Business In Real World Flashcards

Question

Advanatges of partnerships

Answer 1

• Easy to set up • Capital needed is small • Easier to raise extra capital than a sole trader as there are more partners to invest • Profits go to partners which means motivated workers

Answer 2

• Partnerships have unlimited liability • Trust and reliability can be an issue • Partners can have disagreements;

Answer 3

Shares cannot be bought by the public, the share issue is limited (hence the ltd) to friends and family who can buy shares in the business • Owners control who buys the shares • Minimum 2 people – no maximum • Expand by selling more shares, giving the business more capital • Limited liability, t

Answer 4

• Protection of limited liability for investors, they cannot lose their own assets on the value of the investment • Easy to raise capital – issue more shares to friends and family • Banks more willing to lend money to a ltd company than a sole trader

Answer 5

• Business has to issue more information about itself which can be expensive to produce • Business has to prepare Annual Accounts and have these printed and sent to all shareholders

Answer 6

• Shares can be bought and sold by anyone on the Stock Exchange • Can expand by selling more shares • Limited liability • Company has its own legal status • Normally start as LTD then become PLC • Normally very large businesses

Answer 7

• Protection of limited liability for owners and investors • Easy to raise capital – issue more shares • Banks more willing to lend money to a large well-established company – less risk

Answer 8

• Expensive to produce accounts every year • Has to publish annual accounts which means the public and competitors can see all their financial information • Expensive process to become a plc

Answer 9

• A not-for-profit organisation is one that has the objective of something other than making a profit (but it still might make a profit) • They are dedicated to a social cause -limited liability

Answer 10

The objective is to reach a sustainable level of sales that allows the business to reach its break-even point

Answer 11

Profit is total revenue (revenue into a business) minus total costs (costs out of a business) • A business will aim to maximise profit, they must do this therefore in only two ways: – Increase revenue into the business – Reduce costs out of the business

Answer 12

The business may wish to increase the number of shops or outlets that they have in the UK (this is the domestic or home market) • The business may wish to expand into other countries, for example Europe (this is the international market)

Answer 13

A business may aim to increase their market share. This is the percentage of sales held by a business in a market. • They will have to take sales away from competitors to achieve this aim

Answer 14

• Social enterprises are businesses trading for social or environmental purposes

Answer 15

• Ethics is the principal of knowing right decisions from wrong ones in business • Having ethical objectives is expensive and will cost the business money

Answer 16

• Shareholder value is; where shareholders, in a business, earn a return from their investment which is greater than their required rate of return

Answer 17

• A stakeholder is defined as anyone who has an interest in a business and is affected by the actions of the business

Answer 18

Role; to start and run a business to make a profit • Objectives; to get a good return on any money they have invested in the business • To make a profit • To survive

Answer 19

• Role; to work in a business in return for wages • Objectives; To have job satisfaction, to have job security so they can pay their bills, to get promoted

Answer 20

• Role; to buy goods or services from the business • Objectives; to get a good choice of goods or services, to get value for money, to get quality products at low prices, to have the opportunity to buy innovative products

Answer 21

• Role; For those who live near a business who may be affected by its operations • Objectives; They want the business to provide jobs, they want the business to operate in an ethical way, they may also want them to buy from local suppliers and to not pollute the local atmosphere

Answer 22

Role; to provide the business with goods or services that they might need • Objectives; they want to charge high prices to make a profit, they want customer loyalty with repeat orders, they also want payment on time, they may also want larger orders

Answer 23

The size of business- smaller business are focused on survival and growth rather than increasing market share. Larger businesses get greater attention from public so may want to act ethically by protecting environment for a good reputation. The level pf competition a business faces- if business is highly competitive it may want to win customer satisfaction so can win customers. If firm dosen't have much competition it objective may be growth and maximisation of profits. The type of business- not for profit businesses may focus on social or ethical objectives rather than growth

Answer 24

-owners make Descisions in a firm,so there most influential stakeholders - however they need to consider interest of other stake holders when setting objectives. - often stakeholders will have conflicting opinion about objectives - firm may want to ignore the opinions but will need to take account of other stakeholders if want to survive such as: No business can ignore its customers. If it cant sell products it wont survive. If business dosen't have happy workers it will be unproductive

Answer 25

Revenue = sales x price

Answer 26

- fixed costs don't vary with output. They have to be paid even if firm produces nothing. E.g rent,insurance -variable costs are that will increase as the firm expands output. E.g factory labour, raw materials Total costs= variable costs + fixed costs

Answer 27

-average unit costs is how much each product costs to make -to make profit a firm must charge a higher price Average unit cost= total cost/output

Answer 28

Profit=revenue-costs

Answer 29

-to help set up a new business- will help an entrepreneur decides what resource they need to start there business such as human resources,equipment,raw materials and technology To help the business raise finance Help the business to set objective-aims to achieve it goals. Should set targets and objectives that can be followed for the business To outline how functions of the business will be organised.

Answer 30

Section1-goals (short term and long term and Unique selling point) Section 2-pricing Section 3-knowing your market Section 4-customers Section5-competitors ( need to know how to be better than competitors such as pricing,product and availability) Section 6-location Section 7- promotion Section 8- finance

Answer 31

• A business plan will help the business owner to define their business idea • It will help them to plan for the future • It will also help to show if the idea is realistic and workable

Answer 32

It is key to attract funding, and will be needed when applying for lending (from a bank) • Businesses are in dynamic markets, and demand and supply can change on a daily basis, a business plan is a rigid and fixed document which may not take these changes into account

Answer 33

1) Gross profit Gross profit (GP) is sales revenue (SR) minus variable costs (VC) 2) Net profit Net profit (NP) is sales revenue (SR) minus fixed (FC) AND variable costs (VC)

Answer 34

• Some businesses may decide to open in a certain location because they have been given a government grant • Government grants do not need to be paid back, they are given to businesses to encourage them to set up in areas which have high unemployment

Answer 35

-labour factors-adequate supply of cheap and skilled labour is necessary for businesses. Some businesses may move to areas of high unemployment so there is a large pool of applicants for job. Also may decide to set up near a cluster of other similar businesses or closed to skilled staff. Proximity to market-– bulky or perishable goods manufacturers need to be close to their customers as the goods cannot be transported long distances. Location close to customer traffic is important as it is good for the customers (convenience) and good for the business as it may need more sales. Proximity to competitors- will draw customer to a certain area if they don't find the product they are looking for.

Answer 36

Franchising- is where a company expands by giving other firms the rights to sell it products in return for a fee or a percentage of the profits. Product manufacturers are known as franchisors selling product to franchisees. Opening new stores E-commerce- lots of people can buy products from the firm even if not near shop so can access greater market. It's cheaper than setting up and running a new store-no rent or hiring staff. Outsourcing- business could pay another firm to carry out tasks for the. Outsourcing firm may be able to do tasks more quickly,cheaply or to higher standard.

Answer 37

a) A business that grows from within can retain their own company culture b) Higher production means the business can benefit from economies of scale and lower average costs c) Much cheaper than a merger d) Less risk, slower growth, known business model

Answer 38

a) This is a very high risk strategy, opening lots of stores or taking on new staff is very risky b) Long period between investment and return on investment c) Growth may be limited and is dependent on reliability of sales forecasts

Answer 39

Merger-two businesses merge to become one new one Takeover-One business will takeover a another business (by buying more than 50% of the shares), sometimes this can be hostile if the shareholders don’t agree

Answer 40

-economies of scales -increased revenue and market share -buying technology -international expansion

Answer 41

-clash of cultures -possible communication problems -diseconomies of scales

Answer 42

-being larger means than an average unit cost of each product falls and reduction in cost. Purchasing economies of scale- when a large firm buys its supplies in bulk and so gets them at a cheaper price than a small firm. Technical economies of scale- these occur because a large firm can afford to buy and operate more advanced machinery than smaller firms -as average unit cost of making each product is lower firms can make more profit on each item they sell.

Answer 43

-bigger the firm, the harder and more expensive is to manage properly - big firms have more people so can be harder to communicate with company. Decision take time to reach bottom of hierarchy leading to demotivation and lack of productivity.