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Business > 3.1 What is Business? > Flashcards

3.1 What is Business? Flashcards

1
Q

What is a business?

A

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

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2
Q

What is a business objective?

A

A short term goal in order to meet the businesses aims and missions

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3
Q

What is profit?

A

The money left over after all costs are taken away from all the money that’s come into the company

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4
Q

What are the benefits of businesses?

A
  • Employment
  • Drives innovation
  • New products
  • Pay taxes on profits
  • Creates wealth providing returns on investment
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5
Q

What is meant by growth?

A

a stage where the business reaches the point for expansion and seeks additional options to generate more profit

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6
Q

What is meant by survival?

A

Keeping the business operating for a certain amount of time

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7
Q

What is meant by cash flow?

A

The movement of cash into and out of a business

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8
Q

What is a social objective?

A

Objectives that relate to the interaction of individuals, groups and institutions within society

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9
Q

What is meant by ethical objectives?

A

Objectives that could have an impact on morals and principles.

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10
Q

What is a mission statement?

A

The over-riding goal of the business and the reason for its existence

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11
Q

What is the difference between an objective and a mission?

A

Objectives are small tasks that work towards the overall mission of the business

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12
Q

Why do businesses set objectives?

A
  • Motivation
  • Organisation
  • Provide a target
  • Provide a clear focus for decision making
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13
Q

What is the calculation for profit?

A

Profit = Revenue - Total costs

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14
Q

What is the calculation for Revenue?

A

Revenue = Number of Sales x Selling Price

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15
Q

What is the calculation for fixed costs?

A

Fixed costs = Total costs - (Variable costs x Units produced)

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16
Q

What are fixed costs?

A

Costs that are the same each month regardless of how much stock is produced or sold

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17
Q

What is the calculation for Variable costs?

A

Variable cost = (Direct labour costs + Direct raw material cost + Variable manufacturing overhead) / Number of units produced

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18
Q

What are variable costs?

A

Costs that change each month depending on how much of the product is produced and sold

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19
Q

What is the calculation for total costs?

A

Total costs = Total fixed costs + Total variable costs

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20
Q

What are total costs?

A

The sum of expenses a company needs to manufacture a specific level of output

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21
Q

What is the reason for revenue?

A

Helps businesses to measure profits with a specific period of time

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22
Q

What is the reason for variable costs?

A

To see how much expenses change based on how much a company sells or produces

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23
Q

What is the reason for total costs?

A

Helps product managers to evaluate their overall profit margin

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24
Q

What is meant by demand?

A

The amount of product that customers are prepared to buy (measured in volume or value)

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25
Q

What is meant by revenues?

A

The amount of a product that customers actually buy from a firm

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26
Q

What are the two ways to increase revenue?

A

Increase quantity sold

Achieve higher selling prices

(Or both)

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27
Q

What are semi-fixed costs?

A

Costs which change once a certain level of output is reached (administrative salaries, rent)

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28
Q

Why are costs important?

A
  • Thing that drains away the profits
  • Determines a good or bad profit margin
  • Main cause of cash flow problems
  • Change as output or activity change
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29
Q

Why is profit important to a business?

A
  • Return on Investment
  • Reward for taking risks
  • Key source of finance
  • Measure of the businesses success
  • Motivating factor or incentive
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30
Q

What is a sole trader?

A

A business which is owned and run by one person

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31
Q

What are some examples of sole traders?

A

Plumbers, Electricians

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32
Q

What are the advantages of being a sole trader?

A

+ Total control over the business
+ Cheap and easy to set up
+ Keep all of the profit
+Business affairs are kept private
+No income tax up to £12,500

33
Q

What are the disadvantages of being a sole trader?

A
  • Unlimited liability
  • Can be difficult to raise finance as banks are unwilling to loan large amounts of money
  • Problem continuing if sole trader retires or dies
  • Nobody to cover in the event of absence or illness
34
Q

What is a partnership?

A

A business with two or more owners of the company

35
Q

What are some examples of partnerships?

A

GoPro, Redbull

36
Q

What are the advantages of being a partnership?

A
  • Spreads the risk across more people
  • Partner may bring money and resources to the business
  • Partner may bring other skills and ideas
  • Increased credibility with potential customers and suppliers
  • Shared pressure and responsibility
37
Q

What are the disadvantages of partnerships?

A
  • Have to share profits
  • Less control over the business as an individual
  • Disputes over workload
  • Problems if partner disagrees over direction of business
38
Q

What is a Franchise?

A

When a franchisor grants a licence to a franchisee to allow another business to trade using the brand/business format

39
Q

What is an example of a Franchise?

A

McDonald’s

40
Q

What are the advantages of a franchise?

A
  • A classic growth strategy for a proven business format
  • Enables quicker geographical growth
  • Option to open locations operated by franchisor
41
Q

What are the disadvantages of a franchise?

A
  • Cost to buy a franchise
  • Have to pay a percentage of revenue to the business
  • Have to follow the franchise model (less flexibility)
42
Q

What is a private limited company?

A

A business owned by its shareholders, run by directors and where liability of the shareholders for the debts of the company is limited.

43
Q

What are some examples of private limited companies?

A

Photographers, Lawyers

44
Q

What are the advantages of being a private limited company?

A
  • Owner can retain control
  • More able to raise money
    -Limited liability
45
Q

What are the disadvantages of being a private limited company?

A
  • Must be registered with the registrar of companies
  • High set up costs
  • Harder to motivate and control workers
46
Q

What is a public limited company?

A

A company that is able to offer shares to the public. They don’t have to but they can.

47
Q

What is an example of a public limited company?

A

Amazon

48
Q

What are the advantages of a public limited company?

A
  • Better access to capital
  • Liquidity
  • Easily make acquisitions
  • More prestigious profile
49
Q

What are the disadvantages of being a Public limited company?

A
  • Financial markets will govern the value of the company
  • Greater public scrutiny of financial performance/actions
50
Q

What is a private sector organisation?

A

An organisation run by individuals rather than being government controlled

51
Q

What is a public sector organisation?

A

An organisation controlled and funded by the government

52
Q

What is a non profit organisation?

A

A business with a purpose of doing something other than making a profit.

53
Q

What is a social enterprise?

A

Businesses that are focused on their mission and exist to tackle social or environmental issues

54
Q

What is unlimited liability?

A

The potential risk that sole traders and partnerships face, being liable for the debts of the business

55
Q

What is limited liability?

A

When shareholders are only liable for the money that have invested

56
Q

What is an incorporated business?

A

A company with separate legal entity. The owners of the company are shareholders

57
Q

What are dividends?

A

Payments made to the shareholders by the company from earned profits, they are paid per share and there are no requirements to pay

58
Q

What is capital growth?

A

They increase value in the business, reflected in an increase in share price, no guarantee that shareholding will increase

59
Q

What is a share?

A

The individual part of the issued share capital - more shares = more power

60
Q

What is a share price?

A

Determined by supply and demand

Falling share price indicates excess supply

61
Q

What is a shareholder?

A

The legal owner of limited companies, owns a percentage in the form of shares

62
Q

What internal factors increase share price?

A
  • Financial performance
  • Dividend policy
  • Relationship with Key investors
  • Management reputation
63
Q

What external factors influence share price?

A
  • State of the economy
  • Company is a target takeover
64
Q

What is stock market floatation?

A

Share issued on the stock exchange for the first time

65
Q

What is demand?

A

How much of a goods or service consumers are willing to pay for. For a business demand turns into revenue

66
Q

What is competition?

A

How other companies affect the demand

67
Q

What is GDP?

A

Gross domestic profit - measures the value of the output in the economy - value used to assess changes in economic growth

68
Q

What is an interest rate?

A

The reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed

69
Q

Who determines the rate of interest?

A

The bank of England

70
Q

What happens when interest rates fall?

A
  • cost of loans / debt is reduced
  • consumer confidence increased
  • disposable income rises
  • business investments boosted
71
Q

What happens when interest rates increase?

A
  • cost of borrowing rises
  • repayment of debts
  • slow in the housing market
  • contraction in retail credit
  • currency could get stronger
  • UK export is more expensive
72
Q

What is a demography?

A

Concerned with the size and composition of the population

73
Q

What are the problems with an aging population?

A
  • less people able to work
  • more pressure on part time and labour jobs
  • higher amount of money spent on pensions and the NHS
74
Q

What is a real income?

A

Measures the amount of disposable income available to consumers (e.g households and individuals)

75
Q

What are the impacts a business can have on the environment?

A
  • sustainability
  • a green supply chain
  • minimising packaging
  • promoting environmental policies
  • complying with environmental laws
  • carbon emissions
  • waste disposal
76
Q

What are some benefits to businesses after environmentally friendly actions?

A
  • Lower cost of raw material
  • longer life assets that are recycled or repaired
  • trading opportunities with organisations that use environmentally friendly suppliers
  • improved customer goodwill
77
Q

What do businesses need to look at when assessing how environmentally friendly they are?

A
  • Use of raw materials, water and other resources
  • Energy use
  • Waste and Pollution
  • Impact on employees and the local community
78
Q

What is meant by fair trade?

A

Trade between companies in developed countries and producers in developing countries in which fair prices are paid to the producers

Business (7 decks)

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