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Economics > business Topic 1 (chapter 1-4) > Flashcards

business Topic 1 (chapter 1-4) Flashcards

1
Q

business

A

organisation that produce and sell products to satisfy individuals’ needs and wants for a profit

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2
Q

production

A

combination of resources to create products that satisfy customers’ needs and wants by business

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3
Q

8 roles of business QPEEIIWC

A
  1. quality of life (improve standard of living)
  2. profit (reward)
  3. employment
  4. incomes
  5. choice
  6. innovation (existing products improved, new products created)
  7. entrepreneurship & risk
  8. wealth
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4
Q

profit

A

remaining income after all expenses deducted from revenue

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5
Q

revenue

A

money businesses receive as payment for its products

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6
Q

income

A

money received by person for providing labour

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7
Q

wage

A

money received by workers on an hrly basis for services they provide to employer

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8
Q

salary

A

fixed regular payment on fortnightly/monthly basis

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9
Q

shareholders

A

part owners of a company because they own a number of shares
-owners of private/public companies

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10
Q

dividend

A

distribution of company’s profits (yrly/half-yrly) to shareholders, calculated a no. cents/share

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11
Q

choice

A

act of selecting among alternatives

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12
Q

innovation

A

creating new product, service, process/ improving existing one

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13
Q

entrepreneurship

A

ability & willingness to start, operate and assume risk of a business venture to make profit
-entrepreneur: someone who starts…

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14
Q

risk

A

possibility of loss

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15
Q

distribution of wealth created by business (SIGEL)

A
  1. Shareholders/bus. owners (dividends/profits)
  2. business Itself ( retained profits)
  3. governments (taxes)
  4. employees (salary, wage)
  5. lenders (loan repayments)
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16
Q

quality of life

A

overall wellbeing of individual, combination of material & non-material benefits

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17
Q

4 methods to classify business (GILS)

A

Geographical spread
Industry sector
Legal structure
Size

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18
Q

businesses in legal structure

A

GVT enterprise
public/private company

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19
Q

businesses in size (5, 20, 200) 10 mill

A

SME (small to medium enterprises): <200 full time employees/<$10 mill turnover
small: 5-19
medium: 20-199
large: 200/+

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20
Q

industry sector businesses PSTQQ

A

quinary
quaternary
tertiary
secondary
primary

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21
Q

geographical spread of diff business sizes

A

transnational corporations (TNCs)
local: restricted geographical spread
national

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22
Q

5 main industry sectors PSTQQ

A

Primary
Secondary
Tertiary
Quaternary
Quinary

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23
Q

industry

A

businesses involved in similar types of production

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24
Q

primary industry

A

businesses involved in collection of natural resources

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25
Q

secondary industry

A

businesses take raw material –> finished/semi-finished product

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26
Q

tertiary industry

A

people performing vast range of SERVICES to others

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27
Q

quaternary industry

A

services involve TRANSFER/processing of info and KNOWLEDGE (property, finance, education)

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28
Q

quinary industry 2

A

services traditionally performed in home (tourism, childcare)
paid/unpaid work

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29
Q

incorporated

A

process companies undergo to become separate legal entity from owner/s
regardless of what happens to shareholders, business continues operating

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30
Q

4 main legal structures of privately owned businesses SP, C(PP)

A

Sole trader, partnership (UNincorporated)
company - private/public (INcorporated)

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31
Q

sole trader

A

business owned & operated by 1 peep
provides all finance, makes decision, takes responsibility for business operations

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32
Q

partnership?

A

legal business structure owned & operated by 2-20 ppl to main profit

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33
Q

limited liability?

A

legal structure limits each owner’s financial liability to a fixed sum, most commonly amt person’s investment in a corporation

most money shareholder can lose is amt. they paid for shares

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34
Q

private company

A

incorporated business, usually 2-50 private shareholders

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35
Q

GVT enterprises or GBE?

A

GVT owned & operated businesses
aim increase value of their assets & returns shareholder (GVT)
owned & operated by all GVT levels (federal, state, local)

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36
Q

privatisation ?

A

transferring ownership of GVT business to private sector

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37
Q

3 most important factors that influence business owner upon legal structure choice (SOF)

A

size of business
ownership
finances

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38
Q

size (choice of legal structure)

A

as businesses expand, may wish to seek protection of LIMITED LIABILITY (choose private company)

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39
Q

ownership in choice of legal structure

A
  • if owner wants complete control & ownership of business, sole trader
    -share ownership –> partnership
    -**private company **offers protection of limited liability (control who can become shareholder, usually only 50)
    -degree of ownership directly related to no. shares owned (more shares more ownership, over 50% for owner to retain ownership of business)
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40
Q

finance (choice of legal structure)

A

-business expands requires injections of finance to purchase new equip, open new outlets, hire more staff, etc
-esp hard or sole traders/partnerships to obtain adequate finance (exposure to risk, unlimited liability)

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41
Q

business environmeny

A

surrounding conditions business operates

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42
Q

external environment FGSPLITECM

A

factors business has very lil control
economic
financial
geographic
social
legal
political
institutional
technological
competitive situation
markets

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43
Q

internal environment PLRMB

A

factors business some degree of control
products
location
resources
management
business culture

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44
Q

business cycles (ECONOMIC influence)

A

periods of growth (boom) and recession (bust) occur resulting from fluctuations in general lvl of eco activity

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45
Q

5 expansion key features
(consumer spending, bsuiness expectations, business investment, sales/profits, unemployment)

A

INCREASE consumer spending
business expectations increasingly OPTIMISTIC
INCREASING business investment
sales and profits RISING
unemployment FALLING

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46
Q

contraction key features
(consumer spending, business expectations, business investment, sales/profits, unemployment)

A

DECREASING consumer spending
business expectations increasingly PESSIMISTIC
DECREASING business investment
sales and profits FALLING
unemployment RISING

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47
Q

PEAKS four key features
(wages & salaries, business operating capacity, sales & profits), level of unemployment

A

wages and salaries at HIGH levels
business operating at FULL capacity
sales and profits HIGHEST levels
LOW level of unemployment

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48
Q

TROUGHS key features
(wages & salaries, business operating capacity, sales & profits), consumer spending level of unemployment

A

wages and salaries at LOW levels
business operating BELOW full capacity
sales and profits LOWEST levels
consumer spending LOWEST levels
HIGH level of unemployment

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49
Q

deregulation (FINANCIAL influence)

A

removal of GVT regulation from industry to increase efficiency & improve competition

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50
Q

how does GEOGRAPHY influences businesses? (LPDW)

A

LOCATION
-AUS businesses benefit from rapid eco growth in asian nations past decades, high profit (opportunity advantage for trade &expansion in asia-pacific region)

POPULATION GROWTH
-growing pop. benefits most by expanding potential market

DEMOGRAPHIC CHANGES
-characteristics of pop (age structure, cultural composition changes types of g&s demanded)

WEATHER/CLIMATE
- weather shortly impact revenue of businesses
-climate changes are long term in g&s demanded

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51
Q

FINANCIAL influences IDLE

A

interest rates, lending policies, deregulation, exchange rates

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52
Q

how do interest rates influence businesses?

A
  • RISE –> repayments on BORROWING more EXPENSIVE –> less likely to use debt to finance expansion
  • LOW –> encourage bus. BORROW funds for growth (apply for loan, banks assess potential to pay back debt)
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53
Q

how do LENDING POLICIES influence businesses?

A

depending on eco conditions, RISK (GVT policies, credit policies of banks & other lenders may be strict)

54
Q

how does DEREGULATION influence businesses?

A

businesses explore borrowing options outside major banks (more competition in FINANCE sector & choice for potential borrowers

55
Q

how do EXCHANGE RATES influence businesses?

A

AUD appreciates (3)
-repayments on foreign loans fall
-imports cheaper
-exports expensive (hurt AUS exporters)

AUD depreciates
-foreign loan repayments higher
-imports more expensive
-exports cheaper (benefit exporters)

56
Q

what are the TECH influences in busniess 2 benefits, 2

A

opportunities to innovate g&s & make processes efficient (speed,cost)
high financial costs, risk of blitches/breakdown

57
Q

what are the 4 key tech influences OMFH

A

Operations
-improve speed & accuracy of production processes, saving costs over time (reduce labour demand)

Finance
-make financial reports quicker to produce, accessible

Marketing
businesses connect with customers online (promote products, sell g&s, conduct research, receive feedback)

Human resources
allow employees work from home, speed up processes (payroll, leave applications)

58
Q

what are INTERNAL influences PLRMC

A

Products
Location
Resources
Management
business Culture (corporate culture)

59
Q

4 benefits of good corporate culture

A
  1. higher productivity
    2.willing to embrace change
  2. lower absenteeism & staff turnover
  3. project positive image to customers
60
Q

what are stakeholders

A

person/group/organisation with interest/stake in decision making & activities of business

61
Q

what are some stakeholders (6)
SCEEMS

A
  1. society
  2. customers
  3. environment
  4. employees
  5. managers
  6. shareholders
62
Q

what are the 4 stages of the business life cycle? EGMP

A
  1. Establishment
  2. Growth
    mergers & acquisitions
  3. Maturity
  4. Post-Maturity
    -renewal
    -steady state
    -decline
63
Q

what is a merger?

A

business deal where 2 separate companies combine to form a new organisation

-business surnames combine

64
Q

what is an ACQUISITION/takevoer

A

transaction where one company purchases and gains control over another

-a business makes offer to buy, owners of smaller leave and give all resources
-smaller business surname replaced by bigger

65
Q

what are the 3 types of mergers & acquisitions? VIHID

A

Vertical integration
horizontal integration
diversification

66
Q

what is vertical integration

A

business expands by taking interest in DIFFERENT but RELATED levels of production & marketing of product

eg. abattoir (slaughter animals to eat) merges with cattle farm (supplier of inputs) and/or butchery (distributor of output)

67
Q

what is horizontal integration

A

business acquires/merges with another firm makes/sells SIMILAR products

eg. abattoir merges with another abattoir

68
Q

what is diversification

A

business acquires/merges with business in UNRELATED industry

eg. abattoir purchases sports retailer

69
Q

2 key features establishment stage

A

business needs** solid foundation**

enough sales to generate income to pay expenses and generate positive CASH FLOW

70
Q

cash flow

A

money COMING into business in cash RECEIPTS and

money LEAVING business as cash PAYMENTS

71
Q

MATURITY stage risks

A

biggest RISK is COMPLACENCY! too comfy!
-sales during GROWTH may give owners false SECURITY
-may lose dynamism from early success (slowdown in sales, esp with high competition)

72
Q

maturity stage strategies

A

maintain high lvls CUSTOMER SERVICE

more efficient ways of OPERATING (service speed, reduce costs)

plan RENEWAL stage (introduce new products/services)

73
Q

4 features of ESTABLISHMENT stage

A

-many decisions,
-large start up costs,
-customer base needs building
-generate INCOME on BUDGET

74
Q

4 GROWTH stage features

A
  • spend money to make more later
  • new products/open outlets
  • balance between attracting new customers and retain existing
  • AVOID cash flow problems
75
Q

POST MATURITY stage

A

STEADY State: continues operate same level as maturity phase

DECLINE: falling sales and profits –> business fails

RENEWAL: increase sales & profits, new growth

76
Q

capital

A
  1. funds available for business to use (start-up, expand, new equip) common def
  2. funds contributed to business by owners
  3. factories, machinery, equip owned by business used in production (CAPITAL EQUIPMENT)
77
Q

cash flow

A

money coming into business in receipts
and
money leaving business in payments

78
Q

fixed costs

A

costs dont change with business’ level of production
eg rent

79
Q

variable costs plus examples

A

go up & down as business changed level of output
(wage, stock, bills)

80
Q

market niche

A

small target market

81
Q

economics of scale (factories spread to make larger volumes)

A

cost advantages when increaseing production of product

toyota produce more cars increase variable costs (steel, wages)

fixed costs (factories, machinery) REMAINS SAME

hence average cost of producing 1 car decreases (fixed costs spread over larger volume of output)

82
Q

delegation

A

managers/owners handing specific tasks/responsibilities to employees

83
Q

specialisation

A

employee focuses on production of limited scope of goods to gain greater degree of efficiency

highly specialised same thing over and over

different tasks not highly specialised

84
Q

2 product influences on businesses

A
  1. range, types of g&s for expansion
  2. some g&s require extensive preparation, some merely delivers
85
Q

what is a business’ size based on?3

A
  1. range & type of g&s produced
  2. lvl of tech used
  3. volume of g&s produced
86
Q

inflenced of location on business

A

affects total sales, how expensive to run
locating next to complementary businesses (sells similar range of g&s)

87
Q

factors to consider when choosing location CSVC

A
  1. proximity to customers,
  2. visibility
    3.proximity to suppliers
  3. cost
88
Q

RESOURCE influences on business HIPF

A
  1. human (employees, most important asset)
  2. information (knowledge, data eg. sales reports, market research)
  3. physical (equip, machinery, raw materials)
  4. financial (funds business uses to meet obligations to various creditors)
89
Q

management style influenced by PENT

A

preference of manager

experience of employees (skills, values)

Time & other restraints eg. resources

Nature of tasks

90
Q

corporate culture

A

values, ideas, expectations, beliefs shared by members of organisation

91
Q

why do shareholders have a direct influence on a business

A

they have voting rights on major business decisions and companies need to maximise returns on shareholder’s investments

92
Q

main challenge in establishment stage

A

get business on solid foundation by generating enough sales to create positive cash flow (detailed planning!)

93
Q

what is the meaning of small businesses (sole trader/partnership) having unlimited liability?

A

owner personally responsible for all debts of business

94
Q

what happens during growth stage SCNC

A

increased sales
regular customer base
develop new products
improves cash flow

95
Q

What is an early warning sign of possible decline in maturity stage

A

rate of growth slows/eventually flattens

96
Q

reasons for business decline PLGCC

A

inadequate planning
poor location
uncontrolled growth
ignorance of competition
increased competition

ASIC: 3 main reasons
inadequate cash flow/high cash use
trading losses
poor strategic management

97
Q

2 MAIN Causes of bus decline/possible failure

A

lack of management expertise
undercapitalisation
when company doesnt have enough capital to conduct ordinary business operations

98
Q

voluntary cessation

A

owner ceases to operate business of own accord

99
Q

involuntary cessation

A

owner forced to cease trading by creditors of business

100
Q

what happens when sole traders/partnerships voluntarily/involuntarily go into bankruptcy?

A

business/person unable to pay their debts

101
Q

2 options company has facing financial difficulties

A

voluntary administration & voluntary/involuntary liquidationl

102
Q

voluntary administration

A

independent administrator is appointed to operate business hope trading out present financial problems

103
Q

voluntary/involuntary liquidation (voluntary own accord, involuntary forced by others)

A

process of appointed liquidator converting business’ assets to cash

104
Q

why does liquidation occur

A

company is insolvent

105
Q

creditos

A

ppol/businesses owed money and force involuntary cessation

106
Q

bankruptcy

A

declaration that business/person unable to pay debts

voluntary/involuntary

107
Q

realisation

A

converting assets of business into cash

108
Q

administrator’s main tasks

A
  1. bring business and its creditors together
  2. examine financial affairs of business
109
Q

liquidation

A

when independent, qualified person (liquidator) appointed to take contrl of business with intention of selling all company’s assets in orderly, fair way to pay creditors

110
Q

three main features of liquidation BLI

A

can be regarded as equivalent of bankruptcy for company (corp)

results in life of company ending

occurs bc company unable to pay debts when due, became INSOLVENT

111
Q

insolvent

A

company isnt able to pay debts when due

112
Q

what are the4 main legal structures of privately owned businesses?

A

sole traders, partnerships, public/private companies

113
Q

are all companies in/unincorporated?

A

incorporated

114
Q

are sole traders/partnerships un/incorporated?

A

unicorporated

115
Q

advantages of being a sole trader

A

complete control
owner’s right to keep all profits
no tax on business profits + less gvt regulation

116
Q

4 sole trader disadvantages

A

unlimited liability for business debts
carry all losses
difficulty raising finance for expansion
burden of management/wide variety of tasks

117
Q

4 advantages of partnership STC

A

shared responsibility and workload
no taxes on business profits/minimal gvt regulation
less costly than company

118
Q

3 disadvantages of partnership

A

unlimited liability (all debts, including partners)

divided loyalty and authority/difficulty finding suitable partner

119
Q

4 advantages of company

A

easier to attract public finance
greater spread of risk
limited liability (separate legal entity)
company tax rate < personal income tax rate

120
Q

3 disadvantages of company

A

double taxation (company&personal)
public disclosure (reported info)
if directors knew business couldnt pay loans, personal liability

121
Q

3 requirements of public company

A

at least one shareholder
ltd (limited) in name
publish audited financial reports annually

122
Q

globalisation

A

process which world becoming increasingly interconnected due to massively increased trade & cultural exchange

123
Q

what does globalisation involve?

A

reducing barriers limiting free movement of business / trade/ investment/ labour across national borders

124
Q

4 globalisation impact on businesses

A
  1. increased competition
    - consumers multitude of choice in market
    -need continous product improvement to remain competitive
  2. expanded markets
    -internet/technology helps growth
  3. greater customer expectations
    -meet needs of quality, service, price
  4. economies of scale
    when production increased, fixed costs can spread over greater volume of sales –> firms lower costs –> improve efficiency, raise profits –> more competitive
125
Q

why are social influences important (external)

A

**rapid identification & response to changes in tastes, fashions, culture –> sales & profit opportunities –> business growth

otherwise threatens business stability & viability

126
Q

3 social influences

A
  1. environmental sustainability
    operations should consume resources without compromising access for future gens
    rewarded by products being purchased
  2. growing desire for business to provide family-friendly workplaces
    flexible hrs,
  3. growing belief business must cater for workplace diversity
    fair & equitable –> attract & retain staff
127
Q

legal influences on businesses THEEAI

A

laws on taxation
industrial relations
work healthy & safety
equal employment opportunity
anti-discrimination
environmental protection

128
Q

political influences on business

A

from state/federal gvt policies
;abour market reforms (free trade policies)

social reforms (paid parental leave)

environmental management

taxation (GST)

129
Q

factors influencing business’ competitiveness

A

aims to achieve sustainable competitive advantage (strategies to ensure ‘edge’ over
comeptitors for long period)

  1. no. competitors (market concentration) in certain market
  2. ease of entry into market for new busienss
  3. local & foreign comp
130
Q

institutions that influence business

A

gvt
regulatory bodies eg. trade unions, employer associations

Economics (14 decks)

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