B1 (Revision) Flashcards
what is a mission statement?
what a firm is trying to acheive, why it exists
what are objectives?
medium to long term targets established to coordinate the business
for objectives to work they should be…
specific, measurable, agreed, realistic, time specific
what are some common business objectives?
profits, growth, survival, cash flow, social and ethical objectives
examples of profit objectives
earn the greatest possible profits to satisfy shareholders desire for high dividends, long term financial benefits
- why do businesses set objectives?
managers can ensure that everyone is working towards the same overall target (so that people dont get confused), helps encourage employees to seek ways to increase the businesses sales
- why do businesses set objectives?
employees may be motivated bc they know what the business wants them to acheive, success of a business’s plans can be reviewed - managers can measure how much has been acheived compared to the target set
sole traders
business that is owned and managed by one person, may employ others
benefits of being a sole trader
easy to start up (not necessary to register the business with a government agency), freedom to make own decisions e.g. when are where to work, decisions made quickly, profits dont have to be shared
disadvatages of being a sole trader
pressure of holdiing all of the responsibility, lonely, hours are demanding, not as much time off due to the risk of losing customers, diffuculties in raising finance - mainly come from own money (or a bank loan but they can charge high interest rates due to worries of failure), unlimited liability
limited liabilty
responsible for all actions of the business, lose personal assets if there are financial problems
dividends
part of the companies profits that are paid to shareholders depending on how many shares they have
why is a business a private limited company?
desire to retain control over the company, taking decisions for the interest of the company’s long term interests, enjoying the profits generated by the comapny (going public means dividends shared between shareholders - results in the dilution of profits)
why is a business a public limited company (PLC)?
access to capital (through shares enables the business to generate large sums of capital), publicity, ability to take over others companies
why might a sole trader turn into a private limited company?
growth, the business might become larger and so the company needs to access more capital - protection of limited liability is vital and the business’s potential to incur debt increases
why might a private limited company become a public limited company?
desire to access more capital and attain a higher profile
public sector businesses
organisations that are owned and sometimes funded by a national or local government
public sector businesses examples
public cooperations (e.g. channel 4 or airports), public services (e.g. NHS), municipal services (e.g. libraries)
non profit businesses
made not for making profit to benefit the owners or the company, but for helping others, social and ethical aims, e.g. charities, mutuals
why do shareholders invest
financial reasons - increase in share price and from recieving a share of the profits in the form of dividends
influences share prices
good business enviroment (make investors more confident - favourable enviroments make sales and prices more likely to rise - generate a higher profit and pay rising dividends), if the company is performing well, economic climate is troubled may lead to lower prices
factors that shape the external enviroment for businesses are…
market factors (growth in sales within a market, changes in the power of competitors), enviromental + social factors (enviromentally friendly products), economic factors (consumers incomes, level of interest rates), demographic factors (migration, birth + death rates)
