1.5.3 Business objectives

Question 1

Survival

Answer 1

To continue to exist as a business

Question 2

What sort of time frame will a business have survival as an objective

Answer 2

-in the Short term
-in the first year

Question 3

When will a business have survival as an objective

Answer 3

• when it’s a start up trying to build a customer base and establish themselves in the market

-when experiencing difficult trading conditions (e.g because a competitor arrives)

Question 4

what is the objective of survival

Answer 4

to reach a sustainable level of sales that allows the business to reach it’s break-even-point (TR = TC

Question 5

Profit maximisation

Answer 5

When a business aims to make as much profit as it can

Question 6

Profit formula

Answer 6

Total revenue - Total costs

Question 7

when is profit maximisation an objective

Answer 7

When owned by shareholders -> owners would need to maximise profits in order to please them (giving them dividends)

• if owner wants to make as much profit as possible

Question 8

Importance of profit maximisation (redbook)

Answer 8

profit is important as it secures long term success of a business

• profits can be reinvested into the business inorder to grow and keep up with the demands of the ever-changing business environment