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1
Q

adding value

A

the difference between the price of the finished products and the cost of inputs involved in making it

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2
Q

adding value benefits

A

charge higher prices
different to competitors
focus on target market more closely

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3
Q

adding value drawbacks

A

cost may be more than value added
price may restrict sales
competition may restrict price
elasticity make price changes hard to accept

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4
Q

primary sector

A

gathering of raw materials

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5
Q

secondary sector

A

turning raw materials into goods

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6
Q

tertiary sector

A

servuces

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7
Q

quaternary sector

A

research

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8
Q

stakeholder

A

any individual or organisation that has an interest in the activities and decision making of a business

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9
Q

sole trader advantages

A

less paperwork
be your own boss
make all decisions
no conflict
low barriers to setup/closing

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10
Q

sole trader disadvantages

A

unlimited liability
hard to raise finance
higher tax
business is owner and will suffer if owner ill etc

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11
Q

partnership advantages

A

more ideas
little paperwork
more likely to raise finance
specialist skills

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12
Q

partnership disadvantages

A

unlimited liability
more conflict
bound to decisions
complicated to sell

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13
Q

LTD advantages

A

shares just family and friends
limited liability
be own boss
easier to raise finance

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14
Q

LTD disadvantages

A

more paperwork
companies house, others can see
time consuming to set up
may require outside help to manage its finances

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15
Q

PLC advantages

A

raise finance through shares
shareholders have limited liability
economies of scale

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16
Q

PLC disadvantages

A

require min £50,000 setup
include more detail in reports
greater risk of takeover
more complex accounting requirements

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17
Q

franchiser advantages

A

brand
carefully select applicants
franchiser controls products/brand
may not have to spend money to expand

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18
Q

franchiser disadvantages

A

not in full control
always small risk
possible conflict
major supporting costs

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19
Q

franchisee advantages

A

lower risk
marketing done for you
training/advice
easier to raise finance
established brand and product

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20
Q

franchisee disadvantages

A

shared profit
fees
less independence
cannot sell firm without permission
fixed period
stuck in contract

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21
Q

cooperative

A

a business owned and run by its members

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22
Q

cooperative advantages

A

usually limited liability
legally straightforward to establish
higher quality of service likely
loyal customers

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23
Q

cooperative disadvantages

A

limited capital
possible weak management
slower decision making
employees want more

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24
Q

business sizes

A

small- 50
medium- 50–>250
large- 250–>

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25
Q

merger

A

2 businesses join to make a new business

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26
Q

takeover

A

one business takes control of another

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27
Q

joint venture

A

agreement between 2 participants, a new entity is formed

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28
Q

strategic alliance

A

agreement between 2 parties to meet an agreed goal whilst remaining independent

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29
Q

aim

A

overall target, long term plan

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30
Q

mission statement

A

overriding goal of the business/reason for existence written in a statement to stakeholders

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31
Q

corporate objectives

A

objectives that cover a range of key areas in the business set at a corporate level

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32
Q

functional objectives

A

objectives specific to the functions of the business

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33
Q

individual targets/business unit

A

objectives more focused on individuals

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34
Q

market orientated

A

a business that prioritises the needs and desires of the market/consumers

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35
Q

product orientated

A

business focused solely around n products alone

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36
Q

job production

A

products are made for specific requirements of the customer

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37
Q

batch production

A

many similar items produced together, each batch goes through one stage of production at a time

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38
Q

flow production

A

continuous production process

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39
Q

cell production

A

mass production where it is split into teams for each component

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40
Q

PERT

A

O+P+(Lx4) / 6

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41
Q

total float

A

amount of time that the activity can be delayed without delaying finish time

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42
Q

total float calculation

A

LFT — duration — EST = TF

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43
Q

Free float

A

amount activity can be delayed without delaying the next

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44
Q

free float calculation

A

EST(next) — duration — EST(this) = FF

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45
Q

purchasing economies of scale

A

buy larger quantities

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46
Q

financial EOS

A

cheaper loans

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47
Q

managerial EOS

A

more specialist managers

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48
Q

technological EOS

A

purchase more effective capital

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49
Q

marketing EOS

A

more effective marketing

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50
Q

risk bearing EOS

A

spread risk (e.g. diversifying)

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51
Q

concentrated EOS

A

skilled labour or suppliers nearby etc

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52
Q

information EOS

A

easy access of data

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53
Q

infrastructure EOS

A

gov build facilities

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54
Q

productivity calc

A

output/input

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55
Q

labour productivity

A

output/employees

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56
Q

capacity utilisation

A

percentage of total productive capacity that a business is achieving

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57
Q

capacity utilisation calc

A

actual output/potential output x100

58
Q

stock control

A

the process and controls used by a business to ensure that it has sufficient stock for its purpose

59
Q

lead time

A

time between order and delivery

60
Q

benefits of holding stock

A

meet demand
fluctuations in demand
EOS (sell extra units for less)
unexpected orders
seasonal changes
delay from suppliers

61
Q

cost of holding stock

A

storage
opportunity cost
depreciation
security
admin
insurance
stock lose value

62
Q

average stock calc

A

max stock+min stock / 2

63
Q

JIT

A

company receives goods just in time for when they are needed

64
Q

JIT benefits

A

reduced costs
eliminate waste
less tied up capital
less buildup of work in progress
keep up with demand

65
Q

drawback of JIT

A

lose out on EOS
highly dependant on suppliers
no room for mistakes
need specialist systems

66
Q

lean production

A

cutting waste and improving quality

67
Q

kaizen

A

constant improvements/small changes

68
Q

ergonomics

A

changing work environment to fit the limitations of employees

69
Q

TQM

A

long term success through customer satisfaction, continuous improvement in employees ability

70
Q

Jidoka

A

automation, machines stop working when defects are detected

71
Q

kanban

A

JIT

72
Q

kitemark

A

checking quality of safety products

73
Q

ISO 9000

A

international standards on quality assurance

74
Q

zero defects

A

everything done right first time

75
Q

internal standards

A

set of guidelines in certain areas of a business

76
Q

reshooting

A

returning production and manufacturing back to the companies original country

77
Q

offshoring

A

basing some of a companies processes over seas to take advantage of lower costs

78
Q

outsourcing

A

hiring a party to perform services or create goods

79
Q

benefits of reshoring

A

certainty around delivery and quality
minimise supply chain risks
collaborate with home suppliers easy
communication

80
Q

benefits of offshoring

A

lower manufacturing costs
higher skilled workers
free trade
target markets
spare capacity over seas

81
Q

subcontracting

A

part of production is undertaken by another firm

82
Q

plan do review

A

plan- establish objectives
do- implement plan
review- evaluate the process

83
Q

contingency planning

A

planning for unexpected outcomes to minimise the impacts

84
Q

crisis management

A

process which an organisation goes through to deal with an event that threatens the business

85
Q

3 elements of crisis management

A

management response- asses severity

operational response- implement contingency plan

communication response- contact stakeholders

86
Q

ansoff matrix

A

assess the risk of growth strategies

87
Q

ansoff- market penetration

A

existing products in existing markets

least risk, least reward/loss
don’t need market research

88
Q

ansoff- product development

A

new products in existing markets

effective market research
existing customers
first to the market better

89
Q

ansoff- market development

A

existing products into new markets

when existing markets are declining
more risky that P development
existing products may not suit market

90
Q

ansoff- diversification

A

new products into new markets

risky
no experience
no EOS initially

91
Q

porters five forces

A

threat of new entrants
degree of rivalry
threat of substitutes
bargaining power of suppliers
bargaining power of buyers

92
Q

forecasting

A

use of existing data to predict future trends

93
Q

qualitative forecast

A

based on opinions

94
Q

delphi technique

A

experts asked opinions on likely outcomes, an average opinion is taken

95
Q

trade credit

A

buy stock now and pay later

96
Q

factoring

A

sell debt to a third party to find cash flow

97
Q

hire purchase

A

make instalments before purchasing the good

98
Q

debentures

A

long term debt lent by business

99
Q

venture capital

A

investment in a high risk project

100
Q

business angel

A

invests in new/growing businesses

101
Q

consistency

A

accounts produced the smae

102
Q

realisation

A

when ownership changes not when payment is taken

103
Q

materiality

A

judgements need to be realistic

104
Q

going concern

A

assume operating as normal

105
Q

prudence

A

not overstating finance

106
Q

matching

A

dates used to record transactions when it takes place

107
Q

objectivity

A

information is realistic and reported in a non biased way

108
Q

fixed cost

A

stays the same regardless of output level

109
Q

variable cost

A

changes depending on output level

110
Q

unit cost calc

A

total cost / total output

111
Q

break even point

A

when total revenue = total cost

112
Q

margin of safety

A

difference between sales and break even point

113
Q

break even point calc

A

fixed cost / price - variable cost

114
Q

contribution calc

A

price - variable cost

115
Q

contribution

A

how many products needed to sell in order to cover fixed costs and then make a profit

116
Q

total contribution calc

A

contribution x number sold

117
Q

standard costing

A

expected cost of the production of a good/service

118
Q

cost centres

A

specific part of the business where costs can be identified and allocated with ease

119
Q

profit centres

A

seperately identifying profit, costs and revenue

120
Q

absorption coating

A

all fixed costs absorbed by different cost centres

121
Q

payback period calc

A

initial investment - return until you reach positive number, then divide needed cash to get 0 by the year it will become positive and x 12

122
Q

ARR

A

revenue - investment / years
———————————————— x100
initial cost

123
Q

Net present value

A

cash flow x discount factor for each year, add all present values together and then minus the initial investment

124
Q

sales budget variance analysis

A

actual>forecast = favourable
forecast>actual = unfavourable/adverse

125
Q

expenditure variance analysis

A

forecast>actual = favourable
actual>forecast = unfavourable/adverse

126
Q

zero budgeting

A

all budgets set to zero, managers justify the need for funds

127
Q

causes of cash flow problems

A

low profit
too much production capacity
excess stock
allowing too much credit
overtrading
seasonal demand

128
Q

working capital

A

= current assets - current liabilities

129
Q

fixed/non-current asset

A

used over and over, stays the same

130
Q

current asset

A

used once, changes all the time

131
Q

liabilities

A

what you owe

132
Q

depretiation

A

an accounting estimate of the fall in the value of a fixed asset over time

133
Q

reasons for depretiation

A

wear and tear
outdated tech
out of fashion
trends
not brand new/used by someone else

134
Q

net book value

A

cost of machine minus depreciation
(end of the year

135
Q

accumulated depreciation

A

added up over the years

136
Q

residual value

A

value at the end of life

137
Q

straight line method

A

reduces equally every year of its life

138
Q

reducing balance method

A

constant percentage of depreciation

139
Q

advantages of straight line method

A

amount of depreciation is low at start
lower depreciation = higher value asset
low depreciation = profits appear higher
easier to calculate
suitable for small businesses

140
Q

disadvantages of straight line method

A

estimate of residual value is required
assume the life of the asset is known
lower at start may be misleading
repairs and maintenance will be needed

141
Q

reducing balance method advantages

A

realistic, more depreciation at start
no estimate required
receive larger tax benefit early on

142
Q

reducing balance disadvantages

A

higher initial depreciation lowers value

above reason mean borrowing against assets is harder

some assets don’t lose value quickly

more complicated

business steeds (2 decks)

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