3.0 revision Flashcards
Fully learn the 3.0 topic for test
Calculation for output per employee
Total value of output/ total number of employees
Labour cost per unit of output
Total labour cost/ total output
What is share capital
Raising finance via selling shares of a business
Issues of share capital
Loss of control, time consuming, future profits now shared
advantages of share capital
Can control amount of shares released, no interest of money gained, can help business grow through flotation
What is a Loan
Amount of cash borrowed from a bank with a set time frame and interest rate
Advantages of loan
Quickly raise finance, long term payment, reliable financial source
Disadvantages of loan
Interest on cash borrowed, may need to use collateral to pay
Gearing meaning
Proportion of finance that is provided by debt within a business
Organic growth
expansion of business oer period of time by expanding its reach to customers markets and employees
Inorganic growth
Business expands through merging or taking over another business from same or different markets
Advantages of organic growth
Avoids risk of merging, cheaper, retains company culture, easier to plan, more market share comes with more influence in market
Disadvantages of organic growth
high risk, capital intensive opening many new stores and employees at once, growth is limited to sales forecast predictions, new markets and country’s dangerous to enter, llong time period before recieve money on your investment
Advantages of inorganic growth
Fast growth, lower costs on setting up stories already there, economies of scale, increased market share
Disadvantage of inorganic growth
Difficult to change company culture, high financial risk, communication issues, less control (lead to diseconomies of scale)
What is merger
agreement between shareholders and managers to bring 2 businesses together under 1 board with shareholders in both businesses. (Bringing 2 company’s into 1 big one)
What is takeover
when a company buys over 50% of shares in another company and becomes its controlling owner
Types of merger
backwards verticle (become own supplier), horizontal (same business), lateral (similar but not competition),
Forwards verticle (closer to company/more interactive), conglomerate (different type of business)
What is stockholder
Anyone with an interest in business or may be effected by its activities
What is shareholder
A person, business or organisation with at least one owned share in a company (financial stake in business)
Internal stakeholders
employees, managers, owners
External stakeholders
government, customers, suppliers, local community, competition, environment
Stakeholder conflicts
all stakeholders have different objectives which can lead to conflict within a business
Why might stakeholders conflict
shareholders want high returns, employees high earnings and managers high rewards, as well as high quality and low price for customers
Methods of organic growth
Expanding into foreign markets, expansion of workforce, opening new stores/branches, new product launches
