(Unit 1) What is a business? Flashcards
(78 cards)
1
Q
What are businesses?
A
They are organisations that transform inputs or resources (adds value) into outputs or products that are purchased by their customers.
2
Q
What is a good?
A
A physical product (tangible).
3
Q
What is a service?
A
A intangible item.
4
Q
What is a product?
A
A more general term that includes goods and services.
5
Q
Why do businesses exist?
A
- create employment
- create income
- create new products
- enhance a country’s reputation
6
Q
What are the 2 sectors?
A
Public and Private.
7
Q
What is the private sector?
A
Owned businesses.
8
Q
What is the public sector?
A
Government operated businesses.
9
Q
What does B2B mean?
A
Business to Business.
10
Q
What does B2C mean?
A
Business to Consumer.
11
Q
What does CELL stand for?
A
Capital, Enterprise, Land, Labour.
12
Q
What does Capital mean in CELL?
A
Man-made physical equipment to produce other goods and services.
13
Q
What does Enterprise mean in CELL?
A
The individuals who take the risks and combine the other 3 factors of production to produce a good/service to make a profit.
14
Q
What does Land mean in CELL?
A
The stock of natural resources (e.g. renewable energy).
15
Q
What does Labour mean in CELL?
A
The human input (labour work).
16
Q
What are the 3 type of businesses?
A
Primary, Secondary and Tertiary.
17
Q
What is a Primary type of business?
A
The extraction of raw materials (e.g. farming and fishing).
18
Q
What is a Secondary type of business?
A
Transforming or refining the raw materials (e.g. manufacturing and constructing).
19
Q
What is a Tertiary type of business?
A
The service industry (e.g. hotels and restaurants).
20
Q
Why do businesses exist?
A
- profit
- growth
- survival
- cash flow
- social
- ethical objectives
21
Q
What is a mission statement?
A
A statement that overrides the purpose of the business.
- the reason for its existence
- a strategic perspective
- supports the stated vision for the future
22
Q
What is the criticism of mission statements?
A
- often too vague and general
- not always supported by actions of the business
- often merely statements of the obvious
- are they just for PR?
23
Q
What should business objectives be?
A
SMART
24
Q
What does SMART stand for?
A
Smart, Measurable, Achievable, Relevant, Time-bound
25
Why do businesses set SMART objectives?
- clear set of guidelines
- co-ordinate business activity
- motivate workers
- emphasise what is improtant
- influence the actions of workers
26
How do you calculate profit?
Total revenue - Total costs
27
What type of businesses are sole traders and partnerships?
Unincorporated
28
What type of businesses are plc and ltd?
Incorporated
29
What does unlimited liability mean?
Business owners are legally liable for any debt their business might accrue
30
What does limited liability mean?
This means that the legal duty to pay debts run up by a business stays with the business itself, not with its owners/shareholders
31
What does sole traders mean?
Sole traders are individuals who establish and operate a business on their own.
32
What are traits that a sole trader may need?
- good communication skills
- a business idea
- understanding basic financial concepts
- willing to take a risk
33
What are the advantages of being a sole trader?
- easy to set up
- motivating, own boss
- freedoms, own decisions
- keep the profits
34
What are the disadvantages of being a sole trader?
- loneliness
- unlimited liability
- hours can be demanding
35
What is a partnership?
2-20 people forming a business together, they also have unlimited liability.
36
What are the advantages of being in a partnership?
- additional opportunities
- more ideas
- more capital
37
What are the disadvantages of being in a partnership?
- disagreements
- less control over the business
- share the profit
- unlimited liability
38
What is incorporation?
This is the process where it creates a separate legal identity within the business, the business can take legal action against others and have legal action taken against it.
39
What are the advantages of forming a limited company?
- limited liability
- able to gain access to a wider range of borrowing opportunities
40
What are the disadvantages of forming a limited company?
- must make financial information available publicly at Companies House
- have to follow more and more expensive rules
41
What is a private limited company (Ltd)?
- owners are known as shareholders
- shareholders have to be invited by the business before they can purchase a share of the business, %/ portion of the business
- pay corporation tax (rose from 19 to 25% from last year)
- more paperwork, file annual reports (not available for the public)
42
What is a public limited company (plc)?
- shares are sold to the public on the stock market, become part owners and have a voice on how it operates
- expensive to set up ($50,000)
- more complex accounting and reporting requirements
- greater risk of hostile takeover
- shareholders have limited liability
43
What is ordinary share capital?
This refers to the amount of finance raised through selling shares to shareholders.
Business usually use ordinary share capital as source of long-term finance.
44
What is market capitalisation?
The total market value of the issued share capital of the company.
45
How do you calculate market capital?
Share price (per share) X No. of shares issued
46
What are dividends?
These are payments made to shareholders by the company from earned profits. Amount paid is ‘per share’ (e.g. $1 per share held).
47
What are some factors that influence a PLC share (external and internal)?
- the financial performance (e.g. profit growth) (I)
- relationship with investors (I)
- state of the economy (E)
- alternative investment opportunities (E)
48
What are Not-For-Profit organisations?
An organisation which typically run on commercial lines but has strong social welfare/environmental aims rather than existing to generate profit for private investors.
49
What are the 3 type of Not-For-Profit Organisations?
Mutual businesses, social enterprises and charities
50
What are mutual businesses?
They are business that exist only to ‘serve members’, they don’t have shareholders/owners (the CO-OP).
51
What are social enterprises?
They are proper businesses that makes its money in a socially responsible way (The Eden Project), businesses with primarily social objectives.
52
What are charities?
They are businesses whose aim is to raise money for good causes, or to help people, animals and the environment.
Activities are regulated by the Charity Commission, proceeds earned from activities are spent within line of their aims.
53
What is the effect mission statements have on a sole trader?
Sole traders unlikely to have a mission, but the sole owner provides a sense of direction.
54
What is the effect of mission statements on an LTD?
Mission statements are the centre on maintaining a family run business or reputation.
55
What is the effect of mission statements on PLC’s?
Mission statements can play an important role to project the company’s image and to provide a focus for consistent decision.
56
What is the effect of mission statements on Not-For-Profit organisations?
Mission statements can be important in establishing the ethos of the business and underpinning all decision-making.
57
What is the effect of objectives on sole traders?
Objectives are the centre around meeting personal goals, such as generating income.
58
What is the effect of objectives on LTD’s?
Objectives can relate to satisfactory levels of profit or financial stability to ensure continued survival.
59
What is the effect of objectives on a PLC?
Objectives are likely to relate to costs, prices, business image and market share and link to financial performance in the longer term.
60
What is the effect of objectives on a Not-For-Profit organisation?
Objectives are likely to be non-financial and can be less easy to measure such as benefiting the community or protecting the environment.
61
What is the effect of decisions on a sole trader?
Decisions are potentially rapid and responsive, but lack support and possibly information.
62
What is the effect of decisions on a LTD?
Decisions are much more complex as people are likely to be involved too, more information available and some specialist input.
63
What is the effect of decisions on a PLC?
Decisions can be very complex and have long-term implications, some decisions require specialist input and need to be based on extensive information.
64
What is the effect of decisions on Not-For-Profit organisations?
Decisions may lack specialists, desire to meet social or other objectives may cloud judgements.
65
What is the effect of performance on a sole trader?
It allows a business to respond to customers but may not be price competitive.
66
What is the effect of performance on a PLC?
Performance based on meeting personal needs.
67
What is the effect of performance on a LTD?
Access to capital and pressure from shareholders likely to place emphasis on being competitive in terms of price, customers, service and desirable products.
68
What is the effect of performance on a Not-For-Profit organisation?
Performance unlikely to be measured in not-financial terms, need to perform well enough financially to meet other goals.
69
What are examples of some external environment factors that have an affect on how a business may operate?
- incomes (disposable income)
- government decisions (policies)
- economy (inflation, interest rates)
- competitors actions
- demographic changes
- seasonal changes
- environment (recycling + sustainability)
- availability of resources
- tastes and fashion (trends)
70
What is demand?
The amount of a product that customers are prepared to buy.
71
What might be factors that businesses may need to factor in when in a competitive environment (e.g. Amazon vs A Bookstore)
- price
- variety
- quality
- customer satisfaction
- connivence
72
What affect does household incomes have on demand for goods?
Normal and luxury goods will see sales rise as income levels rise.
Some goods may see their demand fall as consumers incomes rise, and these are known as inferior goods.
73
What is Fair Trade?
Fair trade is about better prices, safer working conditions, local sustainability and fair terms for farmer and workers, across the world.
74
What is an example of fair trade?
1in3 coffee drinks in the UK are fair trade, farmer in Ethiopia employs workers and pays them wages for every pound of coffee harvested.
75
How does fair trade impact businesses?
- increase costs
- understands the whole supply chain (tracked)
- fosters long-term partnerships
- empowers producers through training and support to increase quality.
76
What does PESTLE stand for?
Political, Economic, Social, Technological, Legal and Environment
77
How is PESTLE analysis important?
PESTLE analysis examines the external factors that are likely to impact the activities and outcomes of a business.
78
What can managers use PESTLE analysis for?
Managers can use the information gathered to understand the potential threats to the business’ performance and identify future difficulties so that action can be taken to help avoid and eliminate their effects.
