Chapter 14: Measuring Success In Business (Version) Flashcards
What is one way to measure the success of a business?
The amount of revenue generated. Increasing revenue year-on-year indicates success.
What factors can affect whether increased revenue signifies business success?
Sales objectives, trading conditions, and industry benchmarks.
Why might increasing market share be considered a sign of success?
It shows the business is dominating the market and possibly charging higher prices.
What challenges are associated with measuring market share?
Requires accurate data on total market size and competitors’ revenues, which may be difficult to obtain.
How can customer satisfaction be used to measure business success?
By monitoring complaints, conducting surveys, and analyzing customer loyalty trends.
Give an example of a business practice aimed at measuring customer satisfaction.
Sending emails to customers after purchase to collect feedback.
Why might rising profits indicate business success?
It shows financial improvement, but depends on factors like market competition and business size.
What are two metrics for evaluating profits relative to business size?
Return on capital employed and profit margin.
What are some ways to measure business growth?
Turnover/revenue, number of employees, market share, and capital employed.
What is the EU’s definition of business size based on?
Turnover, number of employees, and capital employed.
What is one risk of rapid business growth?
Overtrading, which occurs when a business runs out of resources to meet rising demand.
How do shareholders in public limited companies measure business success?
Through rising dividend payments and share prices.
What might private limited company shareholders consider as business success?
Survival, rising salaries, or business growth.
What aspects of success are important to employees?
Job security, fair wages, good working conditions, training opportunities, and promotion.
Why might profitability not always signify success to employees?
Profit-driven layoffs or cost-cutting measures negatively impact employees’ views of success.
How can setting objectives help measure business success?
Objectives provide clear targets and can motivate staff to achieve measurable goals.
Revenue
Measures the amount of income generated from sales of goods & services. Increasing revenue typically indicates success. Context, such as objectives and market conditions, is important.
Market Share
The proportion of sales in a total market that a business or product enjoys
Customer Satisfaction
Assesses how well a business meets consumer needs. Businesses use surveys and feedback to monitor and improve satisfaction.
Profit
Indicates financial gain. Factors such as market competition, business size, and industry benchmarks affect interpretation.
Growth
Measured by turnover, number of employees, market share, or capital employed. Sustained growth often reflects success.
Owner/Shareholder Satisfaction
Focuses on dividend growth and share prices for public companies. Private owners value financial security and market survival.
Employee Satisfaction
Involves wages, benefits, job security, and working conditions. Businesses must balance profit and employee welfare.
Overtrading
Taking on more work than a business can afford to fund effectively
Capital employed
Amount of money invested in a business
