3.2.1 Growth, 3.2.3 Mergers and takeovers

Question 1

Average cost

Answer 1

this is the cost of producing one unit of output. It is calculated by dividing total cost by the current output level

Question 2

Delegate

Answer 2

passing authority down the hierarchy

Question 3

Diseconomies of scale

Answer 3

factors that cause average costs to rise as the scale of output rises

Question 4

Economies of scale

Answer 4

factors that cause averages costs to fall as the scale of output increases

Question 5

Market dominance

Answer 5

describes a situation where a firm sells a product that achieves a very high market share. This ascendancy over the competition enables the dominant firm to raise prices without losing too many customers. According to the EU, firms that have a market share over 40-45% are considered dominant

Question 6

Organic growth

Answer 6

comes from within the business, as compared to inorganic growth achieved by takeovers or mergers

Question 7

Annual general meeting

Answer 7

a once-yearly meeting at which shareholders have the opportunity to question the chairperson and votes new directors to the board

Question 8

Private equity

Answer 8

investment groups that buy up businesses in the expectation that they’ll be able to sell them on for profit- usually within the next three years

Question 9

Synergy

Answer 9

the occurs when the whole is greater than the sum of the parts. It is often the reason given for mergers or takeovers occurring