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A-Level Business (AQA) > 3.1 What is business? > Flashcards

3.1 What is business? Flashcards

1
Q

Define Business

A

An organisation that provides a good & service on a commercial basis to a customer

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2
Q

What are the impacts businesses have on society?

A
  • Provide Employment ( jobs )
  • Drive innovation
  • Improve & develop a countrys reputation
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3
Q

What is the transformation process?

A

Where businesses convert inputs ( Raw materials) into outputs ( Finished goods) to satisfy the needs & wants of customers

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4
Q

What are the two types of businesses?

Define them

A

B2B : Business to business : Businesses sells goods and/or services to other businesses e.g. shopify
B2C : Business to consumer : Businesses sells goods and/or services directly to consumers e.g. Spotify

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5
Q

What are the four types of sectors in business?

Define them as well

A

1) Primary : Extracting/growing primary products from nature ( e.g. Fishing ,Farming & miners)
2) Secondary : Manufacturing raw materials into finished goods (e.g. clothes)
3) Tertiary : Providing services to individuals or businesses ( e.g. Cinemas)
4) Quatermary : Providing information ( ICT , software)

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6
Q

What is a mission statement?

A

A formal statement which explains the overriding purpose and values of a business.

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7
Q

Who are the key audience for mission statements?

A

Stakeholders
e.g. Employees
Shareholders/investors
Society
Customers

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8
Q

What makes a good mission statement?

A
  • Clear sense of purpose
  • Motivates & guides employees/shareholders
  • simple & easy to remember
  • Differentiate from competitors
  • For all stakeholders
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9
Q

What are criticisms of Mission statements?

A
  • Often vague & general
  • Not always supported by actions of a business
  • Sometimes regarded cynically by staff
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10
Q

What is a corporate aim?

A

Are the long-term goals of the entire business, which will allow the business to work towards its overall mission.

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11
Q

What are corporate objectives?

A

Contain the specific tasks and activities a business must accomplish in order to satisfy its corporate aims.

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12
Q

What are business objectives?

A

Are statements of specific outcomes that are to be achieved.
They must be SMART

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13
Q

What does ‘SMART’ stand for?

A
  1. Specific
  2. Measureable
  3. Achieveable
  4. Relevant
  5. Time-bound
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14
Q

What are the benefits of setting objectives?

A
  • Provides direction
  • Ensures all employees are working towards the same goal
  • Can help and support planning
  • Can motivate staff as theres a clear goal
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15
Q

Examples of Business objectives:

A
  • Increase market share - Growth
  • Increase cash flow - survival
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16
Q

What is revenue?

A

The income earned by the sale of goods and/or services
also known as sales, takings

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17
Q

What is the formula for revenue?

A

Revenue = number of sales x sales price

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18
Q

What are costs?

A

Are the amounts businesses incur in order to make goods and/or provide services

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19
Q

Why are costs important?

A

They are the main cause of cash flow problems
They drain away profits

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20
Q

What are the 2 types of costs and define them?

A

Fixed costs : Costs that dont change when output varies e.g. Salaries, rent
Variable costs : Costs that change when output varies e.g. Raw materials

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21
Q

Whats the formula for variable costs?

A

Variable costs = Cost per unit X Total number of units

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22
Q

What is cost leadership (A/A*)

A

A strategy to reduce the cost of operation and produce the lowest priced products or services, to outdo the closest competitors and gain market share.

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22
Q

Whats the formula for total costs?

A

Total costs = Fixed costs + Variable costs

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23
Q

What are profits?

A

The amount of money a business makes when taking into account costs

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24
Q

What is the formula for profit?

A

Profit = Total revenue - total costs

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25
Q

What is the formula for
average unit cost?

A

Average unit cost = Total costs / outputs (i.e. total num of units produced)

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26
Q

What is interest?

A

The money you pay back when you borrow money

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27
Q

Formula for interest

A

Interest = Interest rate X the size of the loan

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28
Q

What is a good?

A

A tangible product that can be physically held

29
Q

What is a service?

A

An intangible product

30
Q

What is a sole trader?

A

A business owned & controlled by one person e.g. Plumbers

31
Q

Advantages of sole traders

A
  • Easiest type of business to set up
  • They are their own boss
  • Keeps 100% of profits
  • Easy to change legal structure if circumstances change
32
Q

Disadvantages of sole traders

A
  • Unlimited liability
  • Hard to raise funds ( As banks see them as risks)
  • Responsible for everything ( Causes stress & requires them to be multi-skilled)
33
Q

Is a sole trader a good form of business ownership?

A

Depends on the personal skills of the person

34
Q

What is a partnership?

A

A business owned by 2 or more people

2-20 PEOPLE CAN OWN A Partnership

35
Q

What is the deed of partnership?

A

A legal contract on how partners divide profits & ownerships

36
Q

Advantages of a partnership

A
  • Access to more finance
  • Mixture of skill sets
  • Businesses can stay running even when one partner is ill
37
Q

Disadvantages of partnerships

A
  • Share profits
  • Share control
  • Unlimited liability
  • If a partner dies/retires then the business may have to shut down
38
Q

What is unlimited liability?

A

The business owner/owners are responsible for all debts incured by the business no matter the value

39
Q

What is limited liability?

A

The business owner/owners only lose the money they invested into a business if it fails i.e. their personal assets are safe

40
Q

What is a private limited company (LTD)?

A

A type of organisation where the ownership of shares are restricted and all shareholders must agree to sell shares before they are sold

41
Q

Advantages of LTD

A
  • Limited liability - as the company is its own separate entity
  • Access to more capital
  • Neccesary if you want to grow your business
  • No minimum start up cost
  • Control over who shareholders are
42
Q

Disadvantages of LTD

A
  • Share profits
  • More legal paperwork
  • Have to publich accounts yearly
  • Dont have complete control
43
Q

What is a shareholder?

A

Someone who owns shares (a part) of the business

44
Q

What is a Public limited company?

A

A company that sells its shares to the public on the stock exchange

45
Q

What is Flotation?

A

The process of converting an LTD to a PLC, by issuing shares for the public to buy

46
Q

What is dividens?

A

A sum of money paid regularly by a company to its shareholders out of profits

47
Q

Advantages of PLC

A
  • Limited liability
  • Easier for companies to raise capital
  • Can raise investment due to being able to sell shares on stock exchange
48
Q

Disadvantages of PLC

A
  • No control over shareholders
  • Company accounts must be public
  • Need £50,000 to set up a PLC
  • Can be bought out
49
Q

What is a not-for-profit organisation?

A

A business set up to pursue objects that benefit society & any profits made must be reinvested into the business

50
Q

What are the types of Not-for-profit organisations?

A
  • Charities - Make money through donations
  • Social enterprise - Make money by selling goods & services
  • Unincorparated associations - Get no profit & have unlimited liability
51
Q

What is franchising?

A

Where a business gives the right to sell its products & use its trademarks for am upfront fee and a percentage of the profits made e.g. KFC

52
Q

Advantages of franchising

A
  • Increases brand awareness
  • Expands businesses without needing large investments
  • Doesnt incur costs of opening new stores
53
Q

Disadvantages of franchising

A
  • No complete control
  • If a franchise is run poorly than it can negatively affect brand image
54
Q

What is ordinary share price?

A

The amount of finance raised through selling shares to shareholders. & is a source of long term finance

55
Q

What is market capitalisation?

A

Is one way of valuing a business

56
Q

What is the formula for market capitalisation?

A

Market capitalisation = Num of shares issued X Current market price of one share

57
Q

What factors influence shareholders buying shares?

A
  • If they believe the share price will increase giving them good ROI
  • If they agree with companies values and aims
  • If they want dividends
58
Q

What factors affect the shareprice?

A
  • Business performance
  • Economic performance
  • News articles/brand image
59
Q

What is the impact of changing values of shareprice?

A

Can influence shareholders to increase or decrease amount of shares held

60
Q

How do shareholders make decisions on the future of the company?

A

Through the Anual generals meeting (AGM) where votes are made on key business decisions

61
Q

How do you determine shareholders power?

A

The number of shares owned

62
Q

What are functional areas?

A

Are departments in a business e.g. HR , finance ,etc…

63
Q

What are overhead costs?

A

Costs that dont directly relate to the production of goods and services e.g. rent

64
Q

What are external enviroments?

A

range of factors which may affect a business but are outside the business’ control.

65
Q

What is PESTLE? + Examples

A

External factors
- Politics - laws/changes in gov spending
- Economy - Changes to Interest rates
- Social - Demographic changes/culture
- Technology - Advancements in tech e.g. AI
- Legal - Health & saftey regulations
- Enviroment/Ethics - Carbon emmisions

66
Q

What other external enviroment factors?

PESTLE

A
  • Competiton
  • Market conditions
  • Consumer income
  • Fair trade
67
Q

W

What is a market?

A

Anywhere buyers and sellers come together to transact with eachother e.g. Local market
electronic markets

68
Q

Whats a local market?

A

the customers who will buy the products/services in the vicinity of where they are produced

69
Q

Whats a national market?

A

The domestic marketplace for goods and services operating within the borders of and governed by the regulations of a particular country

A-Level Business (AQA) (2 decks)

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