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A-level business > Unit 1 - What is a business > Flashcards

Unit 1 - What is a business Flashcards

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1
Q

Why do businesses exist

A
  • Making a profit
  • Provide goods and services
  • Enterprise (develop a good idea)
  • Provide help and support to each other
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2
Q

What is a mission statement

A
  • A declaration of an organisations core purpose and focus
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3
Q

What are the applications of a mission statement

A

Can act as a guide when making critical decisions that may affect the direction of the business

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4
Q

What is an objective

A

A goal to help a business achieve its mission

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5
Q

What are some key business objectives

A

survival
growth
profit

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6
Q

The global nature of business and the intense competition in many markets has lead to which objectives becoming more important

A

Customer service and corporate social responsiblility (CSR)

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7
Q

What is corporate social responsibility (CSR)

A

The commitment of a business to behave ethically towards their workforce, local community and society at large

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8
Q

How do objectives differ from the mission?

A

Objectives are actionable and measureable

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9
Q

What does putting together the mission and objectives to a business provide

A

A balance that helps shape a businesses operation and services

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10
Q

What characteristics should objectives have

A

The SMART characteristics

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11
Q

What does SMART stand for

A

Specific, Measurable, Achievable, Realistic and Time based.

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12
Q

What is a specific Objective

A

One that is clear, precise and well identified

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13
Q

What is a measurable objective

A

One that is possible to know when it has been completed

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14
Q

What is an achievable objective

A

One that must be within capablities and resources

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15
Q

What is a realistic objective

A

One that must be challenging but possible to achieve given the capabilities and resources

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16
Q

What is a time based objective

A

One that has a deadline to work to

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17
Q

What are the advantages of a business setting objectives

A
  • They can be used to evaluate performance as they are measurable and time based
  • Provide motivation by being realistic and achievable
  • Ensures the business remains focused on its mission by being specific
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18
Q

What are variable costs

A

Costs that vary as a direct result of changes in the level of output

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19
Q

What are fixed costs

A

Costs that don’t change as a result of changes in the level of output

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20
Q

What is the private sector

A

Part of the economy made up of private enterprises - businesses that are controlled by and individual/s

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21
Q

What are corporate businesses

A

businesses that have a legal identity separate from the identity of their owners

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22
Q

what is limited liability

A

restricts the financial responsibility of shareholders for a company’s debt to the amount they have individually invested

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23
Q

What are the two types of corporate businesses

A

Public limited company (PLC)
Private limited company (LTD)

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24
Q

What are the two types of non-corporate businesses

A

Sole trader
partnerships

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25
What are the two ways by which the liability of shareholders can be limited
By shares and by guarantee
26
How can liability of shareholders be limited by shares
A shareholders liability is limited to the value of the shares they have purchased
27
How can the liability of shareholders be limited by guarantee
Each members liability is limited to the amount they have agreed to pay if the business becomes wound up - this is most common in not for profit businesses
28
What is a private limited company
They are usually much smaller than a PLC, the shares cannot be brought or sold without the agreement of other shareholders. share capital cannot exceed £50,000
29
What is a public limited company
Their shares can be brought on a stock exchange by any business or individual, they have a minimum share capital of £50,000 by law, the have to public more financial details than a LTD
30
What two documents must be sent to the Registrar of Companies to those wanting to form a company
Memorandum of Association Articles of Association
31
What does the Memorandum of association include
This sets out details of the company's name and address and its objectives in trading
32
What does the Articles of Association include
This details the internal arrangements of the company, including the frequency of shareholders' meetings
33
What is sent to a newly formed business to approve it for trading
The Certificate of Incorporation
34
Whats the relationship between non corporate businesses and their owners
They are not treated as separate elements meaning that in the event of failure the assets of the owners are at risk
35
What is a sole trader
A non-corporate business run by one person
36
What is a partnership
A business run by 2-20 people who contribute capital and their expertise. A partnership is based on the deed of partnership
37
What is the deed of partnership
A document which states how much capital each partner has invested, share of profits and rules for electing new partners.
38
What is a sleeping partner
partners who only contribute capital to the business and are not active in running the business
39
What are not-for-profit businesses
Businesses which have objectives other than making a profit
40
What are some examples of objectives for not for profit businesses
- To provide services to local community - To give people job related skills - Fair trading activities
41
What are fair trading activities
When a business chooses to pay above market price for imports in less developed countries
42
What are the advantages of being a sole trader
- simple and cheap to establish with few legal formalities - Owner receives all the profits - No financials need to be published
43
What are the disadvantages of being a sole trader
- Owner is likely to be short of capital - Unlimited liability - Difficult for the owner to take time of work
44
What are the advantages of being a partnership
- Wide range of knowledge between partners -Raise greater amounts of capital than sole trader - Pressure is reduced as cover is available for time off
45
What are the disadvantages of being a partnership
Control is shared between partners Disagreements between partners Unlimited liability Still a shortage of capital
46
What are the advantages of being a private limited company
- Limited liability - Little amount of financial data has to be released - Separate legal identity
47
What are the disadvantages of being a private limited company
- Can't sell stocks on stock exchange - Limited potential to grow due to permission to sell shares - Expensive administrative formalities
48
What are the advantages of being a public limited company
- Access to large amounts of capital by trading on the stock exchange - Public limited companies can gain public publicity as a result of trading on the stock exchange - Supplies are more likely to offer credit to public limited companies
49
What is the public sector
The part of the economy that is owned and controlled by the government or local authorities
50
What is privatisation
The process of converting government owned and controlled industries to the private sector
51
What are the reasons for choosing different forms of businesses
-Formalities and expenses: sole traders and partnerships are relatively easy to set up - Size and risk: If a business is and intends to remain small then a sole trader/partnership is more appropriate - Objectives of the business: If a business has an objective of growth then forming an incorporated business is more appropriate
52
What are the reasons to change business form
- Changing circumstances within a business e.g. growth - Capital - Acquisition or takeover- may change the structure of the business
53
What is ordinary share capital
The money invested into a company by shareholders
54
What are shareholders
The owners of limited companies and can be people, company's or other institution's
55
What are the two reasons individuals and businesses invest in shares
Income- shareholders are entitled to dividends (share of company's profits) Capital growth- Shareholders hope the value of their share will increase over time
56
What are the influences on changes in share price
Performance- if profits are worse than expected, share price will decrease and vice versa. Expectation of better or worse profit performance Changes within the market or competitive environment World uncertainty
57
What is Market capitalisation
Gives a valuation of a company by calculating the share price by the number of shares issued
58
What is business to business (B2B)
One business selling products/services for another business
59
What is business to consumer (B2C)
One business selling products/services for consumers
60
What is the transformation process
The process of inputs into outputs which adds value to inputs.
61
What is added value
An amount added to the value of inputs or to a product/service
62
What is the primary sector
Extracts or develops natural resources
63
What is the secondary sector
Makes use of extracted primary materials to build, manufacture or develop finished goods.
64
What is the tertiary sector
Provides the services needed to meet the needs of the end users e.g. retailers, insurance etc.
65
What are corporate objectives
Targets for the business as a whole that are set to achieve its mission
66
What are functional objectives
Targets set for each business function
67
What is cash flow
The movement of money in and out of the business
68
What is profit maximisation
Trying to make the most profit possible to reward the owners, investors and shareholders
69
What is short-termism
When a business prioritises short-term profit rather than long-term performance
70
What is profit satisficing
Trying to make enough profit to keep the owners comfortable - aim of smaller businesses (sole trader)
71
What is the external environment
Refers to the aspects that are out of control of the business
72
How can factors of the external environment affect a business
It can change the demand and cost for a product or service
73
How can competition affect how a business operates
The strategies adopted by competitors will impact the costs of the business e.g. discount retailers such as Lidl gaining an advantage over Tesco
74
What are the market conditions
The characteristics of a particular market
75
What are some examples of market conditions
size, growth rate, amount and intensity of competition
76
What are some examples of economic factors
interest rates, inflation, income, exchange rates
77
How can increasing interest rates affect cost and demand
- lower demand as consumers have less disposable income due to higher borrowing costs - Discount retailers may benefit over competitors - Businesses with high amounts of borrowing will have increased costs
78
What is the result of falling incomes
Lower demand as people have less disposable income
79
What is demography
The study of human populations which include factors such as: birth and death rates, income, level of health and migration etc.
80
What is the result of successive UK governments introducing legislation to help protect the environment and pollution
Businesses have to spend large amounts on measures to ensure that water, air and land are kept free from pollution
81
What are examples of technological factors
Innovation, AI, social media, data storage

A-level business (8 decks)

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