Buisness Mock November Flashcards
How to work out expected value of decision tree
Probability of outcome occurring multiplied by payoff
Net gain
Financial gain after initial costs of decision have been subtracted
Features of decision tree
Square represents decision point
Circle shows alternative outcomes
Decimals lines are probabilities
Values in pounds represent payoff
Advantages of decision tree
Nice visual representation and simple to follow
I can help decide decision made for managers
Disadvantages of decision tree
Data is only quantitive and ignore all qualitative data
Probabilities are very hard to predict accurately
In reality was a wider range of potential outcomes
Roles of stakeholders
Care about the companies overall performance
Importance of stakeholders
Provide revenue and labour for business operations
Market share
Percentage of sales in a market made by one thermal brand
Sales/total market size x100
Market size
Market size is the total number of sales in the market over a period of time if the market increases from one period of time to another then the market is growing
Market growth
Newmarket - old market size/old market size x100
Price elasticity of demand
Response in demand due to change in price
Percentage changing quantity demanded/percentage change in price
Always negative
If greater than one, the product is price elastic if less than one then inelastic
In elastic and elastic for price
Elastic if demand is greater than price change?
In elastic if changing demand is less than changing price
How does price elasticity help?
Helping manufactured the side whether to raise or lower the price of a product
Boston matrix/portfolio analysis
Compare market growth with market share each side when the matrix represents one product the size of each side represents the sales revenue of the product
question marks /problem child.
New products they have small market share and high market growth. They aren’t profitable yet so they’re quite heavy marketing and brand building.
Cash cows
High market share but low market growth they’re in maturity phase they’ve already been promoted and they’re producing high volume so cost low cash cow’s bringing plenty of money
Stars
High market Griffin high market share but in the profitable growth phase and have the most potential their future cash cows but competitors are allowed to take advantage of this Grove market so you need to spend a lot on promoting to keep market share up and increase capacity to keep up with demand
Dogs
Low market share and low market growth pretty much a lost cause or failed product business will harvest profit in short term if no longer make a profit it can be sold off
Advantages of Boston matrix
Showing where business products are positioned in the market
Marketing decisions will depend on products positions in the matrix
Disadvantage of Boston matrix
Contradict what will happen to a product a product profit may be different from what the matrix suggests
Labour productivity
Measures how much each employee producers
Output per period/number of employees
Higher of the labour productivity the better of the workforce is performing as labour productivity increases labour cost per unit full
Ways of increasing labour productivity
Improving worker motivation
Training to make a more productive
New technology can increase speed
Disadvantages of increasing labour productivity
Increasing efficiency may impact quality and more waste may be produced
If capacity is not increased trained workers may be made redundant which lowers morale
New technology and trading can be expensive and business is needed to the side it’s worth investing
Unit cost
Total cost/units output
Lower output would result in higher unit cost
Economies of scale
Scale of production increases the cost of producing each item decreases
Internal economies of scale increase efficiency within a firm how?
Technical – production methods for large volumes are more efficient
Managerial – employment managers with specialist skills to manage specific department they oversee plans and strategies and help Work be done more efficiently and quicker
Purchasing – economies of scale to do a discount big businesses can negotiate discount when buying suppliers and large quantities
Marketing – large output can spread the cost of marketing over more units so they can afford more effective forms of advertising
External economies of scale
Make a whole industry or area more efficient
When industries are connected in a small geographic area, having a large number of supplies to choose from economy of scale
Locating their lots of supplies firms can easily negotiate with arrange your supplies which can increase quality and reduce prices
Good skilled local labour supply makes industry more efficient
Capital intensive
Uses more machinery than relative workers
Advantages of capital intensive production
Cheaper a manual labour in long-term
Machinery is often precise than human workers
Can work 24/7?
Easier to manage than people
Disadvantages of capital intensive production
High set up costs
Only suited to one task which makes them inflexible
If she breaks down, it can lead long delays
Fear of being replaced by machine can cause workers motivation to decrease
Labour intensive
More workers and less machinery
Advantages of labour intensive production
People are flexible and can be retrained
Cheaper for small scale production
Also cheaper while low-cost labourers available such as China and India
Workers can solve any problems that arise during production and can suggest ways to improve quality
Disadvantages of labour intensive production
Harder to manage people in the machines
People can be unreliable they can get sick
People can’t work without breaks or holidays
Wage increases mean the cost of labour can increase overtime
Financial objective definition
Financial goals that a business wants to achieve set by financial managers and will help the business to achieve its corporate objectives must be consistent with the functional objectives improve coordination between thieves act as focus for decision-making
Examples of financial objectives
Revenue
Cost minimisation
Profit maximisation
Improve cash flow
External factors influencing financial objectives
Economy
Competitors
shareholders
Availability finance
Environmental/ethical influences
Internal factors influencing financial objectives
Overall objective of the business
Status of business
Of the areas of business
Break even output
Level of sales the business needs to cover his cost
Costs = revenue
Margin of safety
Amount between actual output and breakeven
Disadvantages of breakeven analysis
It seems variable costs always rise steadily a business can get discount for buying in bulk sometimes
Only for one product but businesses sell lots of different product products
If data is wrong, then results will be wrong
Assume the business sales all the products without any wastage
Only tells you how many units you need to sell to break even not how many you actually gonna sell
Advantages of breakeven analysis
Easy to do if you can plot figures on graph and as quick
Lets businesses full forecast variations and sales will affect costs revenue profit and how price and cost will affect how much they need to sell
Help persuade bank to give him a loan
Decide whether or not new products are launched or not
Labour turnover
Measures proportion of staff who leave each year
Number of staff leaving/average number of staff employed X 100
Higher the figure the large of the proportion of workers leaving
External causes of labour turnover
Changes in regional unemployment levels
Growth of other local firms using staff with similar skills
Internal causes of high labour turnover
Poor motivation of staff
Low wages
Lack of opportunities for promotion
Less responsibility
Benefits of high staff turnover
Constant stream of new ideas for a new staff
Finn can recruit staff I’ve already been trained by competitors
If sales full phone can reduce workforce through natural wasted rather than cost redundancy
Enthusiasm, new staff influences other workers
Disadvantages of high staff turnover
Lack of loyal and experienced staff who know the business
Firm loser staff, it has trained often to direct competitors
Training costs money and productivity drops while new staff get trained
Recruitment costs are high
What is delayering?
Removing parts of the hierarchy creates a flatter structure with wider span of control
Can help lower costs by reducing salaries
But may cost business money in short time as trading stuff need to be retrained in new roles
Narrow span of control
Not responsible for many people
Flexible working definition
Where can I was in patterns are adapt suit employees?
And attractive prospective highly skilled workers
Examples of flexible working
Flexi time – employees work full-time, but the side went to Work
Compressed hours
Annual hours
Job sharing
Home working
Advantages of flexible working
Improve motivation so productivity improves
Help employees with children
Suits families, disabled workers and those who live remote places
Disadvantages of flexible working
Impractical for business that needed to solve the public during normal work hours
Homework workers can be easily distracted at home
Job Sharon Conley to conversion over responsibilities and unequal workload
Ansoffs matrix
Tool for comparing the level risk involves with the different strategies it helps manager to decide on direction for strategic growth
Advantage of ansoff matrix
Doesn’t just layout potential strategies for growth also force his managers to think about expected risks of moving in certain directions
Disadvantage of ansoff matrix
It fails to show that market development and diversification strategies also tend to require significant change in day-to-day workings
Existing market and existing product
Existing product and a new market
Market penetration
Market development or extension
New product and existing market
New product a new market
Product development
Diversification
Economies of scope
Arises when a business produces multiple products instead of specialising in one it’s cheaper for one business to produce many products then to produce only one product
Basically more varieties cheaper
Existing businesses can benefit from brand loyalty and allows businesses to charge low prices due to lower unit costs which gives a competitive advantage due to being more efficient
Experience curve
A business grows and increase itself volume it will begin to produce more products. Workers will get more experience and more efficient and making products which will cause the cost per unit to decrease
Efficiency increases of total units produced increases so costs per unit decreases
Synergy
The concept value performance of two companies would be greater than for some of the individual parts(stronger together)
Which can lead to increase revenues combined talent combined technology and cost reduction
What four factors does SWOT analysis use?
Strength
Weaknesses
Opportunities
Threats
Which factors are internal and external for SWOT
Strengths and weaknesses are internal
Opportunities and threats are external
Benefits of SWOT
Useful tool in developing strategy for more on strategic planning considered the businesses, individual circumstances and has done in factual and objective way
It could help build businesses strengths and converting weaknesses into strengths and managing threats
Can be easily redone to take an account changing conditions so it can adapt strategy using this analysis
SWOT analysis and competition
Let the business know where it has a competitive advantage over its rivals the business can change attractive to focus on these elements
Current liabilities
That which need to be paid off within a year they include overdraft taxes payable and dividends
Total current liabilities are deducted from total fixed and current assets to give the value of assets employed
Non-current liabilities
That’s that the business will pay off over several years such as loans and mortgages
Non-current assets
I said that the business is likely to keep for more than a year such as property land and equipment
What two figures on a balance sheet should balance
Total equity and net assets
Current assets
Assets of the business is likely to exchange for cash within the accounting year before next balance sheet is made this includes receivables and inventories
Net assets formula
Total fixed and current assets minus total current and non-current assets
Working capital formula
Amount of cash the business has available to pay a day-to-day debts
Current assets minus current liabilities
Liquidity
How easily it can be to turn us into cash
Can be improved by decreasing stock level speeding up collection of debts out to the business or slow down payments to credit
Current ratio
Compares current asset to current liabilities
Current assets/current liability
Ideal to be 1.5 to 2
Value below 1.5 suggested liquidity problem and a struggle to meet its current liabilities
Examples of efficiency ratios
Inventory turnover
Payable days
Receivables days
Inventory turnover
Tell you how many times during the year the business sold all the stock
Cost of sales/cost of average stock held
Can be improved by holding less stock or increasing sales easier
Payables days ratio
Payable/cost of sales X365
Number of days the phone takes to pay for goods advice on credit from supplies
You can use the ratio to maximise it cash flow
Gearing
Shows where a business gets his capital from and how vulnerable business is to change as an interest rate
%= noncurrent liabilities/total equity plus noncurrent liabilities X 100
Gearing above 50% showed more than half the business as finance comes from long-term debt
Capital employed
Total equity +non-current liabilities
How does gearing show the vulnerability of the business to change an interest?
More the business is borrowing the holiday will be hit by rising interest rates
Guarantee risk assessment can be used so an investor can help this decide whether to buy shares in the company or not the more the firm borrows the more interest they will have to pay. This may affect dividend paid the shareholder but that shows that the owner can take risks which may attract investors
Total equity
Same as assets and there’s a amount invested into the business
Net asset
Total assets- total liabilities
What is working capital ratio also known as?
Current ratio
