Introduction to Business Flashcards
What is the primary objective of a profit-oriented organisation?
a) Maximisation of wealth
b) Outputs of goods/services
c) Minimise costs
d) Provision of goods/services
a) Maximisation of wealth
What is the primary objective of a non profit-oriented organisation?
a) Maximisation of wealth
b) Outputs of goods/services
c) Minimise costs
d) Provision of goods/services
d) Provision of goods/services
In the context of corporate objectives, satisficing means that;
a) Managers seek to make satisfactory profits rather than maximise wealth
b) Managers seek to keep all stakeholders satisfied
a) Managers seek to make satisfactory profits rather than maximise wealth
Satisficing is when managers are not maximising wealth for owners - but are merely making enough profit to keep owners satisfied. This is a product of the agency problem caused by the separation of ownership and control
Who are the primary stakeholders in a profit oriented business?
Shareholders/owners
What is the primary objective of a profit-oriented business?
Why may this not always be pursued?
Profit maximisation so as to increase shareholder wealth
Managers may make decisions that pursue managerial objectives rather than owners objectives
According to William Baumol, what managerial aim would result in increasing their prestige in the business community?
a) Maximising wealth
b) Maximising sales revenue
c) Minimising costs
d) Minimising social impact
b) Maximising sales revenue
Managers personally benefit from following this objective because of the prestige of running a large company, and also because salaries and benefits may be higher in bigger companies than in smaller ones.
What is Herbet Simon’s constraints theory?
Decisions for small businesses are taken without reference to the wealth objective at all.
This is not because managers are ignoring profit, but because it is not the most important constraint in their business - e.g. compliance with environmental laws or the need to give customers high quality products which may lower profitability.
What is agency theory and what is the impact of it in business decisions?
The separation of the principal (owner) and the agent (managers) - can result in managers pursuing aims other than wealth maximisation
To establish whether a particular organisation should be classified as a business or not, it is necessary to enquire about the nature of its;
a) Primary objective
b) Mission
c) Vision
d) Secondary objective
a) Primary objective
Organisations whose primary objective is to make profits for their owners are classified as businesses
What does the SMART acronym stand for
S: SPECIFIC
M: MEASURABLE
A: ACHIEVABLE
R: RELEVANT
T: TIME BOUND
What are the four elements of a mission statement?
What is our business?
What is our value to the customer
What do we want our business to become?
What should our business be?
Not detailed tactics or numerical targets
Match up the business functions with their descriptions;
a) Plan 1) Specific, quantitative goals
b) Vision 2) Future position of business
c) Mission 3) Basic function of company
d) Objective 4)What will be done to
achieve mission
a 4
b 2
c 3
d 1
What are the two types of goals
Non operational (Qualitative) aims
Operational (Quantitative) numerical objectives
To what does the term ‘triple bottom line’ refer?
a) Operating profit, Profit before tax, Profit after tax
b) Profits, Planet, People
c) Profit after tax, Net cash flows for the year, changes in equity
d) Corporate profits, Business unit profits, departmental profits
b
