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Business A - level > 1 What is business > Flashcards

1 What is business Flashcards

1
Q

What are the 4 reasons businesses exist

A
  • Make a profit
  • Provide goods and services
  • Develop a good idea
  • Provide help and support for others e.g. charities
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2
Q

Define a mission statement

A

A written declaration of a company’s core purpose and focus and defines the reason for it’s existence

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3
Q

What is the purpose of a mission statement

A

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

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4
Q

Define an objective

A

A goal to help a business achieve its mission

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5
Q

What are 3 key objectives of business

A
  • Survival
  • Profit
  • Growth
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6
Q

What are the 2 additional important objectives of business

A
  • Customer service
  • Corporate social responsibility (CSR)
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7
Q

Define what CSR is

A

The commitment of a business to behave ethically towards its workforce, local community and society at large

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8
Q

Why does each functional area set objectives in a business

A

In order to contribute to the business achieving its overall objectives

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9
Q

What are objectives, that the mission is not

A

Actionable and measurable

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10
Q

Put these in order of achievement:
- Corporate aims
- Functional/department objectives Mission statement
- Corporate objectives
- Mission statement

A

Functional/department objectives ]
Corporate objectives
Corporate aims
Mission statement

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11
Q

What characteristics should objectives follow

A

SMART characteristics

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12
Q

What does the S in SMART characteristics mean

A

Specific: objectives must be clear, precise and well-defined

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13
Q

What does the M in SMART characteristics mean

A

Measurable: must be possible to know when an objective has been completed

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14
Q

What does the A in SMART characteristics mean

A

Achievable: objectives must be within capabilities and have sufficient resources

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15
Q

What does the R in SMART characteristics mean

A

Realistic: an objective must be challenging but possible to achieve given the capabilities and resources

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16
Q

What does the T in SMART characteristics mean

A

Time-based: there must be a deadline to work towards

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17
Q

List the 3 reasons businesses set objectives

A
  • Performance can be evaluated as objectives are measurable and time-based
  • Provide motivation for those who are responsible as they are realistic and achievable
  • They give meaning to planning and ensures a business remains focused on its mission as they are specific
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18
Q

Define profit

A

The amount of money remaining once all costs have been deducted from the revenue

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19
Q

What a reward to owners/shareholders of a business for taking a risk of investing in the business

A

Profit

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20
Q

What is an incentive for setting up in business

A

Profit

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21
Q

Define revenue

A

Money receives from sales

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22
Q

How is revenue calculated

A

Units x price per unit

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23
Q

Define variable costs

A

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

24
Q

Examples of variable costs

A

direct labour and raw materials

25
Q

Define fixed costs

A

Costs that do not change as a result of changes in the level of output
- Doesn’t change in the short term

26
Q

Examples of fixed costs

A

Rent, rates and director salaries

27
Q

How is total costs calculated

A

Fixed costs + Variable costs

28
Q

How is profit calculated

A

Total revenue - total costs

29
Q

What is the private sector

A

The part of the economy that is made up by private enterprises
- businesses owned and controlled by individuals/groups of individuals

30
Q

What are the 2 categories that the private sector falls under

A
  • Corporate businesses
  • Non-corporate businesses
31
Q

Corporate businesses consist of

A
  • Private limited companies
  • Pubic limited companies
32
Q

Non-corporate businesses consist of

A
  • Sole traders/ sale proprietors
  • Partnerships
33
Q

What are corporate businesses

A

Businesses which have a legal identity that is separate from that of their owners

34
Q

What do corporate businesses owner’s benefit from

A

Limited liability

35
Q

Define limited liability

A

the restriction of financial responsibility of shareholders for a company’s debts to the amount they have individually invested

36
Q

Limited liability means company can

A
  • Sue
  • Be sued
  • Enter into contracts
37
Q

In the event of a corporate business failing, what does this entail for shareholders

A

Their private possessions are safe

38
Q

By what 2 methods can liability of shareholders be limited

A
  • Shares
  • Guarantee
39
Q

Limited liability by shares

A

A shareholders liability is limited to the value of the shares that have been purchased
- no further call on the shareholder’s wealth

40
Q

Limited liability by guarantee

A

Each member’s liability is restricted to the amount they have agreed to pay in the event of the business being wound up
- Most common with not-for profit businesses

41
Q

Features of a private limited company

A
  • Smaller than public limited companies
  • Share capital must not exceed £50 000
  • “Ltd” must be included after the company’s name
  • Shares cannot be bought/sold without agreement of other shareholders
  • Shares can’t be sold on the Stock Exchange
  • Relatively small and family businesses
42
Q

Features of a public limited company

A
  • Share can be sold on the Stock Exchange and can be bought by any business/individual
  • “plc” must be included after the company’s name
  • Must have a minimum capital of £500 000 by law
  • Publish more details of financial affairs than private limited companies
43
Q

What 2 documents are given to the Registrar of companies when forming a company

A
  • Memorandum of Association
  • Articles of Association
44
Q

Who receives the Memorandum of Association and Articles of Association

A

The Registrar of companies

45
Q

What does the Memorandum of Association include

A

sets out the details of the company’s name, address and it’s objectives of trading

46
Q

What does the Articles of Association include

A

details the internal arrangements of the company, including the frequency of shareholders’ meetings

47
Q

Once the Registrar of companies approves documents, what does this mean for the business

A
  • They receive a Certificate of Incorporation
  • Can commence trading
48
Q

What are non-corporate businesses

A

Businesses where their owners are not treated like separate elements

49
Q

What is the risk of owners in non-corporate businesses

A

They can lose their private possessions in the event of failure of the business so they are known to have unlimited liability

50
Q

Features of a sole trader business

A
  • Owned by a single person
  • May have multiple employees
51
Q

Features of Partnerships

A
  • Between 2-20 people who contribute capital and expertise to a business
  • Usually based on a Deed of Partnership
52
Q

What does the Deed of Partnership state

A

How much each partner has contributed, the share of profits each shall receive and the rules of electing new partners

53
Q

Examples of sole traders

A

Plumbing and hairdressing

54
Q

Examples of partnerships

A

Dentists and accountants

55
Q

Define “ sleeping partners”

A

a partner that contributes capital but takes no active part in the business

Business A - level (1 decks)

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