3.1 what Is Business Flashcards
Why do shareholders buy shares in a plc and an ltd
For dividends and share value
What is market capitalisation
The total value of a company’s outstanding shares of stock (current share price times total number of shares outstanding)
What is ordinary share capital
The money a company raises by issuing common stock to investors
What is a sole trader
One person who sets up and runs a business by themselves
Two pros and two cons of a sole trader
+ don’t have to share profit with other owners
+ full control over all decisions
- unlimited liability
- limited growth and finance
What is is unlimited liability
Business is personally liable for any debts or legal issues, personal assets and at risk
What is limited liability
When a business’s owners personal assets are protected, not at risk
What is a private limited company
Structure in which ownership of the company is divided into shares
Two pros and two cons of an ltd
+ limited liability
+ access to capital (sell shares to investors)
- ownership restrictions (number of shareholders limited)
- shares cannot be freely traded on stock exchange
What is a public limited company
Company whose shares are publicly traded on stock exchange
Two pros and two cons of a plc
+ limited liability
+ shares traded on stock exchange
- vulnerable to market pressure
- high regulation costs and compliance costs
What is a non-for-profit business
A business that main objective does not involve making a profit (charity)
What is a mutual business
Business is owned and controlled by its members rather than external shareholders
What are 4 benefits business’s bring to the economy
- Employment opportunities
- Economic growth
- Tax revenue
- Infrastructure development
What area main aims and objectives
- Profit maximisation
- Growth and expansion
- Customer satisfaction
- Market leadership
- Sustainability (ethically responsible)
What is a cost and give an example
A cost is something of a business needs to pay in order to survive
(Wages/rent/raw materials)
What is a fixed cost
Costs that don’t change delisted output (rent)
What is a variable cost
Costs that change due to output (raw materials)
How do you get total costs
Variable costs + fixed costs
What is a good
A physical product (food)
What is a service
A non physical product (taxi/hairdresser)
What is primary sector
Extraction of raw materials (agriculture)
What is secondary sector
Manufacturing/ processing (automobile manufacturing)
What is the tertiary sector
Providing a service (education)
What are the four factors of production
Land (natural resources used)
Labour (human effort and skills)
Capital (financial resources/machinery)
Enterprise (create goods/services)
What is a the public sector
A business that is owned by the government
What is the private sector
A business that owned by an individual
What is revenue and what is the calculation
Revenue is the money coming into the business (total income)
Selling price times quantity
What is average unit cost and what is the calculation
How much it costs to produce one product
Total costs/number of units of output
What is profit and how what it the calculation
The money coming in the business minus the costs
Total revenue - total costs
What are the functional areas of internal environment
-marketing
-finance
-operations
-Human Resources
What is the external environment
Cannot be controlled by business’s
What are the factors of the external environment
-political/legal
-competition
-economic
-technology
-social and environment
