Bridging Units Flashcards
What is a demand curve show
The relationship between quantity demanded of a good/service, at any price, over a period of time
The relationship between price and quantity in a demand curve?
As price decreases , demand increases
How is a change in price shown on a demand curve?
By a movement along the demand curve
What other factors affect demand? And how can this be shown on a demand curve?
Consumer income, Price of other goods, Taste in fashion
By a shift in the demand curve
What is price elasticity of demand?
Measures the responsiveness of quantity demanded for a change in price
What is the calculation for PED?
% change in quantity demanded / % change in price
Two objectives sources of finance should satisfy?
making sure there is enough pay for what you need
It’s appropriate (wont leave the business with high interest)
Common internal sources of finance
Sale of assets - e.g. machinery
Retained profit
Effective use of capital - e.g. negotiating longer credit periods
Common external sources of finance
Venture capital
Loan capital
Ordinary share capital - e.g. saving, inherited funds , bank loans
Personal funding
What’s an overdraft?
Allows the business to withdraw more money from the bank than it has in its account ( short term)
What do venture capital provide?
For entrepreneurial businesses normally provides long term committed share capital and is invested in exchange for an equity stake
What are ordinary shares?
Raising new shares and offering them to new/existing shareholders. The market value of shares is determined by the price another investor is per prepared to pay
3 factors that influence location
Costs of operation
Desired level of customer service
Potential revenues
Supply factors that influence location?
Labour costs
Energy costs
Community factors
Land costs
Transport costs
Demand factors that influence location?
Customer convenience
Labour skills
Image
Expansion potential
Site suitability
What is a multi-site location?
Where a business operates from more than once location
E.g. retailers, distributors, franchisees
Advantages of multi site locations:
-close to customers
-recruitments is easier (local)
-Better understanding of local market
-economies of scale
-less risk of business disruption from problems at just one location
Disadvantages of multi-site locations:
-diseconomies of scale
-Harder to control operations
-increased risk , business not understanding local markers in which its operating
-communication across the business is more challenging
What is off shoring?
The relocation of business activities from the home country to a different international location
Difference between off shoring and outsourcing?
Offfshoring - the wok is done overseas
Outsourcing - someone else does the work
Advantages of offshoring:
- manufacturing costs are lower
- potential better skilled and higher quality
- to be closer to customers and demand
- to overcome protectionism
Drawbacks of offshoring:
- longer lead times for supply
- additional management costs
- implication for CSR (supply chain management)
- more exposed to change in exchange rates
- Communication: language and time zones
Definition of an exchange rate:
Price of one currency expressed in terms of another
