UNIT 1. Chapter 3: Size of business Flashcards Preview

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Flashcards in UNIT 1. Chapter 3: Size of business Deck (12)
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1
Q

What are the different measures of size? (5)

A
  1. Number of employees
  2. Sales turnover
  3. Capital employed
  4. Market capitalisation
  5. Market share
2
Q

Def. Sales turnover

A

Total value of sales made by a business in a given time period

3
Q

Def. Capital employed

A

The total value of all long-term finance invested in the business

4
Q

Def. Market capitalisation

A

The total value of a company’s issued shares.

Market capitalisation: Current share price x total number of shares issued

5
Q

Def. Market share

A

Sales of he business as a proportion of total market sales

(Total sales of business/Total sales of industry) x100

5
Q

Which form of measurement is the best?

A

None of them.

•If an absolute measure of size is required, test a firm on at least two of the above criteria and make comparisons.

6
Q

What is the significance of small and micro businesses? (5)

A
  • Many jobs are created
  • Adds variety to the market
  • Create more competition
  • Supply specialist goods for larger firms needs eg. wheels
  • They might become large business to benefit the economy
7
Q

How can a government encourage and assist business start ups?
(4)

A
  • Reduced rate of profit tax
  • Loan guarantee scheme - the gov repays a % of bank loans
  • Information and advice may be provided through agencies
  • May finance some acitivites
9
Q

Advantages of small business?

A
  • Often able to adapt quickly to meet changing customer needs
  • Offer personal service to customers
  • Find it easier to know each worker
  • If family owned, the business culture is usually informal, employees would feel motivated and less under pressure
10
Q

Disadvantages of small businesses? (6)

A
  • Lack of specialist management expertise, the owner has to undertake of management departments
  • No economies of scale
  • Do not have a lot of influence on competition
  • Have access to less sources of finance
  • Cannot spread their risk by diversifying into different markets
  • May not be able to afford market research.
11
Q

Why do business owners and directors seek growth?

A
  • Increased profits to have higher source of finance.
  • Increasing market share gives higher market profile
  • Increased economies of scale reduce costs
  • Increased power and status of the owners and directors
  • Reduces risk of being a takeover target
12
Q

Def. Internal Growth

A

Expansion of a business by means of opening new branches, shops or factories ( organic growth).