Introduction To Business Flashcards
Sole trader
Anyone who runs their own business
Unlimited liability
You are personally responsible for all the depts of the business
Partnership
Two or more people who run a business
3 advantages to partnership
Different skills
More time
Less hours
3 disadvantages to partnership
Let you down
Avoid jobs
Limited finances
Deed of partnership
Set of rules for running a partnership
Sleeping partnership
Someone who invests money but takes no part in the day to day running of the business
Company
Separate legal existence
Ltd
Private limited company
3 advantages to ltd
Limited liability
Shareholders invest
Shareholders become directors
3 disadvantages to ltd
Complicated to set up
Loss of individual control accounts must be made public
Plc
Public limited company
2advantages to plc
Raises lots of capital investment
Generates a lot of publicity
2 disadvantages to plc
Bad publicity can lead to drop in share price
Shareholders can revolt against ideas
High starting costs
Social enterprise
A business who seeks to help people and give back
Franchising
Paying a fee (royalty fee) to trade under another business
10 steps to franchising
- Apply
- Security check
- Interview
- Experience- shadow
- Meet franchise fam
- 2nd interview
- Panel interview
- 9 months training
- deal
- Hand over keys
2 advantages to franchising
Buy cheap stock
Offers you wouldn’t otherwise get e.g advertising
2 disadvantages of franchising
Long process
Expensive
Name the 3 sectors of the economy and what they do
Primary- raw material
Secondary- manufacturing
Tertiary-service
Examples of sectors of e economy
Diamond extraction-p
Diamond ring- s
Jewlers-t
Entrepreneurship
Owning your own business and haven’t excellent ideas
Why is a business plan important
Clear objectives–sales increase-profits–reinvest/-expand–increases sales–profits
See where your going wrong
Organised
What are the peters 5 forces
- Threat of new entrants
- Threat of subsidies
- Degree of rivalry
- Bargaining power of buyers
- bargaining power of suppliers
Opportunity costs
The best alternative given up
Business ethics
Doing what is morally right
Sustainability
Meeting today’s needs without taking away resources from the future
Bank of England
Responsible for making decisions in interest rates
Redundancy
When your job no longer exists
HSE
Health and safety executive-oversees all safety and law inspections
Negative externalities, example
A negative effect on a third party from a transaction
Smoking
Drunk behaviour
Break even
How many products I must sell before you cover all your costs
Why do you need to know your break even point?
Set targets
Minister success
Where your going wrong
Limitations to break even
Prediction
Can change
Break even formula
BE= fixed cost/contribution Contribution= selling price-variable cost
Margin of safety
How many products you are above break even
Investment
Spending money whichbyou later benefits you
Investment appraisal
How a business decides if an investment project is worthwhile
Advantages of knowing payback
Simple to calcite
An early return is important even liquidyis more important than quality
Disadvantages to knowing payback
Disregards cash flow
Discrimination against projects which involve a long payback period
Formula for annual accounting rate of return (ARR)
ARR= average accounting profit divided by initial investment x100
Budget
Allocating a set amount of money each month for various expenses
Variance
Where there is a difference between planned budget and the actual outcome of the budget
Advantages to knowing your budget
Simple to calculate
Allows decision making
Disadvantages to knowing your budget
Disregards other factors
Zero budgeting
Going to the boss and asking for more money
Cash flow
Document monitoring money coming in and out
Retained profit
Profits from previous year
Advantages/disadvantages to retained profits
Don’t have to borrow–shareholders expect dividends
Personnel savings
Using own savings to support business
Advantages/disadvantages to personal savings
No interest charges–could lose all your money
Sale/lease. Ack
Sell the physical building and lease it back
Advantages/disadvantages to sale lease back
Raise money quickly–you may be evicted over time
Factoring
Sell the debt to a debt collecting money
Advantages/disadvantages to factoring
Doesn’t waste time–reflects badly on business
Divestment
Close off/sell pet it the business
Advantages/disadvantages to divestment
Reduces runnin costs–closes the stream of revenue
Legend
Greggy Tizzle
Reduction and current assists
Selling off stock
Advantages/disadvantages reduction and current assets
Sell stock quickly–lose stock
Loan
When you borrow money from the bank and pay it back over a certain period
Issues shares
Business cretes new shares and sells them
Grants
Given money do not have to pay back. It spent on stated reason
Selling equity
Selling % of the business
Venture capital
Investing in the business then receiving a high % or profits and over a few years the business will buy you out
Trade credit
Paying for goods at a later stage
Overdraft
Withdrawing money used for a small amount of time so you pay it back within a set amount
Leasing
Paying someone for you to have the right to use it
Hire purchase
Pay every month once instalment has finalised you completely own it
Job production
Satisfying the customer
Small business
Flowers for a wedding
Batch production
Set procedure and stages
One process before the next
Flow production
Products move along the line
Car manufacturer
Cell production
Teamwork to ensure the product is put together
P.S contribution
Variable costs
P.S market skimming
High prices then dropping it
P.S premium
High prices
P.S loss leader
Low prices so good value
P.S phycological
In their head e.g food
P.S competitor
Getting the best prices e.g cafe
P.S predatory
Push out competitors
P.S cost plus
Add on cost for profit e.g clothes
P.S Penetration
Stealing customers
Product mix
The overall range if products a business produces and sells
Product life Cycle
The life of a product from its introduction through to its potential decline
Promotion
Making customers aware of the brand
Above the line
Where you don’t contact the customer
Below the line
Where you come into direct contact with the customer
Why choose the radio to promote stuff?
Most people drive
Played a lot
Customers trust the radio–same time everyday
Wholesaler
Person or company that sells goods in large quantities at low prices e.g drink waters
What can you get diseconomies of scale
Poor communication
Conflict
Buying too much stock
Name he 4 stages of a product life cycle
Intro,growth, maturity, decline
