Business Cycle Flashcards
What is the Business Cycle?
The Business Cycle refers to the phases of growth and change over the course of a business’s lifetime
How long can it take for a business to pass through the business cycle stages?
Some businesses take years, while others go through all the stages in a matter of months.
What are the four main phases of the business life cycle?
Establishment, Growth, Maturity, and Post Maturity.
What happens during the Maturity stage?
Sales and growth level off, often due to increased competition.
What happens during the Growth stage?
The business idea takes off and sales increase rapidly.
What happens during the Establishment stage?
The business idea is created and the business is born.
What key activities happen in the Establishment stage?
Developing a business plan, creating business aims, setting an organisational structure, and choosing a legal structure.
What are the possible outcomes during the Post Maturity stage?
Renewal, steady state, decline, or cessation, depending on management decisions.
What are the challenges in the Establishment stage?
Not enough funds, the need to establish a customer base, and high risk of failure
What are signs of Growth in a business?
Increased sales and more employees.
What is the main goal of a business during the Growth stage?
To increase sales and market share.
What is diversification in business growth?
When a business merges with or acquires another business that is unrelated to its activities.
What is a merger?
When two separate businesses combine resources and form a new organisation.
What is a takeover?
When one business takes control of another by purchasing a controlling interest.
What are challenges during the Growth stage?
Recruiting more staff, increasing sales, and developing new products.
What characterises the Maturity stage?
Fully exploited opportunities, slowed growth, and a focus on reducing costs.
What is the main goal during Maturity?
To maintain profits through efficiency.
What are challenges during the Maturity stage?
Managing declining growth, seeking new markets, and controlling costs.
What are the possible paths in the Post Maturity stage?
Renewal, steady state, decline, or cessation.
What is business decline?
Failing due to decreasing market share.
What is a steady state?
Maintaining a steady level of operations
What is business renewal?
A new growth phase using fresh ideas or innovation
What are challenges in the Post Maturity stage?
Poor management, lack of technical expertise, and natural disasters.
What are common reasons for business failure?
Lack of management expertise and undercapitalisation.
What is cessation in business?
Closing the business permanently.
What is voluntary cessation?
Closing the business by choice, such as due to retirement, death, or failure.
What is involuntary cessation?
Forced closure, usually by court order, affecting all stakeholders.
What is bankruptcy?
A declaration that a business or person cannot pay their debts.
What are the two types of bankruptcy?
Voluntary and involuntary.
What happens to assets during bankruptcy?
Business and personal assets are sold to pay creditors, a process called realisation.
What is voluntary administration?
When an independent person is appointed to control a business and its financial affairs.
Who usually goes into voluntary administration?
Companies.
When does liquidation occur?
When a business is insolvent (unable to pay long-term debts).
What is liquidation?
The process of appointing someone to sell a company’s assets to pay creditors.
What is receivership?
A process where a receiver is appointed by creditors or courts to take charge of a business’s affairs.
Who is usually appointed during voluntary administration?
An administrator, often an accountant.
Who appoints a receiver?
Creditors or courts.
Can a company be in both liquidation and receivership?
Yes
