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Business > 3.1 What Is A Business? > Flashcards

3.1 What Is A Business? Flashcards

1
Q

What is mission?

A

A qualitative statement of the business aims

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2
Q

What is aim?

A

A long term plan from which business objectives are derived

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3
Q

What is an objective?

A

A target which must be achieved in order to realise the stated aims

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4
Q

What is a mission statement?

A

A mission statement defines the company’s business, its objectives and its approach to reach these objectives

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5
Q

What is a business?

A

A business is an organisation that exists to provide goods and services on commercial basis to customers

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6
Q

What are goods?

A

They are physical or tangible products e.g. Cars

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7
Q

What are services?

A

They are intangible products e.g. Insurance

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8
Q

Why does a business exist?

A

They are formed by entrepreneurs and are subsequently developed if they manage to get beyond the survival stage.
Profit is also key in a business

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9
Q

What is the transformation process?

A

When you take resource inputs and transform them into goods and services

Inputs -> transformation process -> outputs

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10
Q

What is the role of an entrepreneur?

A

Play a key role in the formation and the development of the business:
Spot a business opportunity
Take risks (calculated) to gain possible future returns
Create growth

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11
Q

What are the 4 broad business sectors?

A

Primary - extraction of natural resources

Secondary - production of finished goods and components

Tertiary - providing service

Quaternary - providing information

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12
Q

What does adding value mean?

A

Creating value by transforming the inputs into business activity so that then what is created is greater than the costs involved

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13
Q

What is the difference between unincorporated & incorporated?

A

A key distinction needs to be made between businesses formed as a company (incorporated) and those that are not

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14
Q

What is unincorporated?

A

The owner is the business - no legal difference

Unlimited liability

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15
Q

What is incorporated?

A

There is a legal difference between themselves and the business
Owners (shareholders) have limited liability

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16
Q

What is a sole trader?

A

This is the most common way of setting up a business
Just one person owning it
They can employ people but those employers don’t share the ownership of the business
Crucially - a sole trader has unlimited liability

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17
Q

What are the advantages of being a sole trader?

A 
Quick & easy to set up
Simply to run
Make all the decisions
Easy to close and shutdown 
Get all profits
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18
Q

What are the disadvantages of being a sole trader?

A

Full personal liability - “unlimited liability”
Business is the owner of the owner becomes ill the business could go down and maybe shutdown
Pay higher tax rate than a company

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19
Q

What are the advantages of limited liability?

A

Protects the shareholders
Easier to raise finance
Stable from structure

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20
Q

What is a public limited company? PLC

A

A public limited company is simply a more specialist type of limited company
Shares may be quoted and traded on a public stock market (don’t have to be)
Usually have more shareholders because shares are done publicly

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21
Q

What is a private limited company? LTD

A

Shares can’t be shared publicly only between family

Bigger than sole traders or partnership but still small

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22
Q

What is partnership?

A

2-20 people setting up a business
Each is self employed & takes shares of profits, personally responsible for any depts
Business can still continue to run if someone dies, becomes seriously ill, bankrupt or resigns

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23
Q

What is public sector?

A

An organisation that doesn’t want to make a profit (cut costs)
Owned by government to help the community

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24
Q

What is privatisation?

A

This is when the government sells an organisation to an organisation in the private sector e.g. Royal Mail

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25
Q

What is a private sector?

A

It is there to maximise profits
Expand business
Improve quality

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26
Q

What is charity aims?

A

Help people
Maximise collections for cash
Recruit more helpers

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27
Q

What are the external environment features that effect a business?

A

P - political - competition
E - economic - spending & income
S - social - taste & fashion
T - technology - new production
L - legal - minimum wage, living wage, health & safety
E - ethical/environment - pollution & emissions

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28
Q

What is fair trade?

A

Better price, decent working conditions & fair trading terms for farms and workers

29
Q

What is innovation?

A

New product or method

30
Q

What are demographic factors?

A

There are a number of major demographic changes which have created new opportunities and threats for firms

They include:
The population increasing
More women working

31
Q

What is interest rate?

A

The cost of borrowing money and the return for lending it

32
Q

What does demand mean?

A

The amount of a particular good or service that consumers or organisations want and are able to afford to purchase

33
Q

What are the market conditions?

A 
Level of sales 
Sales growth 
Price levels 
Strength of rivals
Market shares
34
Q

What is market capitalisation?

A

Multiply the share price by number of shares sold

Value the stock market places on the whole business

35
Q

What does profit mean?

A

This is the prime object of most firms

2 ways of increasing profit are:
Increasing sales revenue
Decreasing cost

36
Q

What are classifying cost?

A

Costs are the money paid out by firms

37
Q

What are the principal reasons for classifying costs?

A

To assess the impact of changes in output on the costs of production
To calculate the costs of making a particular product in a multi-product company

38
Q

What is real incomes?

A

Real incomes measure the amount of disposable income available to consumers

39
Q

What is dividends?

A

Dividends is a payment made to shareholders by the company from earned profits
Normally no requirement to pay dividends, but most quoted companies do

40
Q

What is a share?

A

A share is an individual part of the total issued share capital of a company

41
Q

What is a share price?

A

A share price is the price paid to acquire ownership of that share
When the shares are first issued the price is the “issue price”

42
Q

What does market capitalisation represent?

A

The total market value of the issued share capital of the capital

43
Q

How do you work out market capitalisation?

A

Share price (per share) X number of shares issued

44
Q

What are some of the factors within the company’s control?

A

Financial performance
Dividend policy
Relationship with key investors
Management reputation

45
Q

What are some of the factors outside the company’s control?

A

State of the economy

Alternative investment’s in the company’s sector

46
Q

What is real incomes?

A

Real incomes measure the amount of disposable income available to consumers

47
Q

What is dividends?

A

Dividends is a payment made to shareholders by the company from earned profits
Normally no requirement to pay dividends, but most quoted companies do

48
Q

What is a share?

A

A share is an individual part of the total issued share capital of a company

49
Q

What is a share price?

A

A share price is the price paid to acquire ownership of that share
When the shares are first issued the price is the “issue price”

50
Q

What is share capital know as?

A

Equity finance

51
Q

What are the two methods of issuing new shares for a public company?

A

Flotation - share issued on stock exchange for the first time
Right issue - fresh issue of new shares to existing shareholders

52
Q

What is the definition of flotation?

A

The admission of the shares of a public company to a stock exchange and subsequent trading in those shares

53
Q

What is a stakeholder?

A

A stakeholder is any individual or organisation who has a vested interest in the activities and decision making of a business
A shareholder is one example of stakeholders

54
Q

What is a shareholder?

A

Owner of a business
May work as well
Benefit directly from increases in the value of the business

55
Q

Key stakeholders in a business can be grouped name the three groups

A

Internal - managers & employees
Connected - customers, suppliers
External - government

56
Q

What does the matrix do?

A

Provides some guidance when making a decision, who is mostly listened to in a decision

(Look in notes for the grid)

57
Q

What are the purpose for business objectives?

A

The specific intended outcomes of business strategy
End results of a programme of activities
Targets that the business adopts in order to achieve its primary aims

58
Q

What are the main purposes of business objectives?

A

Make a clear statement of what needs to be achieved
Provide a focus for all business activity
Help set targets for individual and group achievement

59
Q

What does smart stand for?

A

S - specific - stated exactly what you want to achieve
M - measurable - should be capable of reaching the target
A - achievable - target should be realistic
R - realistic - should be relevant
T - time bound - targets set with a time frame

60
Q

What is corporate objectives?

A

Corporate objectives are what a business as a whole wants to achieve

61
Q

What are functional objectives?

A

The specific objectives set for the individual functional areas of a business, designed to support the achievement of corporate objectives

62
Q

What are classifying costs?

A

Costs that are paid out by firms

63
Q

What is a firm?

A

A business organisation -> limited liability, sells goods or services to make a profit

64
Q

What are the two principals for classifying cost?

A

To access the impact of changes in output on the costs of production
To calculate the costs of making a particular product in a multi-product company

65
Q

What are the two types of costs?

A 
Fixed costs (FC) - costs that do not vary directly with output in the short term run
Variable costs (VC) - costs that vary directly with output in the short term run
66
Q

How do you work out the total costs?

A

Sum of the fixed cost and the variable costs

FC + VC = TC

67
Q

What are semi-variable costs?

A

These are costs that combine elements of fixed and variable costs

68
Q

How do you work out the total revenue?

A

Price X quantity sold

69
Q

What is a legal structure?

A

Is the legal definition of your business

Business (3 decks)

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