Chapter 1 Of Book Flashcards
What are aims? Include e.g.
Aims are long term plans and include objectives the business wishes to fulfill. E.g. Tesco: their aim is to broaden the scope of the business to enable strong and sustainable growth
What are objectives?
Medium- long term goals established to coordinate the business
SMART broken down
Specific: define what is being measured. E.g. sales or profits
Measurable: include a realistic target. E.g. 10% increase
Agreed: agree targets with employees
Realistic: realistic objectives
Time specific: employees need to know how long they have
How are profits maximised?
Profits can be maximised by the difference between sales revenue and total costs. The larger the difference the larger the profits.
How does growth help a business?
It is essential to keep it growing otherwise it will not survive or flourish. It’s possible to earn higher profits by exploiting its market position, this benefits shareholders because they receive more dividends as well as better salaries and more job security to its employees.
When is survival a key objective:
. During a recession
. Or intense competition
. Times of crisis
.during a hostile takeover bid
Cash flow:
Cash flow is essential to keeping a business successful and to pay back debts on time. Money in as quick as possible money out as slow as possible.
Cash cycle:
A cash cycle is the amount of time between outflow of cash to pay for the resources needed to produce a product and the receipt of cash following the sale of the product.
Social and ethical objectives:
Social objectives include targets that relate to matters such as providing employment.
Ethical objectives are those based on moral principles. E.g. protecting environment
Diversification:
It’s an objective where a firm produces more range of goods and services. Reduces risk since it’s a bigger range of products.
Fixed costs
They don’t change when output levels do
Variable costs:
They change when the output does
Total costs=
Total costs= fixed costs + variable costs
Revenue
It’s income over a period of time
Revenue= quantity sold x average selling price
Profits
Profits are when revenue exceeds costs
Profit = total revenue - total costs
