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
2
Q
production
A
combination of resources to create products that satisfy customers’ needs and wants by business
3
Q
8 roles of business QPEEIIWC
A
- quality of life (improve standard of living)
- profit (reward)
- employment
- incomes
- choice
- innovation (existing products improved, new products created)
- entrepreneurship & risk
- wealth
4
Q
profit
A
remaining income after all expenses deducted from revenue
5
Q
revenue
A
money businesses receive as payment for its products
6
Q
income
A
money received by person for providing labour
7
Q
wage
A
money received by workers on an hrly basis for services they provide to employer
8
Q
salary
A
fixed regular payment on fortnightly/monthly basis
9
Q
shareholders
A
part owners of a company because they own a number of shares
-owners of private/public companies
10
Q
dividend
A
distribution of company’s profits (yrly/half-yrly) to shareholders, calculated a no. cents/share
11
Q
choice
A
act of selecting among alternatives
12
Q
innovation
A
creating new product, service, process/ improving existing one
13
Q
entrepreneurship
A
ability & willingness to start, operate and assume risk of a business venture to make profit
-entrepreneur: someone who starts…
14
Q
risk
A
possibility of loss
15
Q
distribution of wealth created by business (SIGEL)
A
- Shareholders/bus. owners (dividends/profits)
- business Itself ( retained profits)
- governments (taxes)
- employees (salary, wage)
- lenders (loan repayments)
16
Q
quality of life
A
overall wellbeing of individual, combination of material & non-material benefits
17
Q
4 methods to classify business (GILS)
A
Geographical spread
Industry sector
Legal structure
Size
18
Q
businesses in legal structure
A
GVT enterprise
public/private company
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/+
20
Q
industry sector businesses PSTQQ
A
quinary
quaternary
tertiary
secondary
primary
21
Q
geographical spread of diff business sizes
A
transnational corporations (TNCs)
local: restricted geographical spread
national
22
Q
5 main industry sectors PSTQQ
A
Primary
Secondary
Tertiary
Quaternary
Quinary
23
Q
industry
A
businesses involved in similar types of production
24
Q
primary industry
A
businesses involved in collection of natural resources
25
secondary industry
businesses take raw material --> finished/semi-finished product
26
tertiary industry
people performing vast range of SERVICES to others
27
quaternary industry
services involve TRANSFER/processing of info and KNOWLEDGE (property, finance, education)
28
quinary industry 2
services traditionally performed in home (tourism, childcare)
paid/unpaid work
29
incorporated
process companies undergo to become separate legal entity from owner/s
regardless of what happens to shareholders, business continues operating
30
4 main legal structures of privately owned businesses SP, C(PP)
Sole trader, partnership (UNincorporated)
company - private/public (INcorporated)
31
sole trader
business owned & operated by 1 peep
provides all finance, makes decision, takes responsibility for business operations
32
partnership?
legal business structure owned & operated by 2-20 ppl to main profit
33
limited liability?
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
34
private company
incorporated business, usually 2-50 private shareholders
35
GVT enterprises or GBE?
GVT owned & operated businesses
aim **increase value of their assets & returns shareholder (GVT)
owned & operated by all GVT levels (federal, state, local)**
36
privatisation ?
transferring ownership of GVT business to private sector
37
3 most important factors that influence business owner upon legal structure choice (SOF)
size of business
ownership
finances
38
size (choice of legal structure)
as businesses expand, may wish to seek protection of LIMITED LIABILITY (choose private company)
39
ownership in choice of legal structure
- 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)
40
finance (choice of legal structure)
-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)
41
business environmeny
surrounding conditions business operates
42
external environment FGSPLITECM
factors business has very lil control
economic
financial
geographic
social
legal
political
**institutional**
technological
competitive situation
markets
43
internal environment PLRMB
factors business **some degree of control**
**products
location
resources
management
business culture**
44
business cycles (ECONOMIC influence)
periods of growth (boom) and recession (bust) occur resulting from fluctuations in general lvl of eco activity
45
5 expansion key features
(consumer spending, bsuiness expectations, business investment, sales/profits, unemployment)
INCREASE consumer spending
business expectations increasingly OPTIMISTIC
INCREASING business investment
sales and profits RISING
unemployment FALLING
46
contraction key features
(consumer spending, business expectations, business investment, sales/profits, unemployment)
DECREASING consumer spending
business expectations increasingly PESSIMISTIC
DECREASING business investment
sales and profits FALLING
unemployment RISING
47
PEAKS four key features
(wages & salaries, business operating capacity, sales & profits), level of unemployment
wages and salaries at HIGH levels
business operating at FULL capacity
sales and profits HIGHEST levels
LOW level of unemployment
48
TROUGHS key features
(wages & salaries, business operating capacity, sales & profits), consumer spending level of unemployment
wages and salaries at LOW levels
business operating BELOW full capacity
sales and profits LOWEST levels
consumer spending LOWEST levels
HIGH level of unemployment
49
deregulation (FINANCIAL influence)
removal of GVT regulation from industry to increase efficiency & improve competition
50
how does GEOGRAPHY influences businesses? (LPDW)
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**
51
FINANCIAL influences IDLE
interest rates, lending policies, deregulation, exchange rates
52
how do interest rates influence businesses?
- 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)
53
how do LENDING POLICIES influence businesses?
depending on eco conditions, RISK (GVT policies, credit policies of banks & other lenders may be strict)
54
how does DEREGULATION influence businesses?
businesses explore borrowing options outside major banks (more competition in FINANCE sector & choice for potential borrowers
55
how do EXCHANGE RATES influence businesses?
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
what are the TECH influences in busniess 2 benefits, 2
opportunities to innovate g&s & make processes efficient (speed,cost)
high financial costs, risk of blitches/breakdown
57
what are the 4 key tech influences OMFH
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
what are INTERNAL influences PLRMC
Products
Location
Resources
Management
business Culture (corporate culture)
59
4 benefits of good corporate culture
1. higher productivity
2.willing to embrace change
3. lower absenteeism & staff turnover
4. project positive image to customers
60
what are stakeholders
person/group/organisation with interest/stake in decision making & activities of business
61
what are some stakeholders (6)
SCEEMS
1. society
2. customers
3. environment
4. employees
5. managers
6. shareholders
62
what are the 4 stages of the business life cycle? EGMP
1. Establishment
2. Growth
mergers & acquisitions
3. Maturity
4. Post-Maturity
-renewal
-steady state
-decline
63
what is a merger?
business deal where 2 separate companies combine to form a new organisation
-business surnames combine
64
what is an ACQUISITION/takevoer
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
what are the 3 types of mergers & acquisitions? VIHID
Vertical integration
horizontal integration
diversification
66
what is vertical integration
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
what is horizontal integration
business acquires/merges with another firm makes/sells SIMILAR products
eg. abattoir merges with another abattoir
68
what is diversification
business acquires/merges with business in UNRELATED industry
eg. abattoir purchases sports retailer
69
2 key features establishment stage
business needs** solid foundation**
**enough sales to generate income to pay expenses and generate positive CASH FLOW**
70
cash flow
money COMING into business in cash RECEIPTS and
money LEAVING business as cash PAYMENTS
71
MATURITY stage risks
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
maturity stage strategies
maintain high lvls CUSTOMER SERVICE
more efficient ways of OPERATING (service speed, reduce costs)
plan RENEWAL stage (introduce new products/services)
73
4 features of ESTABLISHMENT stage
-many decisions,
-large start up costs,
-customer base needs building
-generate INCOME on BUDGET
74
4 GROWTH stage features
* spend money to make more later
* new products/open outlets
* balance between attracting new customers and retain existing
* AVOID cash flow problems
75
POST MATURITY stage
STEADY State: continues operate same level as maturity phase
DECLINE: falling sales and profits --> business fails
RENEWAL: increase sales & profits, new growth
76
capital
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
cash flow
money coming into business in receipts
and
money leaving business in payments
78
fixed costs
costs dont change with business' level of production
eg rent
79
variable costs plus examples
go up & down as business changed level of output
(wage, stock, bills)
80
market niche
small target market
81
economics of scale (factories spread to make larger volumes)
**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
delegation
managers/owners handing specific tasks/responsibilities to employees
83
specialisation
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
2 product influences on businesses
1. **range, types** of g&s for expansion
2. some g&s require **extensive preparation, some merely delivers**
85
what is a business' size based on?3
1. range & type of g&s produced
2. lvl of tech used
3. volume of g&s produced
86
inflenced of location on business
affects **total sales, how expensive** to run
locating **next to complementary businesses (sells similar range of g&s)**
87
factors to consider when choosing location CSVC
1. proximity to customers,
2. visibility
3.proximity to suppliers
4. cost
88
RESOURCE influences on business HIPF
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
management style influenced by PENT
preference of manager
experience of employees (skills, values)
Time & other restraints eg. resources
Nature of tasks
90
corporate culture
values, ideas, expectations, beliefs shared by members of organisation
91
why do shareholders have a direct influence on a business
they have voting rights on major business decisions and companies need to maximise returns on shareholder's investments
92
main challenge in establishment stage
get business on solid foundation by generating enough sales to create positive cash flow (detailed planning!)
93
what is the meaning of small businesses (sole trader/partnership) having unlimited liability?
**owner personally responsible for all debts** of business
94
what happens during growth stage SCNC
increased sales
regular customer base
develop new products
improves cash flow
95
What is an early warning sign of possible decline in maturity stage
rate of growth slows/eventually flattens
96
reasons for business decline PLGCC
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
2 MAIN Causes of bus decline/possible failure
lack of management expertise
undercapitalisation
when company doesnt have enough capital to conduct ordinary business operations
98
voluntary cessation
owner ceases to operate business of own accord
99
involuntary cessation
owner forced to cease trading by creditors of business
100
what happens when sole traders/partnerships voluntarily/involuntarily go into bankruptcy?
business/person unable to pay their debts
101
2 options company has facing financial difficulties
voluntary administration & voluntary/involuntary liquidationl
102
voluntary administration
independent **administrator** is **appointed to operate** business hope **trading out** present **financial problems**
103
voluntary/involuntary liquidation (voluntary own accord, involuntary forced by others)
process of appointed liquidator converting business' assets to cash
104
why does liquidation occur
company is insolvent
105
creditos
ppol/businesses owed money and force involuntary cessation
106
bankruptcy
declaration that business/person unable to pay debts
voluntary/involuntary
107
realisation
converting assets of business into cash
108
administrator's main tasks
1. bring business and its creditors together
2. examine financial affairs of business
109
liquidation
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
three main features of liquidation BLI
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
insolvent
company isnt able to pay debts when due
112
what are the4 main legal structures of privately owned businesses?
sole traders, partnerships, public/private companies
113
are all companies in/unincorporated?
incorporated
114
are sole traders/partnerships un/incorporated?
unicorporated
115
advantages of being a sole trader
complete control
owner's right to keep all profits
no tax on business profits + less gvt regulation
116
4 sole trader disadvantages
unlimited liability for business debts
carry all losses
difficulty raising finance for expansion
burden of management/wide variety of tasks
117
4 advantages of partnership STC
shared responsibility and workload
**no taxes on business profits/minimal gvt regulation
less costly** than company
118
3 disadvantages of partnership
unlimited liability (all debts, including partners)
divided loyalty and authority/difficulty finding suitable partner
119
4 advantages of company
easier to attract public finance
greater spread of risk
limited liability (separate legal entity)
company tax rate < personal income tax rate
120
3 disadvantages of company
double taxation (company&personal)
public disclosure (reported info)
if directors knew business couldnt pay loans, personal liability
121
3 requirements of public company
at least one shareholder
ltd (limited) in name
publish audited financial reports annually
122
globalisation
process which world becoming increasingly interconnected due to massively increased trade & cultural exchange
123
what does globalisation involve?
reducing barriers limiting free movement of business / trade/ investment/ labour across national borders
124
4 globalisation impact on businesses
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
why are social influences important (external)
****rapid identification & response to changes in **tastes, fashions, culture --> sales & profit opportunities --> business growth**
otherwise **threatens business stability & viability**
126
3 social influences
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
legal influences on businesses THEEAI
laws on taxation
industrial relations
work healthy & safety
equal employment opportunity
anti-discrimination
environmental protection
128
political influences on business
from state/federal gvt policies
;abour market reforms (free trade policies)
social reforms (paid parental leave)
environmental management
taxation (GST)
129
factors influencing business' competitiveness
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
institutions that influence business
gvt
regulatory bodies eg. trade unions, employer associations
