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A-level Business > 1 - What is business?❓ > Flashcards

1 - What is business?❓ Flashcards

1
Q

Define a business start-up

A

a new firm operating in a market for the first time

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2
Q

Define a market

A

any place where buyers and sellers meet to trade

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3
Q

Define added value

A

the process of making the product more valuable to the purchaser

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4
Q

Methods of adding value

A
  • convenience
  • branding
  • quality/design
  • USP
  • speed and excellent service
  • product features and benefits
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5
Q

How does a business add value?

A

when the selling price of an item produced is higher than the cost of all the resources used to make it

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6
Q

Why do businesses exist?

A

they are formed by entrepreneurs and are subsequently developed if they manage to survive

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7
Q

Why are businesses good for the economy?

A
  • create wealth by returns on investments
  • pay taxes
  • contribute to the infrastructure
  • drive innovation through research & development
  • create employment
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8
Q

What is the role of entrepreneurs?

A
  • spot business opportunities
  • take calculated risk
  • act as a catalyst for creation & growth
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9
Q

Define business objectives

A

statements of specific outcomes that are to be achieved

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10
Q

What is the hierarchy of objectives?

A

Mission
Corporate
Functional / Departmental
Unit / Team
Individual

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11
Q

What are some examples of objectives?

A
  • desired sales / profits
  • rates of growth
  • innovative player in the market
  • leading in the quality of customer service
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12
Q

What is profit?

A
  • source of finance
  • measure of business success
  • return on investment
  • reward for taking risks
  • motivating factor & incentive
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13
Q

Formula for profit

A

Profit = TR - TC

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14
Q

Why is profit important?

A

keeps the business surviving

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15
Q

Define public sector

A

Owned and run by the government - aim to provide for the public than a profit

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16
Q

Define private sector

A

Owned by private individuals - non-profit organisations included

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17
Q

What is a sole trader?

A

Most common type of business structure where an individual owns the company

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18
Q

Pros to sole trader

A
  • quick and easy to set up
  • simple to run
  • easy to shit down
  • entitled to all profits
  • independence
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19
Q

Cons to sole trader

A
  • unlimited liability
  • harder to raise finance
  • long hours
  • limited expertise
  • business suffers if owner ill/uninterested
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20
Q

Define a partnership

A

Owned by 2 or more people with a legal partnership agreement covering areas such as profit shares / decision making

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21
Q

Pros of a partnership

A
  • different skills
  • different and more experience
  • less risk as an individual
  • easier to raise finance
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22
Q

Cons of partnerships

A
  • splitting profits
  • unlimited liability
  • harder to shut down as more people involved
  • long hours
  • poor decision by partner affects others
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23
Q

Define a Private Limited Company Ltd

A

Can only sell privately to fam/friends not on the stick exchange

24
Q

Pros to Ltd

A
  • limited liability
  • family business = supportive
  • seen as prestigious
25
Q

Cons to Ltd

A
  • shareholders must all agree
  • long hours
  • more paperwork to set up
  • harder to shut down
  • splitting profits
  • publish financial documents
26
Q

Define a PLC

A

A larger organisation that sells shares in the stock exchange

27
Q

Pros to PLC

A
  • limited liability
  • easier to raise finance
  • stable form of structure = business continues to exist even if shareholders change
  • less tax
28
Q

Cons to a PLC

A
  • admin costs
  • public disclosure of company info
  • must give away a % of business
29
Q

How much of share capital does a PLC need to be listed on the stock market and how much must be available?

A

Need over £50,000 of share capital and must have atleast 25% of shares available

30
Q

Define a not-for-profit organisation (social enterprise)

A
  • benefit the community
  • has social aims
31
Q

Give examples of not-for-profit organisations

A

Charities, housing associations, community development trusts

32
Q

Define ordinary share capital

A

Money raised by selling shares for long-term investment

33
Q

Define dividends

A

A proportion of the profits earned which are split and paid out to shareholders as a fixed amount per sharw

34
Q

Define market capitalisation

A

The total value of all the ordinary shares issued by a company

35
Q

Market capitalisation formula

A

Number of issued shares X current share price

36
Q

Why would shareholders invest?

A
  • as a venture capitalist
  • you like a business
  • to support family/friends
  • paid a dividend in return
  • retirement
  • to hide money fraudulently
  • be involved in decision making
  • as a source of finance
37
Q

What influences share prices?

A
  • scandal
  • supply and demand
  • exchange rates
  • multinationals
  • ethics
  • taking risk
  • lack of consumer demand
  • inflation
  • the economy
38
Q

What happens to share prices if more people want to buy shares?

A

Share price rises

39
Q

How can the performance of a business cause share prices to increase/decrease?

A

business is doing well = share prices increase as company has more revenue

40
Q

How can rumours of a new product launch affect share prices?

A
  • Increase share prices as more people will buy new product
  • decrease share prices if it seems too risky
41
Q

How can interest rates affect share prices?

A
  • low interest increases share prices as it costs less to borrow and so demand will increase
42
Q

How can the state of the economy impact share prices?

A

Economy is bad then the pound will be weaker so more expensive and riskier to invest in shares

43
Q

Define share rights issued

A

When a company issues existing shareholders a right to buy additional shares in the business, offering a specific number of shares at a discounted price in a time limit

44
Q

What happens if shares right issued aren’t bought?

A

The shares go on the stock market for the public as ordinary shares

45
Q

What does PESTLE stand for?

A

Political, economic, social, technological, legal, environmental

46
Q

What does PESTLE help identify?

A

External influences a business can’t control, but can accommodate to limit impact

47
Q

Define the voluntary sector

A

Includes charities and societies that exist to help people eg. Oxfam, Cancer Research

48
Q

What are some objectives of a voluntary sector business?

A

Make profit for donations, social and ethics

49
Q

What is it called when a business is just about surviving

A

Satisficing

50
Q

Define privatisation

A

Moving from a public sector to a private sector

51
Q

Define business environment

A

Incorporates all of the internal and external factors that affect how a company runs

52
Q

What can business environment include?

A
  • safety
  • culture
  • happiness
  • political factors
  • confidence
53
Q

How does the government have a big influence on business environment?

A

Eg some governments might make too many regulations that a business can’t follow

54
Q

What factors affect costs and demand?

A
  • competition
  • market conditions
  • incomes
  • interest rates
  • demographics
  • environmental issues and fair trade
55
Q

Define a mission statement

A

It’s overall purpose or main corperate aims, giving you a clue on the company’s beliefs and goals

56
Q

What may affect a business’s legal structure?

A
  • number of entrepreneurs
  • mission statement
  • want for unlimited/limited liability

A-level Business (10 decks)

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