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AQA A Level business 📈 > 3.1 What is business > Flashcards

3.1 What is business Flashcards

1
Q

What are the 5

main business aims/objectives

A

Survival

cash flow

profit

growth

social and economic objectives

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2
Q

give an example of two business aims/objectives conflicting with eachother

A

social and ethical objectives may clash with aims of profit

being ethical may increase costs in turn reducing profit

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3
Q

what is a mission statement

A

a qualitative statement of an organisations overall mission or purpose

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4
Q

why are mission statements used

A
  • provide a clear goal/ sense of direction
  • to communicate to stakeholders
  • create a sense of identity and a unique selling point
  • enables a business to set clear goals to achieve its mission
  • review it a business has achieved its goals
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5
Q

what are corporate aims

A

the medium-long term goals that will enable a business to achieve its mission

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6
Q

what are corporate objectives

A

short term goals that will enable the company to achieve their aims

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7
Q

what are functional objectives

A

specific targets set for each functional area in

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8
Q

why do businesses use smart objectives

A

to make the aim clear

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9
Q

what does SMART objectives stand for

A 
Specific 
Measurable
Agreed
Realistic
Time
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10
Q

why do business set goals/objectives

A
  • stepping stones to fulfill a purpose
  • provide clear targets for employees to work towards
  • provide a framework for decision making
  • motivational
  • used to judge progress against
  • provides incentives/pay structure
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11
Q

define profit

A

Profit is the difference between total revenue and total costs

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12
Q

what is the calculation/formula for PROFIT

A

profit = total revenue - total costs

P= TR-TC

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13
Q

define revenue / sales turnover

A

Revenue is the income received from an organisations activities

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14
Q

what is the calculation / formula for revenue

A

Total revenue = Price per unit X quantity of unit sold

TR= P x Q

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15
Q

define variable costs

A

Variables costs are costs that change directly in proportion to output

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16
Q

what is the calculation / formula to work out total variable costs

A

total variable costs = variable costs per unit X output

TVC= VCPU x O

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17
Q

name 4 examples of variable costs

A

raw materials

packaging

wages of staff e.g overtime

power

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18
Q

define fixed costs

A

fixed costs are costs that remain constant in the short run regardless of the output

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19
Q

give some examples of fixed costs

A

salaries

rent/rates

marketing

vehicles

heating/lighting

20
Q

define total costs

A

total costs are all costs of production incurred by a business

21
Q

what is the calculation/formula for total costs

A

total costs = variable cost+fixed cost

22
Q

why is profit important for a business

A

contributes to long term survival of a business

attractive for stakeholders

it’s a measure of success

profit is a motivator for staff

a guide for future investment

used for ethical/social purposes

a source of finance

23
Q

define legal structure

A

Legal structure refers to the ownership of a business

24
Q

what does the legal structure of a business determine

A
  • legal liability of a business
  • sources of finance available
  • degree of risk to owners
  • responsibilities and rights of decision makers
  • legal requirements for record keeping and publishing accounts
  • tax and National insurance payments
25
Q

define limited liability

A

An investors liability/financial commitment are limited to the total amount invested or promised in share capital.

26
Q

define unlimited liability

A

The owners of a business are responsible of the total amount of debt of a business .

27
Q

define incorporated

A

A business with a separate legal identity from its owners ; incorporated business include private and public limited companies

28
Q

define unincorporated

A

a business and its owners have the same legal identity; the owner is therefore liable for all the actions of the business including debts.

29
Q

name 2 types of businesses with limited liability

A

Private limited company (Ltd)

public limited company (Plc)

30
Q

define sole traders

A

an individual who owns and runs their own business . It is unincorporated and therefore has unlimited liability

31
Q

name some advantages of sole traders:

A

cheap and easy to set up

owner keeps all of the profits

sale responsibility for decision making

financial records remain private

motivation is high

32
Q

name some disadvantages of sole traders:

A

unlimited liability

limited capital for investment

little specialist skills

33
Q

define private limited company (ltd)

A

an incorporated business that is owned by a shareholders who tend to be family and friends as the entrepreneur. They benefit from limited liability.

34
Q

advantages of private limited company’s

A

limited liability

potential to raise more funds through selling shares

separate legal identity

35
Q

disadvantages of private limited company’s

A

financial records are publicly available

cannot sell shares on the stock market - limiting financing opportunities

suppliers may view limited liability as a risk

36
Q

define public limited company (plc)

A

an incorporated business that is able to sell shares on the stock exchange to the public. owners benefit from limited liability

37
Q

advantages of a public limited company (plc)

A

limited liability

potential to raise funds through selling shares on the stock exchange

separate legal identity

38
Q

disadvantages of a public limited company (plc

A

risk of takeover

pressure for short term financial results from shareholders rather than long term performances

financial records publicly available

divorce of ownership

39
Q

define public sector

A

organisations owned by the government and funded by tax payers for thr purpose of providing a service

40
Q

why might a business privatise

A

to create a profit motive

generate wealth for owners and shareholders

better service for customers

increased efficiency- cost control and revenue generation

41
Q

define private sector

A

the part of the economy owned by individuals and organisations rather than the state

42
Q

define non profit organisation

A

organisations that are owned and managed in order to achieve objectives other than financial reward

43
Q

define shareholders

A

the owners of a limited company who invest capital in return for decision making power and a share of a company’s profit

44
Q

define market capitalisation

A

market capitalisation is the total value of issued shares in public limited company

45
Q

what is the formula for market capitalisation

A

market capitalisation = number of issued shares x current share price

46
Q

define dividend

A

a share of the company’s profit issued to shareholders on an annual basis

AQA A Level business 📈 (2 decks)

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