business Flashcards

1
Q

internal sources

A

Retained profit-retaining profit for later investment
adv-no interest

dis-shareholders may want in dividends

Owners capital-money owner invests into business
adv-does not need paying back
dis-limited deedning on perosnal wealth of owner

Selling assets-old machinery is sold to generrlise capital
adv-no interest
dis-no longer own asset
may be time consuing to sell asset and get the cash

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2
Q

external cources of finance

A

banks
freinds and family
other businesses
peer to peer lending
crowd funding

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3
Q

freinds and family

A

adv-no interest
dis-limited and may put strain on relationship if not paid back in time

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4
Q

banks

A

offer loans, overdrafts and mortages
adv-recognised finanical instititon
terms and conditions are clear
can advice business

dis-strict lending criteria

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5
Q

peer to peer lenders

A

operate online

alow individuals to lend money to businesses
lender says how mich willing to lend and borrowers say how much wanting to borrow
assess how risky by lending compay and then match them with appropriate lenders

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6
Q

business angels

A

wealthy indiivuals who invest in business they see as potentially being successful

adv-may have buisness contacts and lots of business knowledge
dis-have a share of business, so they may gain some control of business and its decisions

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7
Q

crowd funding

A

done on webstie
put details onto webiste
company put up business idea and people invest money if like idea
people then get discounts,upon releaset etc

adv-raises aawareness, increases sales
dis-reputation may be damaged if business idea fails
risk of idea being copied

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8
Q

short term methods of finance

A

Grants-fixed sum paid by government
adv-no need to pay back
no interst
no share of business given up
dis-applicatio process can be time consuming and difficult to get
Loans-
Overdrafts-where bank allows business to have negative amount in bank account
Trade credit

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9
Q

business plan

A

outline what a business wants to achive and how

good plan contains a business overview, aims and objectives, marketing and sales stregy, finanical forecasts, cash flow forecasts,

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10
Q

adv of business plan

A

helps convice potential investors that everything has been well thought through and low risks of business failing

shows how profitable business expects to be and whe si investors know when they could start getting returns on their investment

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11
Q

what are cash flow ofrecasts

A

show cash inflows(sums of money recived by business)
cash outflows(paid out by business)

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12
Q

what is working capital

A

amount a business has for day to day spending

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13
Q

adv of cash flow forecasts

A

show amount of money that managers expect to flow into busienss adn flow out over period of time

makes sure enough cash around to pay suppliers and employees

can preict when will run out of cash adn can provide loan in time

makes banks and venture capitalist see they done their resratch and idea of where business going to be in future

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14
Q

dis of cash flow forecasts

A

needs lots of experience and research

if dyanmic makret, hard to make accurate cash flow forecast as costs can constnatly go up and down

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15
Q

net cash flow

A

cash inflows-cash outflows

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16
Q

closing balance

A

opening balance plus net cash flow

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17
Q

sales forecasts

A

predict future sales volume and revenue based on past sales data

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18
Q

what are the 3 things sales forecasting helps a business make decsions about

A

finance-important to generate accurate cash flow forecasts

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19
Q

what are the 3 factors affecting sales forecasting

A

consumer trends-sometimes fairly predictbale e.g more fairy lights in christmas but sometimes more uncertain

economic variables-e.g interest rates, inflation rates, unemployment leveles
people have less money then less liekly to spend as much

actions of comeptitors-e.g coemptior decides to decrease their prices or launch a new product, oredicted sales may decrease

(also hard for dynamic markets as external factors affecting sales are constantly changing

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20
Q

what is sales volume

A

number f untis sold in period of time

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21
Q

sales revenue

A

value of sales in given time period

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22
Q

sales revenue calcualtion

A

selling price times sales volume

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23
Q

what are fixed costs

A

DONT chnage with output e.g rent, business rates, basic salaries

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24
Q

what are variable costs

A

costs that do change with output e.g e.g packaging costs, wages, raw material costs

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25
Q

what is profit

A

total reveue-total costs

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26
Q

what 9s break even

A

level of sales a business needs to cover its overall costs
at breakeven point total variable costs+total variable costs=total revenue

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27
Q

break even point calcualtion

A

total fixed costs divided by distribution

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28
Q

sales and break even point relationship

A

when sales are below break even point, then business makes a loss

when sales are above break even point, business makes profit

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29
Q

what is a break even analysis

A

it tells them how much they need to sell to break even

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30
Q

adv of break even analysis

A

easy to do. if can plot figures on graph accurately, do break even analysis

quick, managers can quickly take action to reduce costs or increase sales if tehy need to increase their margin of safety

help persuade sources of finance to give them money

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31
Q

margin of safety

A

acutak ouput-break even ouput

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32
Q

dis of break even anlaysis

A

simple for single product but most businesses sell lots of different products, so looking at business as whole can be more complicated

if data ia inaccurate, results will be wrong

doesnt take into account wastage
assimes business sells all products without any wastage

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33
Q

what are budgets

A

finanical plan for future

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34
Q

what are the 3 types of budgets

A

product budgeting-ues income budget minus expenditure budget to calcuate expected profit by end o year

income budgeting-amount of money that will come into business as reveue

ecpendirture budgeting-predict what businesses total costs will be by end of year

acroyn-PIE

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35
Q

what does business do to set what expenditure and income budgets are going to be

A

income budget-research and predict how sales are going to be
expendiure-research on labour costs, raw materials etc

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36
Q

adv of budgeting

A

can be motivating-give employees tagets to work towards

help control income and expendiure

help managers review their activites and make decisions

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37
Q

dis of budgeting

A

inflation is hard to predict

can be time consuming making owner lose what should be focused on/the real issues taking place

can cause resentment and rivalry if departments have to compete for money

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38
Q

historical budgeting

A

updated each year
based on percnetage increases and decreases from last years budget

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39
Q

adv of historical budegting

A

quick adn simple

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40
Q

dis of historical budgeting

A

dis-assumes that business conditions stay unchanged

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41
Q

zero based budgting

A

starting from scratch each year

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42
Q

adv and dis of zero based budgeting

A

adv-more accurate then historical
dis-time consuming

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43
Q

what is fixed budgeting

A

means budget holderst stcik to their budget plans throughout the year

adv-provides discipline and certainity
dis-prevent a firm reacting to new business opportunities

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44
Q

what us flexible budgting

A

allows budgets to be altered in reposnse to significant changes in makret or economy

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45
Q

gross profit margin

A

gross profit divided by revenue times 100

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46
Q

gross profit

A

total revenue-cost of sales

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47
Q

operating profit

A

gross profit-other operating expenses

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48
Q

net profit

A

operating profit-interest

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49
Q

formula for measuring percentage change in profit

A

current years profit-previous years profit divided by preveious years profit times 100

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50
Q

gross profit margin

A

gross profit divided by revenue times 100

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51
Q

what does a statement of finanical postion show

A

shows how much money is coming into a business and how much is coming out of a business

can be used to assess businesses finical performance

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52
Q

what is the difference betweeen profit and cash

A

cash is what business has now to pay its bills
wheras, may not get profit straight away
busienss could be making lots of profit, but still run out of cash

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53
Q

statments of finical postion

A

lists of assets and libaiities

can also be called balance sheets
snapshot o firms fianances at a fixed point in time
show business assets (things that belong to business)
business liabilties (things business owes)

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54
Q

what are non-current assets

A

assets kept for longer tehn a year

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55
Q

current assets

A

assests likely to be exchanged for cash within an accounting year

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56
Q

curent liabilties

A

debts which need to be paid off within a year

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57
Q

non-current liabilties

A

debts which will be payed off over several ears

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58
Q

what are bad debts

A

where dont pay up

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59
Q

liquidity

A

how easily an asset can be turned into cash and used for buying things
cash is very liquid
non-current asstes e.g machinery are not very liquid

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60
Q

current ratio

A

cuurent assets divided by current liabiltiies

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61
Q

acid test ratio

A

current assets minus inventory divided by current liabilties

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62
Q

working capital

A

current asstes-current liabilties

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63
Q

liquidy

A

shows how easily an asset can turn into cash used for buying things

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64
Q

insolvent defintition

A

where business doesnt have enough current assets to pay its liabilties

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65
Q

what ways can liquidity be improved

A

decreasing stock levels, speeding up collection of debts owed to the business

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66
Q

current ratio

A

current assets divided by current liabitlies

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67
Q

acid test ratio

A

current assets-inventory divided by current liabilties

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68
Q

working capital

A

amount of cash that business has to pay day to day debts

cant survive if dont have enoih working capital to pay debts when due

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69
Q

what is the working capital cycle

A

length of time between buying raw materrials and getting cash from sales of finished product

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70
Q

when does a business fail

A

when it cant cover its expenses

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71
Q

internal finanical factos of business failure

A

bad management of working capital can result in not having enough cash for day to day running of business

poor efficiency-where has costs not as low as could be meaning need to charge higher prices than their competitors

bad decisions about how firm is financed e.g relying on overdrafts in long term meaning costs are high

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72
Q

non finaical internal factors of business failure

A

poor communciation e.g different departments of business arent working well together, reducing the efficiency of the business

poor market research meaning cannot moitor changes in makret that could affect it

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73
Q

finanical external influnces of business failure

A

economic recession can result in consumers having less money to spend, causing falls in sales

change in exchange rates
e.g

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74
Q

non-finanical external factors of business failure

A

acronym: CCC
actions of competitors-if they are able to offer simialr products at cheaper prices
or develop new products more desirbale to consumers

chnage in consumer trends-if consumers suddenly stop wanting product you sell

poor communciation outside of the business e.g suppliers

lack of technology can cause dynmaic business to fail

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75
Q

job prodcution

A

selling one of items
produced by skilled workers

adv-can charge higher prices as person more wiling to pay higher prices for something handmade, unique
dis-cannot reach EOS as products are unique and cannot be made in bulk making unit costs high
dis-have to charge high prices to staff
dis-producivity is lower as takes long time to make few products
dis-may not feel very valued beacuse of being replaced by machiens/demotivated/priodcution lower

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76
Q

flow production

A

uses an assembly line to produce lots of identical products
adv-can operate 24/7
adv-achieve EOS as products identifical so materials can be brought in bulk, reducing unit costs and allowing business to charge lower prices
dis-boring/demotivating for workers
dis-if one bit of machinery breaks down, stop the hwole production
dis-if one bit breaks down, whole flow of production is delayed
dis-if change in demand for product, then whole system has to be changed e.g new machines need to be updated

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77
Q

batch production

A

making small batches of different products
same products are in each batch
when one batch made, equipment is cleaned and next bacth is made
adv-producivity higher then job prodcution but lower then flow production
dis-having to stop and clean equipment inbetweewn can be time consuming and delay production
adv-EOS
dis-cost and inconveience of having to store lots of raw materials

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78
Q

cell production

A

flow is divided into sets of tasks
each task being completed by a work group
adv-working with others, happeier in work, increases motivation, therefore production levels
adv-not having to carry out repeteive tasks
adv-involved in alreg chunk of work, increase pride in work, improving quality of work
dis-because product is removed from flow at each cell,prodcuivity can be lower

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79
Q

adv of use of machines

A

-easier to mange then humans (have no emotions)
can operate 24/7
no chance for human error/everything made in same quality level
dis-if stops, can stop whole production process
dis-high initial cost
dis-may make workers feel less valued
dis-any chnage neds to be completed installed and updated, humans are multiskilled
reprogrammed

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80
Q

human workforce adv and dis

A

adv-can multitask
increased motivation
dis-initial frop in producivity while workforce takes time training

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81
Q

what is efficiency

A

where production happens at an overall minimum average cost

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82
Q

ways to imporve efficiency

A

cutting csts

could adopt a lean production approach

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83
Q

labour intensive firms

A

mostly workers rather then machinery

adv-multiskilled so if any alter in prodctuion, can quickly chnage what they are doing
can be retrined wheras mahcines will have to be replaced

for small firm may not make much sense to buy expensive machines to do jobs that humans could do

can solve any problems which arise

dis-harder to mange people then machines
people can be unreliable e.g can get sick
need rest breaks

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84
Q

capital intensive firms

A

firms which mainly use machines rather then human workforce

adv-operate 24/7
easy to mange dont have human emotions
no chance for human error/tend to produce everythig at consitnely high quality

dis-initial cost is expensive
can make workers feel replaced/less valued
if break down, can stop whole production process, missing out on sales, reputation being damaged
if alter production, needs to be reprogrammed adn del

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85
Q

capaicty utlisation

A

how much capacity a businesss is acutally using

current output divided by max possible output times 100

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86
Q

dis of over utlisation

A

may turn awy potential customers as cant increase output any more

no downtime-machines on all the time
no margin of error-eveything has to be perfect first time, putting stress on workers, might make them work flat out and make mistakes

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87
Q

capacity

A

max am

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88
Q

what does under capciaty mean

A

business has resources its not using e.f factor space

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89
Q

consewunces of uner utlisation

A

increases unit costs meaning less likely to achieve EOS, may also mean they have to increase their prices, therefore less comeptitive

can create bad image eg empty shelves therefore reputation is damaged

reduce employee motivationa as not enough work to do

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90
Q

ways to increase caiaty utlisation

A

use different makreting stregies e.g promotions to increase demand for product, to increase sales
changing ways to distibute goods and services they sell

rationalsation-downsizing organisation to reduce capacity, increasing capaity utlisation to reduce costs
e.g removing to smaller facilty
sellign asstes that are underultisated
making staff redundant

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91
Q

wyas to deal with over capicty utlisation

A

outsourcing-outsourcing some of its work to other businesses
hire other firms to complete work on their behalf

reduce demand for product by increasing prices

waitlisting-makes it more luxurious

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92
Q

stretegies for over utlsaiton

A

expand organisation
grow bsuiness
move to move sigth
invest in greater technology
take on new staff

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93
Q

what is stock

A

raw materials needed for making a product
businesses try to minimise stock just to its costs
flow prodcution-high levels of stock

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94
Q

what is the minimum stock level called

A

buffer stock

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95
Q

what is the lead time

A

time it takes for goods to arrive after ordering them from the supplier

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96
Q

adv of holding buffer stock

A

needed to avoid running out of stock. good for mass markets whcih need to constantly be reaching demadn
may be good to hold large buffe stocks as can offer discounts for bulk buying stock
purachasing EOS

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97
Q

dis of holding buffer stock

A

storage costs

wastage costs espcially if its perishable where could go out of date

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98
Q

what happens if business doesnt control stock properly

A

high stick in costs costs associated with holding too much stock

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99
Q

what is lean production

A

efficient form of prodcution thag focuses on waste minimisation (using as few resources as possible)

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100
Q

JIT production

A

type of lean production
aims to reduce waste of materilas
having as little stock as possible
products avaliable just in time for when customers need them
adv-storage costs are reeduced so cash flow imporved as money isnt tied up in stock
less waste as less damaged or out of date stock lying around
more flexibale so can deal with changes in demand
reduced costs means can charge lower prices then comeptitors, comeptitive advantage

dis-having little stock means rely on frequent deliveries from suppliers
can be hard to organise adn difficult for staff
need to make sure supplier is reliable, or else firm may run out of stock and have to stop production
having smaller more freuwnt deliverieis means cant acheve EOS

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101
Q

what is quality control

A

where product is checked at end by inspectors

adv-done by professionals
doesnt delay production/stop and start

dis-may mean more waste

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102
Q

qulaity assurance

A

where qulaity is checked throughout production process by workers

adv-motivating/feel valued
dis-need t be trained/expensive

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103
Q

total quality management

A

quality is the centre of everything a business does

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104
Q

adv of total quality management

A

help them bond as team as everyone is involved in improving quality

boosts companys repuation having high quality products

reduces waste as less faulty products are produced

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105
Q

dis of total quality management

A

may take long time to introduce

can demotivate staff-having to focus on quality at everrypart of firm can seem like lot of effor

expensive-often means investign in traning for all employees

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106
Q

quality circles

A

workers come together to discuss quality control issues
use knowledge from various different departments
adv-get staff involved/make there opions feel valued
dis-suggestions can be unrelaistic adn may not listen to floor workers

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107
Q

kaizen approach

A

type of lean prodcution
employees should be improving their work a little all the time
employees are constnatly evaluating work they have done

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108
Q

interest rates

A

are the cost of borrowing or return of savings
a fall interst rates means a decrease in cost of borrowing
an increase interest rates means an increase in cost of borrowing
bank of england influences changes in interest rates
high interest rates can affect consumer spending, high interest rates means less money to spend
have to pay more money back in interest so less disposable income

products that tend to be borrowed e,g cars are more affected by changes in interest rates

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109
Q

inflation

A

an overall increase in goods and services within an economy
two types demand pull inflation-when there is too much demand, too much disposbale incomee and business cant supply goods quickly enough so increase the price of their goods

cost push inflation-rising costs push up prices e.g employee wages rise

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110
Q

deflation

A

reduction in prices of goods and services within an economy
causes a fall in producivity

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111
Q

what measures inflation

A

conumer price index

112
Q

why are preminim luxry businesses liekly to be affected by changes in inflation

A

as means people have less disposbale income so aree more likely to save rarther then spend
they could change their prices by reducing them but then could impact brand image and mke it seem lower wuality then it is (psychological pricing)

113
Q

what are the 4 stages of a business cycle

A

boom-GDP is high, wages rise for employees
rpdocution reaches max capaity

recession-incomes start to go down, demand goes down ‘
confiedence is reduced

slump-gdp is at a low
close factories andd lots of redundancies
uneployemnt is high

recovery-prodcuivity increases, employment increases

114
Q

busienss legisalion

A

all about laws

115
Q

misson satment-overall purpose of business

A

needs to be clear nd precise
written descirption of aims
adv-motivating for workers/have something to work towards/shared purpose/common goal
dis-no proof needed, people can just put wht consumers want to hear
if cqught, reputation is damaged
dis-limited, doesnt go into detail about how a mission statement can be acheived

116
Q

cooperate obejctive

A

aim of business as a whole

117
Q

departmental obejctives

A

what that department will do to help achieve coopearate aim
specific to each department

118
Q

should be SMART

A

specific-should not be vargue, need to be specific to be achieved
measurable-needs to be measurbale to know if met
agreed-everyone involved needs to know about it and agree
reslaitic-too ambitious, when not met can be demotivating
timely-needs to be in set time bound so people see it as improtant, if not could see it as not very important and put it to the side

119
Q

ansoff matrix

A

makret penetration-trying to increase market share in existing makretne.g promoting, pricing strategies least risky strategy

NEW prodcut development-selling s=new products to existing makret

market development-sellign exisitng products to new markets
can be done through repostiioning-busienss focuses on new segment within market

diversification-sellign new products to new market
most risky

120
Q

adv of ansoff matrix

A

forces managers to think about expected risks of moving in certain direction

121
Q

dis of ansoff matrix

A

doesnt take into account day to day spendinh
oversimplifies the options avaliable for growth
doesnt take into accoount actions of competitors

122
Q

porters 3 generic strageies

A

cost leaddership-being the lowest cost of prodcution. means can change low prices
adv-good for bigger businesses and can acheive EOS
diversifiction-having unique attributes
adv-can change higher prices
dis-imiation by comeptiros
focus-for niche amrkets on whether they choose to be the lowest cost or being unquie

123
Q

adv of porters genric stratigies

A

if business is stuck in middle meaning inbetweeen both it can help stir them in a direction

124
Q

dis of proters generic stargies

A

doesnt take into account busiensses who successfully achive both

only tells business where they currently sit not how to improve

125
Q

kays three capabilties model

A

Archeticture-relatiosnhip between stakeholders
Reputation-keeping customers satified e.g good customer serbices or high quality products
Innovation-allows a business to bring in new innovative products so can have a USP therefore gaining competitive advantage

126
Q

what does it mean that then need to be susitbable

A

need to be maintained over time

127
Q

what doesnit mean by appropriable

A

other businesses cant copyrigjt e.g traddemarks and patents

128
Q

swot analysis

A

strength
weaknesses
opporutnites
threats

129
Q

adv of swot analysis

A

can help managers to make stretgic and tacital decisions
can easily be redone to take in any change in conditions

130
Q

PESTLE analysis

A

poltical-goverment taxation e.g goverment who wants smaller busiensses to grow can lower taxes sp they can grow

economical-e.g consumer spening, interest rates, exchange rates #

social-changes in social tredns e.g increase in concern for sugar means fall in demand for sugary drinks

technological-e.g new tachnology helping increase productivty levels hwoever expensive intital cost for business

legal-changes in law e.g nincrease in concern for poluution

enviromental-people being more concerned with protecting the environment

131
Q

porters five forces model

A

barriers to entry
supplier power
buyer power
threats of substitutes
rivalrys-how much competition is there

132
Q

barriers to entry

A

how easy it is for new firms to enter the makret

patents and trademakrs can be used to make it harder for firm to sell similar products

existing firms may make it hard by usig a price war, predatory pricing, reducing their prices so firm pushed out then increasing agaij (illegal in EU laws)

133
Q

buyer power

A

buyers want as low price as possible
more power when few buyers and many sellers

134
Q

inorganic growth

A

expanding from outside the business

takeover-when one busijness buys asstes of another business
merger-when two busijenss come togetrh

hiriozntal-at same stage

vertical-difefrent stage

135
Q

adv of inforganic growth

A

synergy(greater sum then consitient parts)

economies of scale

profits are doubled
reduced csts
duplicated resources can be sold off

136
Q

dis of inorganic growth

A

diecsonomies of scale(poorer communciarion

regualtors may sign off due to risk of being too powerful

human resource issues e.g increased job inscurity for staff who may feel job is threated
may get relocated
motivation is redued, increases abseetism
feel less favlued working in larger firm

culture clashses-may haev different objectives and cultures

costs-staff may be made reducnat which increases redundancy costs

learn new porcedures may lead to poorer customer service, loss of sales

137
Q

organic growth

A

expanding within your business
adv-can maintain tis managemnt style, ethics and culture of business
-less risky as expanding what the business is good at
-easy for business to mange and control -not as many disprupitve changes so workers efficnet aand prodcuitvity remain high

138
Q

dis of organic growth

A

takes a lot time to grow organically

businesses may miss out on oportunities for ambirtiou growth if they grow organically

risk that competion could combie inoragnically cuasing you to lose sales and be behind competiors

139
Q

problems with growth

A
140
Q

why may a business not want to grow hge/restirct growth

A

want to maintain the culture of a small buisness

becomes more complicatedd to manage if biffer

141
Q

why may business not be able to grow large (kays 3 distinctive capabilties )

A

product difefrentiation-production process for product is not sutired to mass production adn would result in business losing its USP
maintain their USP-kays distnictive capability of innovation

flexibility to respond to customers needs-small business is able to repond to customers needs more quickly
communcation between staff and customers can be quick and easy
create good relaitonsuip with external people, strengthening kays distinctive capability of archeticture

customer service
dun by original owner =, soo more personal and high quclity customer service
if grw, owner would not ahve time to indiviually eet all customers

PFC

142
Q

moving averges

A

taking averges

adding all togetrh adn and then divideing by number of years

143
Q

investment

A

must balance out risk and reward
like risks to be low and rewards be high

3 methods businesses can use to help them make decision
calcualting AVR
payback period
dicounted cash flows

dpc

144
Q

payback period

A

how long it takes to get the money back

145
Q

payback period formula

A

amount invested divided by annual net cash flow

146
Q

adv of payback period

A

easy to calcualte and understand

good for high tech or any prjects that may not provide long term returns

147
Q

dis of payback period

A

IGNORES cash flow after payback

IGNOREs teh time value of money

148
Q

adv of ARR

A

easy to caluate and undertsand

takes into account all of the projects cash flows

dis-ignores time value of money

149
Q

net present value

A
150
Q

expected montary value

A

probaliability times number at end

151
Q

adv of decision trees

A

forces managers into possible options and identifies the opportunity cost

injects quantitative analysis into the decision making process

152
Q

dis of decision trees

A

accuracy of estimations 9probailtites)
know businesses are effected by exernal enviroment and over time situations can change
wehn did it year ago, external environment different to now

managerical bias

quantitive-does not include employees opinions

hard to be accurate due to external changes

153
Q

critical path analysis

A

identifies the most efficient and cost effective way to compelting a complex task

154
Q

EST

A

earliest start time-earliest time can begin by

155
Q

adv of cirtical path analysis

A

find teh shortest time possible for completing a complex project thereofre can put a business at a Competive advanatge firm is first to get a product to the market

can be sued to review progress on indivuald tasks

156
Q

dis of critical path analysis

A

relies on estimates of how long each task will take

doesnt taKE INTO accoutn factors which could delay the porject e.g staff illness or weather

157
Q

capital employed formula

A

non curent liabitilies plus total equity

157
Q

Gearing ratio

A

non current libailties divided by capital employed times 100

158
Q

what does it mean if your highly gearged

A

gearing is above 50% shpwing more than half of businesses finance has came from bowwrinf such as loans, overdrafts

become vulnerable to changes in interest rates as will need to pay back in interest

159
Q

adv of being highly geared

A

extra funds for expansion-

160
Q

dis of being highly geared

A

might not be able to afford the repayments
might not make enough profit to pay back loan and interest
more likely to be affected by changes in interest rates

161
Q

adv of high gearing on investors

A

get paid interest on money they loaned

162
Q

ROCE ratio

A

return on capital employed ratio

operating profit divided by capital employed times 100

tells you how much money is made by firm compared to amount put into business

163
Q

roce

A

tells us what profit in comparion in how much we orginally invested

the larger the ROCE, the better

164
Q

labour prodcutivity

A

ouput per period divided by number of employees

165
Q

what may business do if labour prodcivty increases

A

reward employees with bonuses and pay rises

to keep motivational levels high

166
Q

what may business do if labour producity is reducing

A

might choose to retrain staff
offer bigger incentives
may offer reducnacies and replace workers with skilled labour

167
Q

labour tunover

A

measures proportion of staff who leave

number of staff levaing divided by number of staff employed

tthe higherthe labour turnover, the higher the amount of staff leaving
resraons may be due to reduced motivation, low wages, lack of opportunities for recruitment

168
Q

labour retention

A

ability to keep its employees

higher the labour tunover, the lower the labour retention

169
Q

abestteisom

A

proprotions of days missed by employees

170
Q

what may cause high rates of absentissm

A

high levels of stress which could lead to staff avoding work or becoming ill

low motivation so staff do not feel inclined to work

dangerous work whcih could lead to injuries

171
Q

what are ways business can do to increase labour producivityt and retention and reduce turnover and abseentism

A

finanical rewards as can imporve motivatinon, making staff want to stay at work

consulation strategies-using employees within the decision making process
taht way feel more valued and more likely to stay at work

empowerment strageies-giving workers more reposnbility and control over their work

172
Q

change in organisational size

A

adv-bigger business, more workers
mor workers, redeuced produciton time ‘economies of scale

however, if unable to manage increase in nuber of workers ], prodcuitvity to decrease
harder to communicate quickly and efficievetly slow communcation=appropriate action not being taken as staff are not informed of decisions in time

173
Q

decrease in organisational size

A

making staff redundant
acn achieve EOS , high unit cksts, charge higheer preices, reducion in comeptiveness

174
Q

changes in ownership

A
175
Q

poor business performance

A
176
Q

what is a transformational leader

A

owner or manger who makes large innovative chnages to a firm

often recurited when firm has had period of bad business perfromance

177
Q

what is change managment

A

process and procedures perfomed by manager to plan and prepare for changes

Culture and size

speed at whcih the chnage can happen

potential repistane of stakeholders to change

178
Q

scenrio planninng

A

where bsuiness considers specifc events that may happen in future and plan how to pperate them if event occurs
e.g specific natua=ral disatter

179
Q

dis of scenrio planning

A

time consuming and expesive, may need speicilait knowledg so firm may need to hire an expert with this knowledge

180
Q
A
180
Q

continutity planning

A

more general then scenrio planning
e.g planning place to locate if something goes wrong

181
Q

succession planning

A

planning for the loss ofa key member of staff

182
Q

dis of share cpaital

A

orginal owner no longer owns whole business
shareholders may expeect to gt share of profits in dividends

183
Q

adv of share capital

A

new shareholders can bring in extra expertise into a business

184
Q

venture capital

A

can be used as method of finance for buisness at high risk, but has potential to be successful

can be provided by business angels

dis-have to give up share of business and sometimes investors want big say

adv-money does not need ot be paird back
may benefit from expert advice that investors can offer

185
Q

unlimited liabiltit

A

they own all debts of business
e.g can lose personal assets such as house

186
Q

limited liability

A

only can lose what they invest in

187
Q

adv of limited liability

A

easier to persuade people to join firm as peole more willing to join firm where only at risking losing the amount they invested

can raise lots of finance via share capital

188
Q

business plan

A

outline of what business wants to achieve and how

consits of cash flow forecasts, staments of finanical postions, aims and objectives

189
Q

adv of business plans

A

potential investors can see done research so more likely to invest

cqn show how profitbale business expects to be

190
Q

cash flow forecasts

A

show cash inflows(recived by business)
cash outflows(what paid out by business)

191
Q

adv of cash flow forecasts

A

helps managers see when expecting to run out of cash so can provide loan in time

assures there is enough cash to payy suppliers and employees

192
Q

dis of cash flow forecasts

A

needs lots of experinvce and research into market

does not take into acccount changes in economy e.g interest rates

not good for dynamic amrkets as cash is consitly chnaging so hard to predict

193
Q

net cash flow

A

cash inflows-cash outflows

194
Q

closing balance

A

closing balance plus net cash flow

195
Q

sales forecasts

A

predict future sales volume and revue based on past sales data

196
Q

what does sales forceasts help make business decisons on

A

finance-

makreting

resoureces

197
Q

what are the 3 factors affecting sales forecsting

A

can be triky to make accurate sales forecast

consumer trends-demand could drop suddenly, some change more unexpedely then others

economica varibles e.g interest rates axchnage rates, infaltion etc

actions of comeptiors-if they decide to charge lower pirces or innovate new product

hard in dynamic markets when changes are consitnely being made

198
Q

sales volume

A

number of units sold in given time

199
Q

sales revneu

A

value of sales over given time

200
Q

sales revenue formula

A

selling price times sales volume

201
Q

fixed costs

A

cosyts which stay the same with output e.g rent, basic salaries

202
Q

variable costs

A

costs which cahnge with outout e.g wages, cost of raw materials

203
Q

total variable costs calcualtion

A

avergae varibale cisy times quanity demanded

204
Q

total costs fomrula

A

fixed costs plus variable costs

205
Q

what is profit

A

difference between revenue and costs
if rebveue is greater then costs=proft
when revenue below costs=loss

206
Q

break even point

A

level of sales business needs to make to cover its costs

at break even point total fixed costs plus total variable costs=total revenue

207
Q

break even analysis

A

tells them how much they need to sell to break even

208
Q

contibution per unit

A

selling price-variable cost per unit

209
Q

berak ven point fomrula

A

total fixed costs divided by contribution per unit

210
Q

margin of satefy

A

amount between the actual ouput and break even

211
Q

adv of break even anlaysis

A

easy to do

quick managers can see break even ouput and margin of sategy straight away so can quickly get into action
cutting costs to increase sales

help persude socures of finance to gove them money

212
Q

dis of break even analysis

A

assumes businesses sell all the products, without wastage

simple for singluar product hard tfor lots of difefrent porudcts

if data is inaccurate, then results will be wrong

213
Q

margin of sategy formula

A

acutal ouput-break even ouput

214
Q

budgets

A

finaical plan for future

215
Q

what are the 3 types of budgets

A

profit budget-uses income budget and minius expesnditure budget
to calcuate epected profit for that year

icome budget-forecast amount of money which will come into a business as revenue

expenditure budget-predicts what businesses total costs will be fore year

216
Q

adv of budgeting

A

van be motivating-employees hav target to work towrds

217
Q

stemtemnt of comprehensive incomste

A

shows how much money has been coming into the business adn how much has been going out over a period of tiem

218
Q

statemtns of finaical positions

A

lists of assets and liabilties

current asstes-assets that are liekly to be paid back in return for cash within accounting year

non current assets-assets that tend to not be exchanged for cash within accounting year

current liabilties-debts which are paid back within accounting year

non-current laibitlies-debts which tend to not be paid back within a year

219
Q

bad debts

A

when debt is not paid

220
Q

liquidity

A

how easily a asset can change into cash for buying things

cash is liquid
non-current assets are not liquid

221
Q

current ratio

A

current assets divided by current liabiltiies

222
Q

acid test ratio

A

current assets-inventory divided by current laibitlies

223
Q

working capital

A

amount of money business has for day to day spendig

current assets-current liabiltie s
working capitalcycle-legnth of time between buying raw materials and getting cash from sales of finaished good

224
Q

business failure

A

when cant cover its expenses

225
Q

internal finaical resaons why business may fail

A

poor efiifciency-unit costs too high so have to charge higher oruces

bad management of working capital-not having enough to pay for day to day running of business

bad decisionns about how a firm is finaned e.g too much reliability on overdrafs

PBB

226
Q

internal non finiacal factords

A

poor communcation means diffent departments are not working well together

ineeadapuet maket research and analysis means business fails to monitor changes in market

227
Q

external financial factors

A

econimic recession having less money to spedn

exchnage rates

228
Q

external non finaical factros

A

actiosn of comeptiors if competiors are able to offer cimialr products for lower pcies. they gain competive advanatge

chnage in consumer trends , lead to drop in demadn for prduct

poor comunnciation outside of business e.g losing suppliers etc

229
Q

job rpdocution

A

where skilled workers produce one off items

adv-people more willing to buy product which is unique/handmade
dis-have to pay high wages to staff
dis-cannot reach EOS as products ar different so materials cannot be brought in bulk

230
Q

flow production

A

producting identical products along an assembly line

adv-EOS as can buy products in bulk meaning can therefore reduce prices and gain comeptitive advnatge
adv-if use machines, can operate 24/7

dis-boring for workers
if issue with mahines, can stop whole production process
chage in demand may leev whole prodcution porcess shaving to stop

231
Q

batch prodcution

A

small bacthes of difefrent products
one batch sells one product then stops, equipment is cleaned ansd new batch is made

adv-may be able to stilla chiev EOS
dis-slow production down having to clean it throughout

232
Q

cell prodcution

A

flow is divided into sets of tasks

adv-all feel valued and involved /have more reposnibility
can work within a team
feel more pride for work, increase in quality levels

dis-producivity can be lower then flow as product is removed from the flow at each cell

233
Q

labour intesve firm

A

uses more workers rather then machinery

adv-muliskilledd so can quickly chnage and alter what they are doing wheras computer woild need to be fully repreogrammed

adv-solve any problems that arise

cheaper to pay low wages then buy expensive equipmen

dis-harder to mnage then machines
less reliabe can call of sick and need rest breaks

234
Q

capital intensive firm

A

uses more machinery rather then human workforce

adv-easier t manage/do not have emotions
adv-no chnace of human error/produce evrything at a good quality
adv-can operate 24/7

dis-inital prie is expensive
dis-if break down, stop all production process, loss of sales, reutaion damaged
dis-need reprogammering if they decide to alter their production

235
Q

under utilation

A

not using all reources e.g sfactory sapce

dis-demotivating for workers as do not have much to do
higher unit costs so have to charge higher prices
negative brand image e.g empty shelevs

236
Q

ways to deal with underultisation

A

rationlise-relocate to a smaller place

make some of their staff redundant

sell some assets which are not being used

cange its marketing stregty e.g promotions

237
Q

over utlsiation

A

e.g working over 100 percent e,g no downtime ‘‘dis-more lieklt yfor staff to make mistakes as lots of stress
no downtime
may have to turn away potenital customers

reduce life of machines, no tiem for equipment maintenance

238
Q

ways to cope with over utlisation

A

outsourcing work to other businesses

buy more machines

increase staff levels

increase their prices to reduce their demand

239
Q

stock

A

raw mateials needed for making a product

buffer stock

most bsuinesses try to minimise amount of stock held to reduce costs
flow production-need large stock of raw materials
batch-needs less
job production-NO STOCK

240
Q

adv of holding buffer stock

A

needed to avoid running out of stock
good for mass makret where need to be consistely meeting demand to be making as many sales as comeptitors

hoding large ampounts of buffer stock=reach EOS

241
Q

dis of hokding buffer stock

A

increased costs of storgae

not good if good is perishable/likely to go out of date as means can be wasted costs

242
Q

lean production

A

focuses on WASTE minimisation

using as few resources as possible

243
Q

JIT production

A

type of lean production emthod
where get the products just in tiem for when customer wants them

adv-saves csosts on storage and cash flow imporved as not tied up in stock
adv-less waste as less out of date goods lying aorund
adv-good for dynamic market where trends are consitnelty changing
dis-rely on lots of fewuent deliverys from suppliers?bad for enviroemnt
dis-if suppier is not reliable then could not get there in tiem, casuing loss of sales and reputation to be damaged

244
Q

adv and dis of total quality management

A

everything is based on immporving quality

adv-good brand image/boosts companys repuation
adv-can change higher prices
adv-help them bond as team
dis-can seem like a lot of effort for workers
dis-may require training/expensive to introduce

245
Q

quality circles

A

workers come together and discuss quality issues within business
adv-will ahev ltos of knwoledge on their department
adv-makes staff feel more valued,given more repsonsbility to make any inputs
dis-may know listen to floor workers
dis-suggestions may be unrelaistic/they dont have much experience

246
Q

kaizen approach

A

lean prodcution method
workers should be imporving there work slightly each time
instead of just making one off improvements
erduces wastes as employees constanetly tryign to find ways to be most efficient
chepa fpr business to introduce
makes wrokers feel more valued and involved in qaulity assurance
dis-not good for uragently imporvign qaulity as only imporves quality slightly over time so business has to be commited in long run

247
Q

quality assurance

A

workers checks product throughout production process

adv-feel more valued
adv-less waste
dis-not expertise so still chance faulty product could not b/checking throughtout can be highly motivating

248
Q

quality control dis

A

does not prevent waste

249
Q

interest rates

A

cots of borrowing or return on savings

high interest rates means borrowing is more expensive so people tend to have less disposbale income therfore tend to save rather then spend
hav to pay more money back in interest
not good for businesses whcih sell things which are often borrowed e.g car are more sentive to changes in interest rates

bank of england base rate infleunecs other banks interest rates

250
Q

inflation

A

increase in price of goods and services within an economy

demand pull inflation-where busienss demadn is so high that they cant supply quick enoigh, they increase their priecs toreduce their demandd

cost push inflation-where costs rise pushing up prices e.g wages increase

251
Q

what tracks inflation

A

consumer index complex

252
Q

what businesses are really highly affected by inflation

A

busienses which sell premimum goods as customers have less spend to spned so less liekly to spedn mony on luxury goods
could reduce their prices but then peoel may associate that as being woeerr quality (psychologuical)

253
Q

busines cyele

A

boom-GDP increased
recession-incomes start to go down, demand goes down, confiednc goes down
slump-GDP is at a low, close factories and ots of reducndancies
recovery, employkment increases again

254
Q

how does business cycle affect businesses

A

boom, increase their prices

recessiom. may make more staff redundant

255
Q

business legisaltion

A

all about laws

certain laws protect consumers adn customers

256
Q

what are the 3 discrimation laws businesses must obey too

A

recuritment-arent allowed to state in job adevrts that candiates must be a particualr age, rave, gender etc

pay-same pay for females and males for equal work value

promotions and reducndancies-everyone should have same opportunity to be promoted

257
Q

employment contract

A

sets out duties and right of both the empoyer and employee

entitled to paid hoiday
right to be paid maternity leave
have to attned work when there supposed to

258
Q

what are the 3 diffebt tyoes of compeitton

A

monopoly
opliogy
perfect

MOP

259
Q

monolpoly

A

where one large firm has all the control within the market
theres NO competition
can change any price

260
Q

perfect

A

lots of businesses compete at an equal basis
e.g sellign simailr products at simailr prices

261
Q

opligody

A

small number of large furms dominate the market

262
Q

mission satemnt

A

tekks yiu purpose of business

263
Q

adv of mission statemtns

A

gives staff sense of shared purpose/common goal

dis-dont have to proff what they put is correct so business can just put down what customers want to hear
however, if they realise actions dont reflect then repuation damaged and loss of sales

264
Q

cooperate obecjtives

A

objectives of business as a whole

265
Q

departmental obecjtives

A

more specifc aims of each department to reach cooperate objective
e.g manager of that department may figure out way for their department to help reach tha whole aimt

266
Q

SMART

A

specific
measurable
agreed
realsitic
time bound

267
Q

straties

A

plans for achieving obejctives

268
Q

ansoff matrix

A

makret penetration-increasing market share in existinf makret
e.g proming, changing pricing stregtu etc
adv-least risky

new product development-selling new products to existing market
see growth and want Competive advanateg

market development-selling existing prodycts to new market
may be by researchin into new segment in makret and how it can adpat its prodct or preomotion to reach aims

diversification-selling new products to new makret/most risky stratgy

269
Q

adv of ansoff matrix

A

allows managers to think about expected risk of going in a certaijn direction

dis-fails to show that diveristictio and makret devleopment tend to ahev significant change in day to day workings

270
Q

porters 3 generic strgeies

A

cost leadership-being the lowest lcosts of prodcution means can charge lower pcies, achiev EOS

differntiation-making prodcyts ahev unique attributes that consumer value over competiors t
that way gain USP

focus-whether niche amrket wants to decide to focus on minisming costs or making their prodcut more unique to allow them to charge high prices

271
Q

keys istincative model9three capbailties)

A

Archeticture-relationship a business has with its main stakeholders
Reputation-good custoemr severice/good wuality prodycts etc
Innovation-bringing in new inovative ideas to create USP

272
Q

appropriate and sustainable

A

appropriable-can be maintained for long time

sustainable-uable to copyright e.g trademakrs and patents

273
Q
A