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Business > End Of Year Exam > Flashcards

End Of Year Exam Flashcards

1
Q

What is a private sector organisation?

A

A business financed and run by an individual/group of individuals

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2
Q

What does incorporated mean?

A

There is a separate legal identity between the business and the owner, the business can: own assets, owe money and the owner has limited liability
E.g. private and public limited companies

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3
Q

Define unlimited liability

A

The owner is liable for all the debts of the business

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4
Q

What is a public sector organisation

A

Organisations that are owned by the government at a national/regional or local level
They are financed by taxation
E.g NHS

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5
Q

What are the characteristics of a business owned by a sole trader?

A

Owned by one person
E.g. hairdressers
Advantages: quick + easy to set up, keep all profit, be own boss, minimal start up costs, no legal formalities, easier to make decisions, more privacy
Disadvantages: unlimited liability, hard to raise finance, stressful, lack of help, limited skills

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6
Q

What are the characteristics of a private limited company?

A

Usually run by a family or small group
Keeps affairs relatively private
Funded by shares that are not sold on the stock exchange
Advantages: more control, keep more profit, information is relatively private, limited liability, more opinions/skills and ideas
Disadvantages: harder to raise finance, have to share profits, more legal formalities than sole trader

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7
Q

What are the characteristics of a public limited company?

A

Owned by Shareholders
Shares are sold on the stock exchange
Advantages: easier to raise finance, limited liability, banks are more likely to invest as they are seen as more reliable
Disadvantages: risk of loss of control, information made public, more expensive to set up, share more profit, have to please other shareholders

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8
Q

What is the role of shareholders?

A

To provide financial support for the business
They invest to: make a profit, possible dividend, become involved and have a say in business activities

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9
Q

What is share capital?

A

Money raised by a company through selling shares
Also known as:
Risk capital
Equity capital
Ordinary share capital

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10
Q

What is a dividend?

A

Payment made by a company to its shareholders
Dividends are not guaranteed

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11
Q

What is market capitalisation?

A

The total value of issued shares of a plc
Often used to indicate investors’ opinions of a company’s net worth/ overall value

Market capitalisation= current market price x number of shares issued

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12
Q

What factors affect business ownership?

A

Size of business
Amount of finance required
Type of investment needed
Need for limited liability
Degree of control the owners want
Nature of the business
Business objectives
Level of risk involved

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13
Q

What are the four types of market segmentation?

A

Geographic
Psychographic
Demographic
Behavioural

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14
Q

What are the characteristics of geographic segmentation?

A

Concerns the location of the target audience e.g. country, city or postcode

Benefits: fewer data points, quick + easy route to personalised marketing, higher product relevancy, improved advertising effectiveness

Drawbacks: not consistent, can be inconvenient, only affects certain areas, may miss certain customers, information may be unavailable

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15
Q

What are the characteristics of demographic segmentation?

A

Concerns non- character traits
Examples: income, age, gender, race, ethnicity, religion, level of education, profession

Benefits: messaging is more personal, information is regularly available, age can help determine where consumers will be

Drawbacks: customers may not be willing to share this type of information

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16
Q

What are the characteristics of behavioural segmentation?

A

How consumers spend their money/ the behaviour when shopping
Examples: spending, purchasing and browsing habits

Benefits: requires little data, customers with similar buying habits can be grouped, aids understanding of consumer needs, helps build brand loyalty

Drawbacks: habits can change, customers may not share data or may not like being tracked

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17
Q

What is targeting?

A

The process through which an advertiser identifies its target audience and then advertises to them through a variety of channels

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18
Q

What is positioning?

A

What customers think of the brand/ business and how it compares to competitors, it links strongly with brand image

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19
Q

What are the characteristics of psychographic segmentation?

A

Personal traits of consumers
Examples: likes/dislikes, personality, interests, hobbies, life goals, values, beliefs and lifestyle

Benefits: makes the business more relatable, better understanding, targeted messaging, explains buyer behaviour, improves customer communication

Drawbacks: customers may not want to share information, interests may change, lack of trust in the business, may be offended

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20
Q

What is niche marketing?

A

A market targeted at a specific group of customers

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21
Q

What is mass marketing?

A

Aims to reach the largest audience possible, the idea is that everyone should be a consumer of the product

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22
Q

What are the influences of positioning?

A

Price
Competition and what alternatives they offer
Ethics
How the product/business meets customer expectations

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23
Q

What are the influences on choosing a target market?

A

Size of market, growth and stability
Competition
Where customers are based
The four segments of the market

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24
Q

How do you analyse operational performance?

A

By looking at:
Labour Productivity

Unit Costs

Capacity

Capacity Utilisation

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25
Q

What is Labour Productivity?

A

Output per worker

Labour productivity= output/ number of workers

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26
Q

How do you improve labour productivity?

A

Motivation through incentives

Training

Machinery

Employ more skilled staff

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27
Q

What are unit costs?

A

How much each unit costs to produce

Unit costs= total costs/ output

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28
Q

What is capacity and what does it depend on?

A

The maximum level of output or production that a business can produce in a given time period

Capacity depends on:
Level of demand
Flexibility of production lines
Seasonality of demand and output
Implications of failure to meet demand
Opportunities for subcontracted or outsourced production

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29
Q

What is capacity utilisation?

A

How much capacity is being used

Capacity utilisation= (actual output/ maximum output) x100

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30
Q

What is the ideal level of capacity?

A

90%
Businesses want to work at a high capacity so there is less waste however need room to respond to changes in demand

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31
Q

How do you decrease unit costs?

A

By increasing labour productivity, output or capacity utilisation

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32
Q

What happens to unit costs if there is an increase in output?

A

They will decrease because fixed costs are spread over more units

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33
Q

How does operational data affect decision making?

A

Labour productivity can affect what the business invests in e.g. training, rewards or how the work is undertaken

Unit costs can affect the suppliers that the business chooses

Capacity can affect decisions such as whether to expand or not

Capacity utilisation can affect the business’ efforts to increase demand (promotions) or downsize (close part of the facilities)

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34
Q

Why is efficiency important and how do you improve it?

A

Why it’s important:
Lower unit costs= lower prices/higher profits= match competitors= be more competitive

How to improve it:
Use capacity more efficiently
Increase labour productivity
Choose optimal mix of resources
Lean productivity
Technology

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35
Q

How is efficiency measured?

A

Efficiency is measured by the inputs used to generate outputs

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36
Q

How do you decrease capacity?

A

Lay off workers

Downsize location

Sell assets

Sell land

Reduce working hours

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37
Q

How do you increase capacity?

A

Employ more people

Get a bigger warehouse

Buy more or better equipment

Subcontract or outsource to another business

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38
Q

How is labour productivity measured and how do you increase it?

A

Labour productivity= output per worker

To increase it:
Training
Targets
Rewards
Employ more experienced workers
Get better management
Better equipment
New technology
Find a new way to work
Use more flexible operations

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39
Q

What are the challenges of increasing labour productivity?

A

Quality may suffer if employees are rushing to make them

Resistance from employees if a new way of working is introduced

Employees may demand higher pay if they have to make more

40
Q

What factors influence the combination of resources?

A

The process (whether machine or labour is used)

What is affordable and achievable

41
Q

What are the benefits and drawbacks of capital intensive industries?

A

Benefits- reduce human error, greater speed and uniformity of output, ease of workforce planning, greater scope for economies of scale

Drawbacks- expensive, lack of initiative, less flexibility to changes in demand

42
Q

What are the benefits and drawbacks of a labour intensive industry?

A

Benefits- provides more flexibility/ skills, creates employment in the economy, more personal response to consumer needs (tailor made goods/ services), opportunity for continuous improvement

Drawbacks- prone to labour relation problems, possible workforce shortages, high human resource management (HRM)

43
Q

What is lean production?

A

A way to reduce waste in the production process it includes:
Kaizen

Total quality management

Just in time

Tame based management

44
Q

What is kaizen?

A

A staff suggestion scheme where staff are encouraged to contribute ideas

45
Q

What is total quality management?

A

Makes quality the responsibility of all employees in a business to create a ‘quality culture’

46
Q

What is just in time?

A

When stock and raw materials are ordered and delivered only when needed

Benefits- less storage costs,

Drawbacks- reliant of suppliers, harder to respond to changes in demand,

47
Q

What is time based management?

A

When the business cuts down time wasted on design and manufacturing

48
Q

How do robotics impact the production process?

A

They carry out both routine and complex activities

Computer aided manufacturing (CAM) helps increase product quality, speed, accuracy, efficiency and reduce waste, production time and reject rates

49
Q

What are automated stock control programmes?

A

Based on the laser scanning of bar-coded information so the computer knows the exact quantity, size and colour of products
Helps keep up to date on stock
Helps decision making on things such as when and how much to order of each product

50
Q

How does ICT affect efficiency?

A

Improves internal and external communications

Increases the speed of communication

More customer information can be collected and held

51
Q

How does design technology help improve efficiency?

A

Computer aided design (CAD)

Allows work to be developed and printed in 2D and 3D images

Quick designing process

Competitive advantage as new products can be launched before competitors

Less prototype waste

More designs can be created in a shorter space of time

52
Q

How does 3D printing improve efficiency?

A

Can print prototypes which is cheaper and quicker than the traditional way

Cost effective flexible manufacturing

53
Q

What are the benefits and drawbacks of using technology?

A

Benefits- reduce waste, improve quality, reduce costs, increase productivity, better working conditions

Drawbacks- employees may be resistant to change, lower morale, costly, breakdowns in machinery, training to help employees use machines

54
Q

What is quality and why is it important?

A

Quality is the extent to which the product or service meets customer requirements

Importance:

Generates a higher level of repeat purchasing which extends product life cycle

Allows premium pricing

Helps build brand loyalty

55
Q

How do you achieve quality?

A

Training- so staff have required skill set

New processes

Investment in technology

Understanding customer requirements

Selecting the right partners

Set targets that help meet customer needs

Action taken if performance does not meet the targets

56
Q

What are the methods of improving quality?

A

Quality assurance

Quality control

Total quality management

57
Q

What is quality assurance?

A

When the product is checked throughout the production process by employees

Benefits- costs less, employees may feel valued and motivated, any mistakes are identified early on

Drawbacks- top quality is down to employee opinion, employees may not have skills required, bias, employees may demand more pay

58
Q

What is quality control?

A

When quality is checked at the end of the production process by quality inspectors

Benefits- consistent results, no bias, can spot minor defects

Drawbacks- expensive, employees may feel untrusted and demotivated

59
Q

What are the difficulties in improving quality?

A

May require a change in culture which may lead to employee resistance

May involve changing suppliers

Involves investing in training

May take time for employees to agree

Employees may feel that it is a criticism of what they have been doing

Employees may want a raise for more work

Unwilling to adapt to new changes

60
Q

What are the consequences of poor quality?

A

Loss of sales

Complaints from consumers

May have to decrease prices

Retailers unwilling to stock products

Costly because of the waste and unsold products

61
Q

What is inventory?

A

The materials/stock held by a business

62
Q

How do you improve operational performance?

A

By keeping more stock:

Quicker speed of response

More flexible with quantity of orders

More dependable

63
Q

What influences how much inventory is held?

A

Security costs

Storage costs

Opportunity costs

Cost if stock loses value (obsolesce)

64
Q

What are the components of an inventory control chart?

A

Buffer stock

Lead time

Re-order level

Re-order quantity

65
Q

What is buffer stock?

A

The minimum level of stock held (emergency stock)

66
Q

What is lead time?

A

The time between ordering stock and delivery

67
Q

What is re-order level?

A

The level of stock at which a firm places a new order with suppliers

Re-order level= (daily sales x lead time) + buffer stock

68
Q

What is re-order quantity?

A

The amount of stock ordered to take inventory back to maximum level

69
Q

What methods help manage supply and demand?

A

Flexible workforce

Producing to order

Outsourcing

Waiting lists

Increasing prices to decrease demand

Accepting orders from other businesses if there is spare capacity

70
Q

What are the advantages and disadvantages of outsourcing?

A

Advantages:
Outsiders may have a better skill set
Can increase the capacity of the business

Disadvantages:
Outsiders quality may be poor (gives the business a bad reputation)
Contrasting ethical views
Expensive

71
Q

What factors affect how you manage the supply chain?

A

What you produce

What you buy from other businesses

The other businesses you work with

How many businesses you work with and if they are long or short term

Terms and conditions of working with other businesses

Assurances wanted from suppliers

72
Q

What are the influences on the choice of suppliers?

A

Ethics

Payment terms

Cost

Quality

Reliability

Frequency

Flexibility

73
Q

How can the supply chain be efficiently and effectively managed?

A

By choosing either long term or short term relationships with suppliers

74
Q

What are the values of setting financial objectives?

A

Focus for decision making

Measures level of success

Improves coordination

Allows shareholders to assess whether the business will be a worthwhile investment

Confirms the financial viability of the business to others

75
Q

What is the difference between cash flow and profit?

A

Cash flow- the timing of payments and receipts

Profit- total revenue takeaway total costs (end result)

76
Q

What is gross profit?

A

Profit when the direct costs/ cost of sales (raw materials, shop floor workers) is deducted

Gross profit = revenue - cost of sales

77
Q

What is operating profit?

A

Takes into account other expenses but not tax or interest paid on loans

Operating profit = gross profit - other expenses

78
Q

What is profit for the year?

A

All costs and sources of finance are taken into account

Profit for the year = operating profit - tax

79
Q

What are the financial objectives?

A

Revenue

Costs

Profit

Cash flow

Level of investment

Capital expenditure

Return on investments

Capital structure

80
Q

What is return on investment?

A

How much of a % a business gets back on an investment from its use

Return on investment (%) = (operating profit / capital invested) x 100

81
Q

What are the factors that influence investment?

A

Expected return on investment

Interest rates

Expected demand

Level of technological change

Availability of finance

Attitude to risk

Spare capacity

Competition

82
Q

What is capital structure?

A

How the business raises its capital either by borrowing funds or selling shares
It depends on: cost of borrowing/ interest rates and economic growth (incomes and share prices)

83
Q

What is debt/ loan capital?

A

Borrowed money that you have to pay interest on

84
Q

What is equity/ share capital?

A

Money sourced from selling shares in exchange for part ownership and potential dividends

85
Q

What is long- term funding?

A

Money provided to a business that does not need repaying within the year

86
Q

What are the internal and external influences on financial objectives?

A

Internal- overall business objectives, nature of the product, objectives of the business’ senior managers

External- competition, economic environment, technological environment, political and legal environment

87
Q

What are the internal sources of finance?

A

Retained profits

Sale of assets

88
Q

What are the external sources of finance?

A

Overdrafts

Debt factoring

Bank loans

Venture capital

Share capital

89
Q

What are the short-term sources of finance?

A

Retained profits

Overdrafts

Debt factoring

90
Q

What are the long-term sources of finance?

A

Retained profits

Sale of assets

Bank loans

Venture capital

Share capital

91
Q

What are retained profits?

A

Profits the business has saved, they can be in the bank, spent on assets or used to reduce overdrafts and loans

Advantages- cheap, very flexible, ownership of the business stays the same

Disadvantages- danger of hoarding cash, shareholders may want dividends, high profit and cash flow may mean there is more chance of debt

92
Q

What are sales of assets?

A

When a business sells land, buildings or machinery (non-current assets)

Advantages- less capital tied up in unused assets, relatively quick and easy

Disadvantages- less capacity if demand picks up, the business may not have non-current assets to sell

93
Q

What are bank loans?

A

Money lent for a fixed period of time, the interest rates can be fixed or variable, timings and number of repayments are set

Advantages- greater certainty of funding, appropriate method of financing fixed assets, lower interest than overdrafts

Disadvantages- requires security (collateral), interest paid on full amount outstanding, harder to arrange, start-ups/ small businesses are often excluded

94
Q

What are bank overdrafts?

A

Allows the business to take out more money than in their account up to an agreed limit, interest will have to be paid

Advantages- relatively easy to arrange, flexible, interest only paid on amount borrowed, not secured on assets of the business

Disadvantages- higher interest rates than a bank loan, interest change varies with changes in interest rate, can be withdrawn at short notice

95
Q

What is debt factoring?

A

When a business sells its outstanding sales invoices (receivables) to a third party at a discount

Advantages- receivables are turned into cash quickly, businesses can focus on selling instead of collecting debt, suitable for a fast growing business, no security required

Disadvantages- high cost (charge from factoring company is often 3%), customers may feel their relationship with the business has changed

Business (8 decks)

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