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What is Business ? Flashcards

(70 cards)

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1
Q

Why Business exist

A

Making profit
provide goods and services including public services such as the NHS
develop good idea
provide help and support for others , most notably charities that raise funds

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2
Q

What is a mission statement

A

Defines an organization and why it exists

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3
Q

Purpose of a mission statement

A

bring focus and meaning to a business and act as a guide when making critical decisions that affect the direction of a business

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4
Q

Why Business set Objectives

A

Motivating to have a clear goal to aim towards for managers and for staff
Objectives are basis for devising strategy : medium to long plan for meeting the objectives

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5
Q

what depends on setting objectives

A

costed both in manpower and money to know what resources are going to be needed to achieve the objectives

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6
Q

6 key Business objectives

A

Profit Optimisation
profit maximisation
growth
cashflow
survival
social and ethical

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7
Q

Profit Optimisation

A

Profit provides capital to fund business growth
Optimisation - getting the right balance between profit and risk. too much profit exploit the consumer and too less would threaten firms image

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8
Q

Profit Max

A

Getting as much profit as possible. Big companies follow this suspecting a rival would buy them off

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9
Q

Growth

A

focus on rising customers instead of profit. getting growth today and profit will come tomorrow

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10
Q

Survival , social and ethical

A

survival relies on keeping cash flow high enough . priority for new , start up business .
social and ethical only mean something if business willing to take sacrifice

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11
Q

SMART Objectives

A

Specific:
Mesurable
Acheivable
Realistic
TIme based

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12
Q

Specific

A

Clear and Precise

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13
Q

Measurable

A

Must be possible know when an objectives has been completed

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14
Q

Achievable

A

objectives must be within capabilities and have sufficient
resources.

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15
Q

Realistic

A

Challenging but possible to achieve given capabilities and resources

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16
Q

TIme-Based

A

Deadline to work on

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17
Q

Which objective is better in difficult economic times

A

survival is likely
to be more important than profit or environmental targets, whereas in a
booming economy, profit, growth and social issues

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18
Q

Objectives and Corporate Objectives

A

Objectives are targets precise enough
Corporate objectives : target for whole business (profit to raise by 20% a yr for next 2 yrs)

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19
Q

Why do firms struggle with cashflow

A

retail consumers expect generous credit terms while supplied demand cash on delivery

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20
Q

Evaluation

A

Company bosses yearn for stability and predictability. Set clear objectives and hold managers to account.

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21
Q

Business with Unliablityl limited

A

Soletraders and Patnerships

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22
Q

Unlimited liability

A

Owners property isnt seperable from business finances and at risk in event of failure

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23
Q

Sole traders

A

A business owned by one single person although it may have some employees and be a public service business

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24
Q

Advantages of Sole trader

A

Simple and cheap to establish with few legal work
Owner receives all profits
respond quickly to changes in market
Confidentiality is maintained as financial details don’t have to be published

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25
Disadvantages of Sole trader
Owner is likely to be short of capital for investment and expansion Few assets for collateral to support application for loans Unlimited liability difficult for sole trader to take holidays
25
Partnerships
Comprise between more than 2 ppl who contribute to capital in a business. based on how much capital each partner has contributed
26
Advantages
partners may have a wide range of sills between them raise greater amounts of capital pressure on owner is reduced as cover is available for holidays and there is support in making decision
27
Disadvantages
Control shared between partners arguments are common unlimited liability
28
Limited liability
restricts financial responsibility of shareholders for a companies debts to amount they invested in
29
Process of Incorporation
Creates seperate legal entity for the organisation and you get through registrar of companies
30
Private Limited Company
smaller than Plc. Share capital must not exceed £50000 LTD be included after the company name. Shares cant be bought or sold without the agreement of other directors often family businesses
31
Public Limited company
Their shares can be traded onto stock exchange and bought by any business / individual must have the term Plc after their name min of 50 ,000 share capital publish more details of their financial affairs than Ltd companies
32
Forming a company must send 2 documents to the Registrar of companies
Memorandum of Association Article of Association
33
Not for profit Businesses
Organisation that has business objectives other than making a profit
34
whats their objectives
Provide service to local communities give people job related skills fair trading activities
35
Mutuals and charities
Mutuals - private businesses who run for the benefit of their members and their base is made up of their clients and policy holders. Not pressured by shareholders for profit Charities - ensures those who fund the charity isn't liable for any benefits.provides tax benefits
36
Public sector
Owned by the state , national and local govt
37
Privatization
converting govt owned businesses to private sector
38
Diff between private and public sector
Private sector much more likely to be profit maximisers whereas public org are set up for benefit of society as whole
39
Reasons for changing different forms of Business
Expenses - relatively easy to set up as a sole trader Size and risk - if to remain little and have low risk then sole trader is the right option Objectives of the owners - if involve growth , then incorporated business will likely to give greater access to capital
40
Reasons for Changing business forms
Circumstances - such as growth of business , owners wish to be incorporated in order to benefit from ltd liability Capital - raise capital by being incorporated is easier takeover - change in structure when taken over
41
Pros of LTd company
benefit from Ltd liability great amounts of capital required to send a ltd amount of financial info
42
Cons of Ltd company
cannot sell shares on stock exchange requires permission to sell shares some admin costs
43
pros of PLC
gain positive publicly from trading on stock exchange access to large capitals
44
cons of plc
stock exchange lisitng means emphasis is placed on short term financial results required to publish great deal of financial info trading can result in admin costs
45
Evaluation on diff business forms
Ltd liability helps firms take reasonalble risks but gives scope to some shady practices as the business can be ran into ground and then can start again leaving customers out of pocket No proof that a stock exchange listing leads to short termism , directors could do this due to their bonuses .
46
Ordinary share capital
Money invested in a company by shareholders entitling them to part ownership . if the owner wishes to get money back , sell shares on stock market
47
role of shareholders
attend AGM and discuss whatever is on agenda major decisions will impact shareholders and required to be approved by shareholder
48
49
2 main financial rewards for company shareholders
Annual dividend payments rise in value of shares
49
Effects of ownership and mission objectives on performance
PLc often dirven by profit by shareholders which lead to short term approach . decision are made based on this whereas sole trader and ltd companies can focus on mission statement and objectives
49
how are shareholders issued dividends
Dividends recieved in proportion to shareholdings ( numbers of shares each individual own)
49
To make a successful takeover bid
higher than the market cap , falling share prices provide opportunity for investment / takeover
49
Market Cap
value that stock market places on whole business by ( share price * number of issues issued)
49
When does share price increase
when investor confidence increases and demand is more than supply
49
Reasons why shares and dividends fluctuate
Performance : profits are higher then share value will increase Expectation: result of a new product due to be launched on market Changes within market or consumer taste
49
RIghts Issue
gives existing shareholders the right to buy more shares at discount to market value
49
Market conditions
Characteristics of a particular market
50
Factors of market conditions
Economy changes consumer taste and fashion disruptive change - resulting from radical innovation /new tech Competitive structure - market with high barriers to entry protect operators in the market
51
Competition
In Competitive environment, strategies adopted by rivals will have an impact on a business. Business must try to differentiate its own products and services in order to encourage consumers to purchase them
52
relation of competition with demand and cost
in competitive environment , firms likely to compete with price , leads to pressure on cost - looking to reduce cost
53
Demand in relation to income
demand for necessities will be less affected by changes in income than demand for luxuries
54
why do rising interest rates result in lower demand
consumers are likely to have less disposable income due to higher borrowing costs for loans and mortgages. encouraged to save more
55
why do rising interest benfit discounters
consumers switching for a cheap price grocery and gain consumers due to cut in spending
56
interest rates in relation to cost
high levels of borrowing be faced with higher costs when interest rates rise.
57
how does interest rates affect business in terms of decision making
high-interest rates lead to businesses postponing on new capital investments due to costs involved
58
Demographic factors
Growing or declining population - project oppurtuinites look exciting in India >japan Age : proportion of older people forecast to grow , opprtuinites for relevant products Gender - male focused items like consoles and cosmetics for females Ethnicity
59
what does it lead to when Govt introduces legislation to help protect the environment from pollution?
Businesses have to spend large amounts on measures that nature is free from pollution located overseas where legislation is less restricted
60
Factors of environmental issues and fair trade
Global warming - business make considerable effot to minimise co2 emissions Sustainability - certain resources are running out and need to be conserved Fair trade- achieving better prices , decent working conditions and fair terms for farmers and workers in less developed countries . Mean higher cost to business but could lead to greater demand and better reputation due to USP
61
Evaluation to external factors
subject to change in customer tase

Business AQA (6 decks)

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