1.5.5. Business Choices

Question 1

Dividends

Answer 1

—Sum of money paid each year by a company to its shareholders from its profits

Question 2

Opportunity cost

Answer 2

-Loss of the next best alternative when making a decision. The benefits that could have been gained by taking a different decision.
Ie. Launching a new product
1.Cost of launch
-Development and research costs
-Equipment purchase and installation
-Direct cost of materials and staff

2.Opportunity cost of launch
-Specialist staff unable to work on other projects
-Commitment of capital may restrict other opportunities
-Hard to get full production levels on existing products

Question 3

Choices

Answer 3

Choices made due to scarcity. Usually involves some form id compromise

Question 4

Trade offs

Answer 4

When two things cannot both be fully achieved; having more of one thing means having less of another ie. Minimising costs and maintains quality standards. Several attributes to manage trade offs include-
1.experience
2.understanding of consumer tastes
3.broad understanding of businesses current position
4. Understanding of external issue influencing the decision