2.3 - business growth Flashcards
Current ratio formula
current assets / current liabilities
Current acid test ratio
current assets - current inventory / current liabilities
What is business growth?
The process of increasing the size and market share of a business.
What are economies of scale?
The cost advantages a business gains as it increases production.
What is organic growth?
Growth achieved by increasing sales and output internally (e.g.
What is external growth?
Growth achieved through mergers
What is a merger?
The combination of two companies into one.
What is an acquisition?
One company buying another company.
What are synergies in business growth?
Benefits that arise when two businesses merge
What is horizontal integration?
The merging of companies in the same industry and at the same stage of production.
What is vertical integration?
The merging of companies at different stages of production within the same industry.
What are the benefits of growth?
Increased market share
What are the drawbacks of growth?
Increased complexity
What is diversification?
The process of entering new markets or developing new products.
What is diseconomies of scale?
The rise in per-unit costs as a company becomes too large and inefficient.
What is a takeover?
When one company buys out the majority of shares in another company.
What are the risks of business growth?
Overextension
What is a strategic alliance?
A partnership where businesses cooperate without merging.
Why do some businesses remain small?
Control
What is franchising as a growth strategy?
Expanding by allowing others to use the business model in return for fees.
What is a joint venture?
A business arrangement where two or more parties share resources to achieve a common goal.
