Q

define secondary sector

A

-processing raw materials into final products (manufacturing & construction)

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24
Q

define tertiary sector

A

-providing service and distribution of goods

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25
Q

define industralisation

A

-moving from primary sector to secondary sector

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26
Q

define deindustralisation

A

-moving from primary & secondary sector to tertiary sector

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27
Q

diff. ownership

A

-Public sector
-Private sector

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28
Q

Public sector:
-who owns
-objective
-funds

A

-gov.
-provide service to people
-taxes

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29
Q

Private sector:
-who owns
-objective
-funds

A

-individual owned
-profit
-savings/ loans

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30
Q

diff. economic systems

A

-Planned economy
-Mixed economy
-Free market economy

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31
Q

Define planned eocnomy

A

-economy is mostly led by public sector
-usually associated with communism

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32
Q

define mixed economy

A

-economy is led by public and pvt. sector

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33
Q

define free market economy

A

-economy is led mostly by pvt. sectors

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34
Q

define enterprise

A

-actions of a person who takes initiative by taking a risk to start the business
-the business / company itself

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35
Q

define entrepreneur

A

-person who markets the business

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36
Q

diff. btw inventor and entrepreneur

A

-inventor: make product
-entrepreneur: market the product

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37
Q

Define business plan

A

-doc containing important details of business and objectives created by entrepreneur

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38
Q

Define business idea

A

-what products/ service business will provide

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39
Q

What does business plan contain

A

-business idea
-objectives
-cost & profit
-revenue forecast
-cash flow forecast
-target market
-long & short term finance
-location
-marketing mix

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40
Q

What does marketing mix contain

A

-product
-place
-promotion
price

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41
Q

Why do gov. support business

A

they bring in:
-GDP
-employment
-taxes

42
Q

Factors on size of business

A

-no. worker
-annual sales ( revenue/ turnover)
-capital employed
-value of output

43
Q

How is no. of employees measured

A

-capital intensive = machinery & tech. more than worker
-labor intensive = more workers than machinery & tech.

44
Q

How is annual sales measured

A
  • Quantity sold x selling price
45
Q

How is capital employed measured

A

-money used in business
(investments)

46
Q

How is value of output measured

A

-how much produced converted into sales

47
Q

what does profit measure

A

-efficiency
-not business size

48
Q

define turnover

A

total value of sales over a period of time

49
Q

define capital employed

A

money used in business

50
Q

4 diff business sizes

A

-micro
-small
-medium
-big

51
Q

EU standard of micro:
-no. workers
-annual sales
-capital employed

A

-less than 10
-up to 2 mil
-2 mil

52
Q

EU standard of small:
-no. workers
-annual sales
-capital employed

A

-10 - 15
-btw 2- 10 mil
-2 - 10 mil

53
Q

EU standard of medium:
-no. workers
-annual sales
-capital employed

A

-51 - 250
-10 - 50 mil
-10 - 34 mil

54
Q

EU standard of big:
-no. workers
-annual sales
-capital employed

A

-more then 250
-more then 50 mil
-more than 34 mil

55
Q

type of business growth

A

-internal
-external (integration)

56
Q

define internal business growth

A

-business expands existing operations using personal money or profits

57
Q

Ways for internal growth

A

-more products/ services
-expand branches

58
Q

define external business growth (intergration)

A

-business expands by taking over or merging with another business

59
Q

define merging business

A

-2 businesses combine mutually

60
Q

define take over

A

-a business is bought over forcefully

61
Q

types of integration

A

-horizontal
-vertical
-conglomerate

62
Q

define horizontal integration

A

-2 similar businesses from the same industry combines

63
Q

Advantages of horizontal integration

A

-reduce competition
-bigger power

64
Q

Disadvantages of horizontal integration

A

-people lose jobs

65
Q

2 type of vertical integraiton

A

-vertical backward
-vertical forward

66
Q

Define vertical backward integration

A

-a secondary sector business combines with a primary sector business

67
Q

Advantages of vertical integration

A

-better control of materials
-cheaper
-assure of supply

68
Q

define vertical forward integration

A

-a secondary sector business combines with a tertiary sector business

69
Q

Define conglomerate integration

A

-a businesses combines with a business from a diff industry

70
Q

Advantages of conglomerate integration

A

-diverse customers
-if 1 business fails, still have another

71
Q

Disadvantages of growth

A

-should be slow
-external is more expensive than internal
-risky
-management
-finance

72
Q

why do business usually fail

A

-people change what they like
-rebranding
-financial issues
-lack management skills
-business expands too quicklky

73
Q

types of business org in pvt. sector

A

-sole trader
-partnership
-Pvt. Ltd company
-Pub. Ltd company

74
Q

what do businesses in pvt. sector need to operate

A

-license which needs to be renewed every year by paying a fee
-needs a legal structure recognised by gov.

75
Q

define sole trader

A

-business owned by 1 person
-simplest form of business
-usually small

76
Q

advantages of sole trader

A

-you’re your own boss
-keep all money
-flexible work time
-less capital = less money to start business
-make all decisions

77
Q

disadvantages of sole trader

A

-unlimited liability
-lack of continuity

78
Q

define unlimited liability

A

-person is liable for company’s debts

79
Q

define partnership

A

-business owned by 2 or more owner
-usually 2 - 20

80
Q

advantages of partnership

A

-more capital to start business
-unlimited liability but debt is shared
-share work - specialisation - more efficient
-no need to work sometimes

81
Q

disadvantages of partnership

A

-unlimited liability
-slow to decision making
-lack of continuity
-disagreements = lead to business fail
-share profit

82
Q

define Deed of partnership

A

-a doc that contains how profit is divided, role of each person and other things to prevent future dispute

83
Q

define Ltd company

A

-businesses that have a legal identity & owned by majority shareholder (51%)

84
Q

how does shares of businesses work

A

-each businesses share is valued depending on how well they’re doing
-shareholders buy shares
-can sell shares for profit
-shares are traded trough stock exchange
-when business make profit, it’s divided among shareholders depending on no. shares they have

85
Q

Why buy shares

A

-get divided profit
-share prices can change

86
Q

what does a legal identity do for Ltd comapny

A

-company is recognised as a person
-can buy things in its name
-can be sued

87
Q

diff btw Pvt and Pub. Ltd companny

A

-Pvt. - limited to who can buy shares
-Pub. - anyone can buy shares

88
Q

define Annual General Meeting (AGM)

A

-a mandatory annual meeting where all shareholders of Pub. Ltd. company are invited to attend where they:
-analyse business performance (accounting)
-make major decisions
-decide dividends

89
Q

define dividend

A

-division of profits among shareholders

90
Q

2 Business forms

A

-franchise
-Pub. corporations

91
Q

advantages of franchise

A

-guarantees success

92
Q

disadvantages of franchise

A

-needs to cater to locals
-no control over business
-have to pay franchise fee
-share profits

93
Q

define public corporation

A

-business owned & controlled by gov. to provide service to people in a non- profit basis

94
Q

what does a business objective do

A

-give a sense of purpose
-a target
for:
-profit maximisation
-survival
-expansion
-provide service
-market share

95
Q

define profit maximisation

A

-to get max profits

96
Q

define business survival

A

-make sure business doesn’t collapse from:
-competition
-new businesses
-recession = sales go down

97
Q

Define market share

A

how much of market is owned by the business

98
Q

how to find market share

A

sales of business/ sales of entire industry x 100%

99
Q

define stakeholder

A

-people who are affected by business decisions

100
Q

what must businesses try to make sure about stakeholders

A

-try to make them all happy, if not the most important ones = careful in decision making

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