Understanding The Nature And Purpose Of Businesses- Topic 3.1 Flashcards
(32 cards)
What are the six main reasons businesses exist?
- To create employment
- To enhance the country’s reputation
- To create wealth
- To create new products
- To create sales
- To generate profit
What is a mission?
An aim a business hopes to achieve
What is a mission statement?
A short amount of text that tells stakeholders the businesses aims
What is an objective?
A measurable target which can be used to help achieve the mission
What is a B2B?
(Business to business)
A business that sells to other businesses
What is a B2C?
(Business to customers)
A business that sells directly to customers
What happens in the primary sector?
The process of extracting raw materials
What happens in the secondary sector?
Raw materials are manufactured into finished goods
What happens in the tertiary sector?
Provision of services
What are some common business objectives?
- Profit
- Cash flow
- Growth
- Diversification
- Social and ethical action
- Survival
What does SMART stand for?
Specific
Measureable
Achievable
Realistic
Time-bound
Why are objectives set?
- so management can ensure everyone is working towards the same overall goal (and contributing to the mission)
- so the success of business plans is more easily reviewable
How is revenue calculated?
Selling price x units sold
How are total costs calculated?
Fixed costs + variable costs
How is profit calculated?
Total revenue - total costs
What are synonyms for the term ‘fixed costs’?
Overheads
Indirect costs
What are fixed costs?
Costs that don’t vary depending on the output of the business
E.g rent and lease costs, salaries, insurance, loan repayments
What are variable costs/ direct costs?
Costs that vary directly depending on the businesses level of output
E.g raw materials, commissions, delivery costs
What is revenue?
Income a business receives in return for the sales of goods or services
What is unlimited liability?
- feature of unincorporated businesses
- the owners personal assets are at risk if the business goes into debt
What is an unincorperated business?
Businesses that do not have a separate legal identity from its owners
What is limited liability?
- a feature of incorporated businesses
- the owners are only at risk of losing the money that they have invested (personal asses are safe)
What is separation of ownership and control?
A business where the owners (shareholders) are not the same people making the day to day decisions (managers)
What is a share?
An individual part of the total issued share capital
