3.1.1 Flashcards
What are 5 reason to grow?
Owner desire to run a large business
Owner desire for higher profits
Reduce costs with Economies of scale
More market power
Easier access to finance
What are 4 reasons to stay small?
Unable to access finance
Operate in a niche market
Profit satisficing, for better quality of life
Diseconomies of scale
What is the principle agent problem?
Occurs when the managers (Agents), make decisions on behalf of owners (Principals), placing their own priorities first.
Why does the principle problem occur?
Due to information gaps.
What are public sector organizations?
What is their goal?
Public sector organizations are owned & controlled by the Government.
Their goal is to provide a service.
What are Private Sector organizations?
What is their goal?
Private sector organizations are owned & controlled by private individuals.
Most is to profit maximize.
What is a Non-profit organization?
They exist to provide a service or meet a need, many use profits to re invest to fund their goals.
What is a Profit organization?
Most firms In the private sector exist to make a profit, even if their goal is not profit maximization
If they don’t make a profit they will go out of business
