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1 What is business? Flashcards

1
Q

What is a business?

A

Any organisation that is involved in any organised form of trade, industrial or professional activites.

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2
Q

What is profit?
How do you work it out?

A

Revenue munis toal cost. The amount of money remaining once all costs have been deducted from the revenue.

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3
Q

What is growth?

A

Increased sales and profit either by value of sales or volume.

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4
Q

What is survival?

A

To continue to exist as a business.

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5
Q

What is cash flow?

A

To ensure sufficient cash is available to meet day to day expenses.

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6
Q

What is social?

A

To behave in a way which benifits society.

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7
Q

What is ethical?

A

To behave in a way which is considered to be morrally correct.

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8
Q

What is a mission statement?

A

A brief written statement of the purpose of a company or organisation which is the overall reason for the business’ existance.

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9
Q

What are corporate aims?

A

The long term targets and plans to fulfil the mission statement.

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10
Q

What does “corporate objectives” mean?

A

The medium to long term quantitable targets.

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11
Q

What is “corperate stredegy” ?

A

The action taken.

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12
Q

What are the 5 key points of a business (MOLFH)?

A

Marketing
Operational decision making
Leadership decision making
Financial decision making
Human recources

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13
Q

What 4 reasons are there for businesses existence?

A

Proft.
To provide goods and services including public services.
To develop a good idea (enterprise).
To provide help and support for others, including most notably charities.

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14
Q

What is the diffrence between a mission statement and objectives?

A

A mission statement is a declaration of business’s core purpose and focus. An objective are goals the are actionable and measurable, designed to help a business achieve its mission.

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15
Q

What are the three key objectives of a business (PGS)?

A

Profit
Growth
Survival

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16
Q

What is the hierarchy of objectives (MCC)?

A

1) Mission statement
2) Corporate aims
3) Corporate objectives

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17
Q

What are the smart objectives?

A

Specific
Measurable
Achievable
Realistic
Time-based

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18
Q

What three reasons are there for a businesses to set objectives?

A

To evaluate performance
To provide motivation for those who are responsible
To give meaning to planning and ensure that a business remains focused on its mission

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19
Q

What is revenue?

A

The money recieved from sales.

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20
Q

What are varible costs?

A

Costs that vary directly with the level of output.

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21
Q

What are fixed costs?

A

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

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22
Q

What are total costs?

A

Fixed costs plus variable costs.

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23
Q

What is revenue also known as?

A

Turnover, sales turnover and sales revenue.

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24
Q

How is revenue calculated?

A

units sold x sales price

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25
Q

Costs are devided into what two categories?

A

Variable costs and fixed costs.

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26
Q

What is a privet sector?

A

The section of the economy made up of businesses owned and controlled by indeviduals or groups of individuals.

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27
Q

What are corporate businesses?

A

Businesses that have a legal identity seperate from that of their owners.

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28
Q

What is limited liability?

A

Restricts the financial responsibility of shareholders for a company’s debts to the amount they have indevidually invested.

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29
Q

What two categories do businesses fall into in the privet sector?

A

Corporate businesses and non-corporate businesses.

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30
Q

What are the features of a corporate busniess?

A

They have a legal identity seperate from that of their owners.
Owners benifit from limited liability.

31
Q

What may shareholers liability be limited by?

A

The value of the shares that each shareholder has purchased.
The amount he or she has agreed to pay in the event of the business being wound up (more common with not-for-profit businessses).

32
Q

What are the two main types of corporate stredegy company?

A

Privet limited companies.
Public limited companies.

33
Q

What are some features of a privet limited company?

A

Normally much smaller then public limited companies.
Share capital must not exceed £50,000
LTD must be included after the companies name.
Often familly run businesses.

34
Q

What are some features of a puplic limited company?

A

Must have the term “plc” after their name.
Minimum capitol of £50,000.
Have to publish more details of their financial affairs then do Ltd companies.

35
Q

What two main documents do you have to send to the Registrar of companies when forming a company?

A

Memorandum of association.
Articles of association.

36
Q

What are some features of a non-corporate business?

A

The owners and their business are not treated as seperate elements.
Owners privet possessions are at risk in the event of failiure.
Sole traders and parteners have unlimited liability.

37
Q

What are the two main types of non-corporate business, sole traders and partnerships?

A

Sole traders (or proprietors) are owned by a single person, common in retailing and in services such as plumming and hairdressing. Partenerships compromise between two and twenty people, are usually based on a Deed of partenership, some may include “sleeping parteners” and are common in the proffesions, for example dentists and accountants.

38
Q

What are some not for profit businesses’ objectives?

A

Provising services to local communities
Giving people job related skills
Fair-trading activities

39
Q

What is a mutual?

A

A privet company with an ownership base made up of its clients.

40
Q

What are some mutuals objectives?

A

Are a form of business organisation
Are generally privet businesses with an ownership base made up of clients and philyholders eg insurance campanies and some bulding societies

41
Q

What is a public sector?

A

Part of the economy taht is owned and controlled by the government or local authorities eg police, NHS and BBC

42
Q

What is privatalisation?

A

The process of converting government-owned and -controlled industries and businesses to the privet sector.

43
Q

What are shareholders?

A

The owners of a limited company, including any person, company or other institution that owns at least one share.

44
Q

What is the result of privatisation?

A

A number of key industries formerly in the public sector have been sold to the privet sector, eg the steel, water and telephone industries.

45
Q

Reasons for choosing different forms of business, the key choice is that between unincorporated and incorperated status. What factors may be concidered for choosing different forms of business?

A

The key choice is that between unincorporated and incorperated status
Formalities and expences
Size and risk
The objectives of the owner

46
Q

(What are some reasons for choosing different forms of business?) What are formalities and expenses?

A

Sole traders and partenerships are relitively easy to set up, with a few formalities.

47
Q

(What are some reasons for choosing different forms of business?) What is size and risk?

A

If a business is, and intends to remain, small and carries out little in the way of risk then a sole trader or partenership may be the most appropriate form.

48
Q

(What are some reasons for choosing different forms of business?) What are the objectives of the owners?

A

If the objectives of the owners involve growth then an incorperated business might be more appropriate as it may give greater access to capital and limited liability.

49
Q

What are some reasons for choosing different forms of business?

A

circumstances
capitol
acquisition or takeover

50
Q

(What are some reasons for changing business form?) What are circumstances?

A

Due to the growth of a business the owner may wish to become incorperated in order to benifit from limited liability.

51
Q

(What are some reasons for changing business form?) What is capitol?

A

The owner(s) of a business may find it easier to raise capitol by becoming incorporated, or if it is a privet limited company by changing to public limited

52
Q

(What are some reasons for changing business form?) What is acquisition or takeover?

A

This may cause a change of structure eg a privet limited may be taken over by a public limited

53
Q

(Role of shareholders and why they invest) What is share capitol?

A

The money given to a company by shareholders.

54
Q

(Role of shareholders and why they invest) What are somefactors of the money given to shareholders (share capital)?

A

It is permanent and will never be paid back
shareholders can get their money back by selling their shares through the stock market
Any privet individual can become a shareholder
The biggest shareholders are financial institutions, pension funds and insurance compainies

55
Q

(Role of shareholders and why they invest). What are some rights and roles shareholders have to play when running a business?

A

Majour decisions are required to be approved by the shareholders at a general meeting called by the directors
Their main role therefore is to attend this meeting and discuss whatever is on the agenda and to ensure the directors do not go beyond their powers
There are also certain things that can only be done by shareholders such as removing the directors or changing the name of a company

56
Q

(Role of shareholders and why they invest). What are the two reasons why privet indeviduals and financial institutions invest in shares?

A

Income (dividend)
Capitol growth

57
Q

(Influences in share price and the significance of share price changes). What is the price of hsares determined by?

A

The market and level of supply and demand.

58
Q

(Influences in share price and the significance of share price changes). What is the price of a share influenced by?

A

Performance (better or worse than expected profits)
Expectation of better or worse profit performance
Changes within the market or competitive environment
World uncertainty

59
Q

(Influences in share price and the significance of share price changes). How is market capitalisation calculated?

A

share price x number of shares issued

60
Q

(Influences in share price and the significance of share price changes). What is external environment?

A

All the3 factors outside the control of a business that may impact its operation

61
Q

(Influences in share price and the significance of share price changes). What are some factors of market capitalisation?

A

It gives a valuation of a company
Changes in the share price will affect the value of a business
Falling share price might provide an opportunity for investment or even takeover
It might be an indication of a business in decline

62
Q

(Influences in share price and the significance of share price changes). What are the effects of ownership on mission, objectives and performance?

A

Profit is a key objective of many privet sector businesses
Publuc limited companies are owned by shareholders and will often be driven by profit
It may result in a very short term approach to business decision making
The philosophy outlines in the mission statement may therefore take a back seat
Sole traders and privet limited companies will be less affected by the need to achieve profits

63
Q

(1.3 business operate within an external environment). What does external environment refer to?

A

Outside the control of the business
Uncertain and unpredictable
May impact on strategic goals and objectives

64
Q

(1.3 business operate within an external environment). What do the factors of external environment include?

A

Competition
Market conditions
Economic factors
Interest rates
Demographic factors Environmental issues

65
Q

(1.3 business operate within an external environment). What are some factors of competiton in external environment?

A

Almost all businesses operate within a competitive environment.
The strategies adopted by competitor firms therefore have an impact on a business
A competitor may come up with an innovative product or service
There is likely to be competition on price with in tern puts pressure on costs(1.3 business operate within an external environment).

66
Q

(1.3 business operate within an external environment). What are some factors of market conditions in external environment?

A

Size
Growth
Any barriers to entry
Seasonal factors
Amount and intensity of competition

67
Q

(1.3 business operate within an external environment). What are some factors of economic factors in external environment?

A

The stage of thr economic cycle
Interst rates
Inflation
Incomes
Exchange rates

68
Q

(1.3 business operate within an external environment). What are some factors of interest rates in external environment?

A

Can have a big impact on both the demand for goods and services provided by a business and on their costs.
Rising interest rates result in higher costs of borrowing for loans ad morgages
Rising interest ratest rates may encourage greater saving
As a result demand is likely to be lower
Not all businesses will be affeted adversely however
Discount retailers eg lidl and cheaper resturants and takeaway may benefit
Rising interest rates may also result in rising business costs especially for high-geared businesses
Investment decisions might also be postponed due to rising interest rates
(The opposite is likely to occur to falling interest rates)

69
Q

(1.3 business operate within an external environment). What are some factors of demographic factors in external environment?

A

Demography is the study of human populations
Age
Sex
Income
Occupation
Birth/death rates
level of public health
immigration

70
Q

(1.3 business operate within an external environment). What do the factors of demographic factors in external environment effect?

A

The level of demand
The nature of the goods and services bought
The structure of the working population

71
Q

(1.3 business operate within an external environment). What are some factors of environmental issues in external environment?

A

Pollution - government legislation - increased cost
Global warming - media attention - damaged reputations
Exploitation - media attention - impact on sales
focus on more sustainable development
concern for fair trade

72
Q

What happens when a company focuses on environmental issues?

A

Business may create a USP
Enhance its reputation
Generate greater sales

73
Q

How can the factors affecting a business be easily recalled (acronym)?

A

PESTLE

74
Q

Ideally what does a mission statement include?
What is it also sometimes known as?

A

Ideally a mission statement guides the actions and decision making of the organisation and management.
It also spells out its overall goal and provides a sense of direction.
Sometimes also known as a vision statement.

business (7 decks)

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