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Business A Level 1st Year Topics > 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
Which company has more control over share price?
LTD
26
Affects of share price changes
1. Company profits - higher/ lower dividend payments 2. Value of a company
27
Define shareholder
Owns at least one share in a company
28
Who can buy the shares of a PLC?
Individuals Companies
29
Who can buy the shares of an LTD?
Family Friends
30
Define capital gain
Buy at low prices and sell at high prices to make profit
31
Why do shareholders invest?
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
What is the aim of a shareholder?
1. To provide funds 2. Receive dividends 3. Limited liability
33
Define a venture capitalist
provides capital to companies with high growth potential in exchange for an equity stake
34
Define market conditions
A range of factors affecting the market - influences cost and demand
35
Define sweatshop
A factory where workers are forced to work long hours in poor conditions for poor pay
36
How does Interest rates (political) affect cost and demand?
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
How does competition affect cost and demand?
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
How does environmental issues affect cost and demand?
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
Define fair-trade
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
How does technology affect cost and demand?
1. Improves marketing 2. Social networking 3. Advertising
41
How does income (economical) affect cost and demand?
Recession: reduce costs and demand Boom: greater costs and increased demand
42
How does demographic (age, sex, race - population) factors affect cost and demand?
Impacts supply and demand E.g. aging population has more demand for nurses and doctors - increased cost of NHS
43
What is a business?
An organisation that exists to provide goods and services on a commercial basis to customers
44
What is the difference between goods and services?
Goods - physical, tangible Services- intangible
45
How can a business make their objectives effective?
By using SMART S - specific M - measured A - achievable R - relevant T - time bound
46
What are the 4 business sectors?
1. Primary - extraction of natural resources 2. Secondary - production of goods and services 3. Tertiary - services 4. Quaternary - information, ICT
47
What makes a good mission statement?
1. Differentiates from its competitors 2. Defines the market it wants to operate in 3. Relevant to major stakeholders 4. Motivates employees
48
List examples of functional objectives
1. Increase sales 2. Reduce cost 3. Increase cashflow 4. Increase customer satisfaction
49
Define enterprise
Business opportunities are identified and exploited for commercial gain
50
What is the role of entrepreneurs
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
Define share price
Price paid to acquire ownership of the share A.K.A equity finance
52
Define unincorporated
Owner is the business, unlimited liability, most are sole traders
53
Define incorporated
Legal difference between the business and owners, separate legal identity, owners (shareholders) have limited liability, most are LTD
54
Define interest rates
Reward for saving and cost of borrowing
55
Affects of market condition
Market demand - how much a consumer is willing and able to pay for Economic growth - value of output in economy
56
Define real income
Amount of disposable income available to customers
57
Factors affecting real income
1. Price inflation 2. Wage growth 3. Employment levels 4. Tax policies 5. Interest rates
58
State the six PESTLE factors
1. Political 2. Economical 3. Social 4. Technological 5. Legal 6. Environmental/ ethical
59
What are the 2 main demographical factors in the UK
1. Ageing population 2. Continued high net emigration

Business A Level 1st Year Topics (7 decks)

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