Understanding The Nature And Purpose Of A Business Flashcards
(19 cards)
What benefits do businesses bring to the UK economy?
-Businesses create employment.
-Businesses create income.
-Businesses create new products.
-Businesses can enhance a country’s reputation.
What do businesses do?
Businesses exist to transform inputs or resources into goods and services that are in demand from individuals and other businesses.
What are the three types of sectors in a business.
Primary- Raw materials
Secondary- Manufacturers
Tertiary- Retail
What is a mission statement
A mission statement sets out what a firm is trying to achieve, that is, the reason why it exists.
What do mission statements commonly focus on
The organisations values
Non-financial goals it may pursue
The benefits of the business to the community
How consumers are to be satisfied
Advantages of having a mission statement
-Everyone in the business knows ultimately what they are trying to do.
-This would make decision making easier.
-A clear mission statement can also motivate people as it gives them a sense of belonging and direction.
Disadvantages of having a mission statement
-Some mission statements are unrealistic so employees may pay little attention to them
-A mission statement will only have value if the behaviour of everyone in the firm supports it
What is an aim
Aims are long-term plans of the business from which its corporate objectives are from.
What is the hierarchy of objectives
Mission statement
Corporate aims
Corporate objectives
Functional objectives
What are objectives
Objectives are medium to long term targets established to coordinate the business
What does SMART objectives stand for
S- specific
M-measurable
A- achievable
R- realistic
T- time bound
What are some common business objectives
Profits and profit maximisation
Growth
Survival
Cash flow
Social and Ethical objectives
Diversification
What is a stakeholder
Stakeholders are individuals or groups ( such as employees, customers and the local community ) who have an interest in a business.
Profit formula
Profit= Total Revenue - Total costs
Types of costs definitions- total, variable and fixed
-Total costs are fixed and variable costs added together
-Variable costs alter directly with the business’s level of output
-Fixed costs are costs that do not alter when the business alters its level of output
Total costs formula
Total Costs= Fixed Costs + Variable Costs
Revenue formula
Revenue = Quantity Sold x Average Selling Price
Profits formula
Profit = Total Revenue - Total costs
Why are profits important
Can attract investment.
Can help business growth.
Impacts whether a company can secure finance from a bank.
Profit can be an indicator of success.
