1.1 Purpose Of A Business Flashcards
Define mission statement.
Sets out an overall purpose to direct an entire organisation.
Define business objective.
Medium to long term goals established to coordinate the business in line with the mission statement.
Define goods.
Physical products.
Define service.
An intangible item.
Define business.
An organisation that exists to provide goods or services to customers on a commercial basis.
What are the benefits of a business to society?
Create jobs and employment.
Drive innovation, research and development.
Pay taxes.
Create wealth.
What makes a good mission statement?
Formulation of objectives which enable progress to be measured.
Differentiates business from competitors.
Defines market.
Relevant to all stakeholders.
Excites, inspires and motivates.
What makes a SMART objective?
Specific.
Measurable.
Achievable.
Realistic.
Time bound.
Name the possible factors affecting business objectives.
Size.
Ownership.
Market conditions/economy.
Legislation.
Attitude to risk.
Competitors.
Why may legislation affect a business’s objectives?
By abiding to laws e.g. minimum wage, ability to maximise profit may be disrupted.
Define revenue.
Amount of money made from sales.
How would you calculate revenue?
Units sold x Selling price
What are total costs?
Fixed costs + Variable costs
Define profit.
Money made from sales after costs are deducted.
How to calculate profit:
Revenue - Total costs
Define fixed costs.
Costs which do not change with business output.
Define variable costs.
Costs that differ directly with level of output.
Why is profit important?
Source of finance - allows for investments and expansions.
Provides money for dividends - encourages shareholders to buy more, increases funding, expansion of business.
What are functional objectives?
Define goals for each department.
Why is it important to set objectives?
Measure success.
Ensures all action is coordinated and leading towards achievement of mission.
