Business In The Real World Flashcards
Equation for Revenue
Price x Quantity sold
Equation for Profit or Loss
Total Revenue - Total Cost
Primary Sector
Industry involved in Raw Materials
Secondary Sector
Involved in using the raw materials to convert them to products
Tertiary Sector
Organisations that provide services-FAST FOOD RESTAURANT
4 Factors Of Production
Land
Labour
Enterprise
Capital
External Influences of a Business (name 3)
Social(age changes,family size)
Economic(interest rate,inflation)
Environmental(ethical)
Limited Liability
Owner/Shareholders have a separate identity from their business. Not responsible if anything happens to the business
Unlimited Liability
Shareholder are legally tied to the business
Main Business Objectives
Survive Profit Shareholder value Satisfaction Market Share
Dividends
Sum of money paid by a company to it’s shareholders
Impacts Of Business Location
Raw Materials. Employment. Competitors. Infrastructure Proximity Finance
Internal Growth
Occurs when a business get bigger by selling more products
External Growth
Occurs when a business gets bigger by joining or buying another business
Market capitalisation
Measures value of all the companies shares
Market price of share x number of shares
Franchise
Occurs when a franchisor sells the rights to a franchisee in return of fee and percentage of profits
Franchisee
Buys a franchise usually for a fee and a turnover
Franchisor
Sells a franchise in return of fee and a turnover
E-Commerce
Is the act of buying or selling a product using an electronic system such as the internet
Outsourcing
Occurs when a business uses another business to produce for it
Merger
Occurs when two or more businesses join together to form a new business
Takeover
Occurs when one business buys control of another
Economies of scale
Occur when a business’s unit cost of production falls as it’s output rises and the business expands
Diseconomies of scale
Occur when the cost per unit increases as a business expands
Examples of economies of scale
Bulk buying
Marketing
Advertisment
Examples of diseconomies of scale
Poor communication
Poor coordination
Poor cooperation
Backwards intergration
Moving further from customer
Forwards intergration
Closer to customer
Horizontal Intergration
Horizontal integration is when two companies at the same stage of the production process merge or take over each other.
Conglomerate intergration
Operating in a completely different industry
Offshore
Setting up a business in another country
Reshoring
Returning a company to the original country
Goods
A physical product
Service
Intangible product provided by someone
Customer
Someone who buys a product from a business
Consumer
Is someone who uses good and services provided by a business
Entrepreneur
Someone who is willing to take risks to start a new business
Enterprise
Refers to a business of organisation. Can also mean someone who takes advantage of new business opportunities
Resources
Inputs in a business that are used to provide a good or service
Interest
Reward for Saving and the Cost of Spending
Interest rates
Refers to the cost of borrowing money
Inflation
Refers to the rate at which prices are increasing
Sole trader
Is someone who sets up a business on their own
Advantages of being a sole trader
. Quick and easy to set up
. Make decisions for yourself
. Keep or decide what happens to all profits generated
Disadvantages of being a sole trader
It can be stressful making all decisions yourself
-A sole trader needs to handle all aspects of the business
If the business goes wrong you have unlimited liability meaning you and your business are legally tied.
Profit
The sum of money left from total revenue when total costs are paid
Partership
Occurs when two or more people join together in a business enterprise to pursue profit
Deed of partnership
Is an agreement between partners that sets out the rules of the partnership, such as how profit will be divided and how the partnership will be valued if someone wants to leave
Private Limited Companies (Ltd)
Firms where shares are private. Shares/Ownership can only be sold if all shareholders agree
Public Limited Companies (PLC)
Firms where shares and ownership can be sold and bought by anyone. PLCs shares are available on the stock market
Advantages of Ltd
.limited Liability
.incorporated
.easier to get loans or mortgage
.owners have a lot of control over how business is managed
Disadvantages of ltd
.more expensive to set up
.lots of legal paperwork
.legally obliged to publish its accounts every year
Advantages of PLC
.much more capital can be raised by plc than any other business
.shares allow to expand and diversify the company
.limited liability and incorporation
Disadvantages of PLC
.hard to get many shareholders to agree on how business is run
.easy for someone to buy enough shares to take over the company
.accounts have to be made public so competitors see if the business is struggling
.more shareholders means theres more demand for dividend payments
Non-profit-organisation
These are firms whose goals are not solely for profit but to give back to the community
Social Enterprise
Firms that make money by selling products and its aims are to use profits to benefit society
Stakeholders
Anyone who is affected by a business’ decisions
Who are the stakeholders
Owners- benefit from profit,high dividends and high share price
Employees- benefit from profitability,growth and ethics
Supplier-benefits from profitability and growth
Local Community-profit from environmental impacts,ethical considerations,profitability and growth
Government- benefit from profitability,growth and job creation
Customers-benefit from customer satisfaction
What does a business plan do
Gives the business a clear idea of what they are going to need to do to be successful
Sections of a business plan
Personal Details Mission Statement Objectives Product description Product details Staffing requirements Finance
What is the location of a business influenced by
Raw materials Labour Supply Competition Location of the market Cost
Types of economies of scale
Purchasing Economies of Scale
Technical Economies of scale
Methods of organic growth
E-commerce
Opening New Stores
Outsourcing
Qualities of an entrepreneur
Hardworking
Organised
Innovative
Willingness to take risk
