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Business > 3.1 - What Is Business? > Flashcards

3.1 - What Is Business? Flashcards

1
Q

What are the objectives of a business?

A
  1. Profit
  2. Growth
  3. Survival
  4. Cashflow
  5. Social
  6. Ethical
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2
Q

Why is profit important?

A
  1. Motivate
  2. Finance
  3. Attract investors
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3
Q

Define mission and objectives

A

Mission - purpose/ aims
Objectives - corporate (goals as a whole) & functional (department specific)

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4
Q

Why do businesses set objectives?

A

To enable them to achieve their mission

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5
Q

Define revenue

A

Sales/ turnover

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6
Q

Define fixed output

A

Do the change with output

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7
Q

Define variable output

A

Change with output

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8
Q

Define total cost

A

Fixed costs and variable costs

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9
Q

Define sole trader

A

An individual who has full responsibility in finance
Such as running costs and capital requirements

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10
Q

Define unlimited liability

A

Responsible for all debts enquired

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11
Q

Advantages of a sole trader

A
  1. Freedom
  2. Profit
  3. Simple
  4. Control
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12
Q

Disadvantages of a sole trader

A
  1. Responsibility
  2. Work hours
  3. Expertise
  4. Finance
  5. Vulnerability
  6. Unlimited liability
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13
Q

What is a private limited company?

A
  1. known as an LTD
  2. has limited liability
  3. can’t share to the public
  4. needs agreement
  5. no minimum share capital
  6. needs expertise
  7. objectives change
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14
Q

What is a public limited company?

A
  1. Known as a PLC
  2. Has limited liability
  3. Can share to the public
  4. Freely transferable
  5. Minimum of over £50,000 share capital
  6. Can have conflict of interest
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15
Q

Define limited liability

A

Aren’t personally responsible for debts
Separate legal identity

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16
Q

What is a private sector?

A
  1. Maximise profits
  2. Owned by private individuals
  3. Non for profit organisations
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17
Q

Give examples of non for profit organisations

A
  1. Charities - get tax reductions, benefit the community
  2. Social enterprises - social objectives
  3. Mutual organisations - offer best value for customers, re invest profits to reduce prices
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18
Q

What is a public sector?

A
  1. Benefit society
  2. Run by the government - tax systems
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19
Q

Define ordinary share capital

A

Money raised by selling shares - long term investment

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20
Q

Define dividends

A
  1. Proportion of profits earned by the company
  2. paid to shareholders
  3. It is a fixed amount of share
  4. It is got in return for investment
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21
Q

Define market capitalisation

A

Total value of all the ordinary shares issued by a company

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22
Q

Formula for market capitalisation

A

Number of issued shares x current share price

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23
Q

Factors affecting supply and demand

A
  1. Better performance - increases share price
  2. Low share price - increase share price (future)
  3. Capital gain
  4. Low interest rates
  5. Economy
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24
Q

What determines the share price for a PLC?

A

Supply and demand

25
Q

Which company has more control over share price?

A

LTD

26
Q

Affects of share price changes

A
  1. Company profits - higher/ lower dividend payments
  2. Value of a company
27
Q

Define shareholder

A

Owns at least one share in a company

28
Q

Who can buy the shares of a PLC?

A

Individuals
Companies

29
Q

Who can buy the shares of an LTD?

A

Family
Friends

30
Q

Define capital gain

A

Buy at low prices and sell at high prices to make profit

31
Q

Why do shareholders invest?

A
  1. Survival - Supporting friends and family
  2. Want to see a company succeed - believe in their aims and objectives
  3. Want to be involved in the running of a business - and become a majority shareholder
  4. Capital gain
  5. Dividends
32
Q

What is the aim of a shareholder?

A
  1. To provide funds
  2. Receive dividends
  3. Limited liability
33
Q

Define a venture capitalist

A

provides capital to companies with high growth potential in exchange for an equity stake

34
Q

Define market conditions

A

A range of factors affecting the market - influences cost and demand

35
Q

Define sweatshop

A

A factory where workers are forced to work long hours in poor conditions for poor pay

36
Q

How does Interest rates (political) affect cost and demand?

A

If demand is low - government try to increase it e.g. cut tax or reduce interest rates which increases disposable income
If demand is high, the government try to decrease it e.g. increase interest rates to increase the cost of borrowing

37
Q

How does competition affect cost and demand?

A
  1. Perfect competition - equal on both sides - keep low costs, prices and high quality to increase demand
  2. Oligopoly - large firms dominate the market selling at similar prices - focus on marketing and brand image
  3. Monopoly - complete control over the market, no competition - marketing cost is low so cost can increase without concern
38
Q

How does environmental issues affect cost and demand?

A
  1. Production process - transport pollution and dumping waste
  2. Government legislation - control of pollution as it incurs fines
  3. Be more sustainable and use renewable energy
39
Q

Define fair-trade

A

Ethical (rights) pay higher and fairer prices for products
This improves living standard of the supplier’s employees
This has increased costs but has a unique selling point which increases demand so is more profitable

40
Q

How does technology affect cost and demand?

A
  1. Improves marketing
  2. Social networking
  3. Advertising
41
Q

How does income (economical) affect cost and demand?

A

Recession: reduce costs and demand
Boom: greater costs and increased demand

42
Q

How does demographic (age, sex, race - population) factors affect cost and demand?

A

Impacts supply and demand
E.g. aging population has more demand for nurses and doctors - increased cost of NHS

43
Q

What is a business?

A

An organisation that exists to provide goods and services on a commercial basis to customers

44
Q

What is the difference between goods and services?

A

Goods - physical, tangible
Services- intangible

45
Q

How can a business make their objectives effective?

A

By using SMART
S - specific
M - measured
A - achievable
R - relevant
T - time bound

46
Q

What are the 4 business sectors?

A
  1. Primary - extraction of natural resources
  2. Secondary - production of goods and services
  3. Tertiary - services
  4. Quaternary - information, ICT
47
Q

What makes a good mission statement?

A
  1. Differentiates from its competitors
  2. Defines the market it wants to operate in
  3. Relevant to major stakeholders
  4. Motivates employees
48
Q

List examples of functional objectives

A
  1. Increase sales
  2. Reduce cost
  3. Increase cashflow
  4. Increase customer satisfaction
49
Q

Define enterprise

A

Business opportunities are identified and exploited for commercial gain

50
Q

What is the role of entrepreneurs

A
  1. Spot business opportunities
  2. Take calculated risks to gain future returns
  3. Act as a catalyst for the creation and growth of new businesses
51
Q

Define share price

A

Price paid to acquire ownership of the share
A.K.A equity finance

52
Q

Define unincorporated

A

Owner is the business, unlimited liability, most are sole traders

53
Q

Define incorporated

A

Legal difference between the business and owners, separate legal identity, owners (shareholders) have limited liability, most are LTD

54
Q

Define interest rates

A

Reward for saving and cost of borrowing

55
Q

Affects of market condition

A

Market demand - how much a consumer is willing and able to pay for
Economic growth - value of output in economy

56
Q

Define real income

A

Amount of disposable income available to customers

57
Q

Factors affecting real income

A
  1. Price inflation
  2. Wage growth
  3. Employment levels
  4. Tax policies
  5. Interest rates
58
Q

State the six PESTLE factors

A
  1. Political
  2. Economical
  3. Social
  4. Technological
  5. Legal
  6. Environmental/ ethical
59
Q

What are the 2 main demographical factors in the UK

A
  1. Ageing population
  2. Continued high net emigration

Business (6 decks)

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