3.1 What Is A Business? Flashcards
1
Q
Mission statement
A
- A qualitative description of what the business does
- Amazon = earths most customer centric company
2
Q
Corporate objectives
A
- support mission statement
- define overall objective
- e.g survival, profit maximisation, growth, revenue maximisation
3
Q
Functional objectives
A
- driven by corporate objective
- marketing dept, finance dept, hr dept, operations dept
4
Q
Why is profit important
A
- a source of finance
- motivate employees
- sign of financial stability, good for supplier relationship
- indicates success
5
Q
Factors of production
A
- land = national resources and physical space where production occurs
- labour = human effort and skill applied to production process
- capital = tools, machinery and financial resources used in production
- entrepreneurship = innovation, organisation and risk taking that drives production process
6
Q
Unincorporated Business
A
- owner and business is same legal entity
- e.g sole traders and partnerships
- unlimited liability
7
Q
Incorporated Business
A
- owner and business are different legal entities
- e.g private limited company, public limited company
- limited liability
8
Q
Sole traders
A
- owned by one individual and retain all profit
- pro = simple set up, cheap, retain all profit, decision making
- con = unlimited liability, fewer source of finance, need to be skilled, hard to take holiday
- private limited company
9
Q
Private limited company
A
- owned by shareholders and managed by directors
- pro = limited liability, raise finance through selling shares, shares not sold on stock exchange
- con = no access to stock exchange, shared profits, legal requirements to publish financial account, more admin
10
Q
Public limited company
A
- company that offers shares to general public via stock exchange
- raise minimum of £50000 share capital
11
Q
Flotation
A
- process of a private limited company offering shares for sale on stock market to become a public limited company
- pros = raise external finance from shares, become larger and EoS, higher prestige and more media exposure
- cons = expensive and legal fees, anyone can buy shares e.g rival company, increased legal requirements
12
Q
Market capitalisation formula
A
Number of ordinary issued shares x price of 1 share
13
Q
Ordinary share capital formula
A
Number of ordinary issued shares x price of 1 share
14
Q
Issues with dividends
A
- opportunity cost, what else could you have done with the money
- short terminism, looking at short term instead of long term
15
Q
What influences the share price
A
- supply, demand
- interest rate, economy
- business performance, rival performance
16
Q
Not for profit organisation
A
- business set to pursue objectives that benefit society
- they have reduced taxes and receive money from fundraisers and sales
17
Q
PLUMS
A
- profit distribution
- liability
- management and control
- source of finance available
