Business Activity Flashcards
What is a business?
any organisation that works to fulfil a common purpose.
Explain the term SME
Small to Medium sized Enterprise.
In the UK a company is defined as being an SME if it meets two out of three criteria:
> it has a turnover of less than £25m
> it has fewer than 250 employees
> it has gross assets of less than £12.5m.
In the UK 99.3% of UK businesses are defined as SME’s.
What four key areas can Business Activity be separated into?
- Business resources (the four factors of production)
- Business functions (the different departments within a business)
- External influences
- Output (the good, services and waste produced by the business)
What is meant by Business Resources?
All business will need to use the four factors of production in their business operations.
These factors are the inputs of a business and are combined to produce goods and services, or in other words the business outputs.
There are 4 factors in Business Resources: Land, Labour, Capital and Enterprise.
What are the factors of Business Resources?
Hint: there 4 of them
> Land
> Labour
> Capital
> Enterprise
Explain what is mean by LAND as one of the factors for Business Resources.
Often described as the free gifts of nature, includes physical land and other natural resources, e.g. oil, minerals, coal, forests, and fish.
Business activity uses both resources:
> renewable - a natural resource that can be used and then replaced for other people to enjoy is called a renewable resource.
> non-renewable resource - is in limited supply and cannot be replaced once it has been extracted and used.
Providers of LAND receive rent.
Explain what is mean by LABOUR as one of the factors for Business Resources.
Refers to physical and mental effort involved in the production of goods and services - It is the workforce of the business.
Manual workers, skilled workers and management are all members of the workforce.
LABOUR includes the skills of those who work as well as the quantity of people who work or who are available for work.
It is possible to improve the quality of human resources through training and education.
The payment for LABOUR is wages.
Explain what is mean by CAPITAL as one of the factors for Business Resources.
Exists at 2 levels:
> Financial capital - which is the money invested into a business which can be used to purchase physical capital.
> Physical capital consists of machinery, computers, equipment, tools, etc.
Providers of CAPITAL receive interest.
Explain what is mean by ENTERPRISE as one of the factors for Business Resources.
The ability to combine the other factors of production and to then use them to provide, profitably, goods and services is known as enterprise.
Entrepreneurs are the risk takers that set up and run business enterprises.
The return on ENTERPRISE is profit.
What is meant by Business functions (the different departments within a business)?
Many firms are organised into different departments based on what they do, or in other words their function.
Separating a business into these functional areas helps with communication and sets out the roles and responsibilities of each department.
Although these functional areas are all separate, their roles are all connected.
