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Business Management > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Economics

A

“Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”

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2
Q

Economic Production System

A

Inputs are transformed into outputs to attain a certain goal

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3
Q

Capital

A

an economic term for wealth that is used to produce more wealth

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4
Q

What is the relationship between labour and capital?

A

Inversely proportional.
Large capital (machinery) —> less labour force

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5
Q

What is cashflow?

A

Inflow-> income
Outflow-> expenses

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6
Q

Fixed assets

A

Assets that are kept for a long period of time.
E.g. land and buildings, machinery, vehicles

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7
Q

Current assets

A

Kept for a short period of time.
E.g. materials, trading stock, cash and cash equivalents, cash float

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8
Q

The business entity concept

A

The business is separate from the owner(s) of the business. Therefore the accounting records for even the simplest business, the sole trader, must be kept separate from the personal affairs of the owner or owners.

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9
Q

Accounting equation

A

Assets = Owners Equity + Liabilities

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10
Q

Command economy

A

RULERS make all decisions about production and consumption

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11
Q

Market economy

A

HOUSEHOLDS make all decisions about production and consumption.
— individuals are favoured over groups

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12
Q

Capitalism

A

INDIVIDUALS/FIRMS develop, own and control the country’s capital.
— individuals are favoured over groups

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13
Q

Communism

A

PUBLIC owns all important means of production (restricted number of
participants e.g. a family). Capital belongs to all, becomes difficult to maintain as the number of people increases.
— rulers take decisions and communism places the rights of the group
above those of the individual

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14
Q

Markets

A

Firms sell their product in a market which allows for exchanges, transactions and trades between buyers and sellers

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15
Q

Diminishing utility

A

The more one has of a product, the lower its marginal personal use is

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16
Q

Demand depends on (6):

A
  1. The type of product
  2. Popularity
  3. The quality
  4. Satisfies choice
  5. Availability
  6. Price

(Doo Doo Toilet Paper Products Quickly Soothe Caca And Poo)

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17
Q

Supply factors

A
  1. ease of making
  2. material costs
  3. labour
  4. machines
  5. capital
  6. price
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18
Q

Price elasticity of demand

A

(% change in quantity) divided by (% change in price)

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19
Q

Price elasticity

A

• p (1 + 1/price elasticity of demand)
• increase in market revenue for an extra unit sold

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20
Q

Income elasticity of demand

A

(% change in quantity) divided by (% change in income)

21
Q

Cross price elasticity

A

• measures a products’ complement and substitute
• e(q-a), (p-b) = (% change in quantity of a) divided by (% change in price of b)
• If cross price elasticity is positive —> substitute product
• If cross price elasticity is negative —> complementary product
• If product form becomes less competitive, the cross elasticity tends to zero (can expect increasing market size with increasing demand)

22
Q

Monopoly

A

One supplier in the market (may exist by legalities which exclude others trading)

23
Q

Monopsony

A

A single demander in the market

24
Q

Perfect competition

A

— Many suppliers and demanders, produce/consume homogenous products, have free mobility of resources and have complete knowledge of resources concerning price and cost.
— perfect competitor produces small outputs relative to the market
— A perfectly competitive firm sets the output/quantity so marginal revenue equals margina costs, to maximise profits

25
Q

Cartel

A

-many suppliers who think they are monopolies

26
Q

Oligopoly

A
  • a few suppliers in the market
27
Q

Profit

A

• the residual cash between input (L,K,M) and output (goods and services) after having paid for all input factors.
• Accountants exclude payments to shareholders and value items differently when defining profit
• Profits of the firm belong to the owners or shareholders
• profit= revenue - costs
• Profit is made where revenue exceeds costs and marginal revenue = marginal costs

28
Q

Shareholders

A
  • partial ownership of the firm
    → bear financial risks (uncertainty in
    investmeht
29
Q

Formula for Total revenue

A

Price x Quantity

30
Q

Fixed costs

A

costs which do not vary over a certain range (time) e.g. rent

31
Q

Variable costs

A
  • costs which vary over a certain range (time) e.g. materials
32
Q

Marginal cost

A
  • cost obtained from making an extra unit
33
Q

Marginal revenue

A
  • revenue obtained from making an extra unit
34
Q

Neo-classical theory

A
  • analysis of the market, monopolist and perfect competitor
35
Q

Schumpeter’s Theory

A

— purposes of firms
— places emphasis on the creative ability of people whereby firms arise when people make new products and processes, which can monopolise markets for a certain period. New products creatively destroy older approaches

36
Q

Resource Based Theory

A

— purposes of firms
— emphasises unique resources that firms have to monopolise
markets. A firm should make what it can monopolise and buy what is available in competitive markets

37
Q

Transaction Cost Economics

A

— mechanics of firms
— see firm as a way of escaping the costs of dealing with the market as market transactional costs are high. It assumes people act rationally, but have limited abilities to process info and are self-seeking with

38
Q

Structure-Conduct-Performance (SCP)

A

— mechanics of firms
— Theory - links various parts of the market to decisions
* made by people in a particular firm, these include technology, capital requirements, profit, growth, efficiency, management, objectives and diversification amongst other factors

39
Q

A business model

A

used to decide if an idea should be carried out

40
Q

Business plans

A

used to estimate economic viability and risks of the idea, to interest people to support the idea, and to provide documentation against which to monitor progress of making the idea into a reality.

41
Q

Key Considerations for the Transformation Stage: (6)

A
  1. Business Model
  2. Operations
  3. Human Resources
  4. Marketing and Sales
  5. Financial Management
  6. Risk Management
    (Big Monkeys Only Hunt Rats Mice and Snakes For Making Rank Meals)
42
Q

Decisions for Business Model:

A

Decide on the
1. target market
2. product offerings
3. pricing
4. distribution
5. differentiation factors
(Too Many People Only Pick Double D Females)

43
Q

Decisions for Operations (5):

A

Make decisions on
1. production
2. suppliers
3. inventory
4. quality control
5. resource allocation.

(Don’t Open Pea Sized Quails In a Rush)

44
Q

Decisions for Human Resources:

A

Determine
1. hiring
2. training
3. employee development strategies
4. establish communication channels

45
Q

Decisions for Marketing and Sales

A

Make decisions on
1. target audience
2. branding
3. advertising channels
4. pricing
5. sales techniques.

46
Q

Decisions on Financial Management

A

Decide on
1. budgeting
2. forecasting
3. pricing
4. financing options
5. financial reporting.

(Fucku Mean Biden For President? Fuck Off For Real)

47
Q

Decisions on Risk Management

A

Identify
1. risks
2. assess their impact
3. develop mitigation strategies.

48
Q

Useful Tools for the Transformation Stage:

A
  • SWOT Analysis: Evaluate internal strengths, weaknesses, external opportunities, and threats to make informed decisions.
  • Business Plan: Develop a comprehensive document outlining goals, strategies, operational details, and financial projections.

Business Management (5 decks)

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