What is a business? Flashcards
(17 cards)
business sectors
primary - extraction of natural resources e.g. mining,farming
secondary - production of finished goods e.g. manufacturing
tertiary - providing services e.g. personal services
quarternary - providing info/ICT e.g. software development
main objectives
profit maximisation, growth, survival, positive cash flow, social/ethical aims, diversification of products
mission and objective difference
mission-gives business direction, ultimate purpose
objectives-detailed steps to how to carry out mission
pros/cons of soletraders
pros
-quick/easy
-simple, has control over all decisions
-minimal paperwork
-easy to close
cons
-unlimited liability
-harder to raise funds
-business it owner, affected if owner ill
-higher tax than a company
pros/cons of partnerships
pros
-simple
-minimal paperwork
-multiple expertise
-specialist skills
-greater potential to raise funds as both can invest
cons
-unlimited liability
-conflict of decisions
-harder to raise funds than a company
-suffers if internal conflict
-complicated to sell/close
company
seperate legal identity between company and founders
pros/cons of companies
pros
-limited liability
-easier to raise funds
-stable
cons
-greater admin costs
-public disclosure of info
-shared ownership with shareholders
types of rewards for shareholders
dividends - % of profit given back
capital gain - value of shareholding rises as value of business rises, this is reflected in higher share price, but no guarantee that sharehold will increase in value
external factors affecting share price
-state of economy
-market sentiment
-industrial developments
-potential for takeover
-alternative investments
internal factors affecting share price
-financial performance
-dividend policy
-relations with key investors
-management rep.
consequences of change in share price
-impacts reputation, if high then more confidence
-affects ability to raise finance
-influences take over risk
-impacts shareholders
profit warning
market expectations wont be met so big fall in share price
shareholders may sell shares before it falls more
market cap
share price x number of shares
features of external environment
-market conditions
-competition
-fairtrade
-household/real income
-environment
-demographic
-interest rates
factors affecting real income
-inflation
-wage growth
-employment levels
-interest rates
-tax policy
SPICED
strong pound, imports cheap, exports dear
key demographic factors
aging population - greater demand for services that support the elderly, increased disposable income so more demand
net immigration - higher costs and greater demand for public services, increased size of workforce
