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Business Studies AS > Introduction to business (JSL) > Flashcards

Introduction to business (JSL) Flashcards

1
Q

08/09/16

Disadvantages of being a sole trader

A 
Long hours
High start up costs
Non guaranteed wage 
Hard work 
Dedication 
Unlimited liability
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2
Q

08/09/16

What is unlimited liability

A

You are personally responsible for all of the debts of the business

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3
Q

08/09/16

Advantages of being a sole trader

A

Profit is kept to themselves
Work when you like when the business is set up
Singular decisions

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4
Q

09/09/16

What is a partnership

A

This is where two or more people own and run a business together

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5
Q

09/09/16

Advantages of being in a partnership

A 
Share workload
Share finance
Motivational
Different skills offered by each partner 
Share responsibilities/debts 
Less individual start up costs
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6
Q

09/09/16

Disadvantages of being in a partnership

A

Unlimited liability
Share decisions (arguments)
Shared profits
Partners may start to let you down

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7
Q

09/09/16

What is a sleeping partner

A

Someone who invests money but takes no part in the day to day running of the business

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8
Q

09/09/16

What does the deed of partnership lay out

A

The rules for running the partnership

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9
Q

08/09/16

What is a sole trader

A

Someone who runs their own business

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10
Q

16/09/16

Advantages of being a private limited company

A

Limited liability
Shareholders invest into business
Shareholders become directors
Continuous

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11
Q

16/09/16

What are the 3 letters associated with private limited companies

A

LTD

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12
Q

16/09/16

Disadvantages of being a private limited company

A

More complicated to set up (legal formalities)
Loss of individual control
Business accounts have to be made public

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13
Q

16/09/16

What are the 3 letters associated with a public limited company

A

PLC

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14
Q

1609/16

Disadvantages of being a Plc

A

Shareholders could go against your plans for the future of your business
Stock exchange charges high rates to sell shares
Shareholders have different ideas
Slows down decision making
Negative publicity (drop in share price)

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15
Q

16/09/16

Advantages of being a Plc

A

Raises a lot of capital for investment

Generates a lot of publicity

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16
Q

16/09/16

What is the one difference between a Plc and and ltd

A

Shareholders are members of the general public - Plc

Shareholders are family and friends - LTd

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17
Q

16/09/16

What are the similarities between Plc and ltd

A

Owners called shareholders
Governed by two legal documents (memorandum of association, articles of association)
Controlled by a board of directors
Run by a managing director

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18
Q

28/09/16

What is franchising

A

Paying a royalty fee to trade under another businesses name

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19
Q

28/09/16

Advantages of being a franchise for the franchisee

A

Established name

Support of franchiser

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20
Q

28/09/16

Advantages of being a franchise to the franchiser

A

Quick way to grow

Royalties from franchisee

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21
Q

30/09/16

Disadvantages of being a franchise to the franchisee

A

Lack of total control

High start up costs

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22
Q

30/09/16

Disadvantages of being a franchise to the franchiser

A

Risk of reputation from unsuitable franchisee

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23
Q

30/09/16

What are the 3 sectors to the economy and what do they do

A

Primary - raw materials
Secondary - manufacturing
Tertiary - services based

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24
Q

30/09/16

Examples of primary, secondary and tertiary sectors

A

Primary - diamonds, beef farming
Secondary - textile making, car brakes, cement production
Tertiary - hairdressing, banking, restaurants

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25
Q

06/10/16

How would Tesco’s benefit from setting clear objectives

A 
Clear marketing plan
Understand customer needs
Open new stores
Increase sales
Focus and motivates staff
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26
Q

07/10/16

What is entrepreneurship

A

Owning your own business and constantly having excellent ideas

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27
Q

07/10/16

What are the qualities of being an entrepreneur

A 
Clear marketing plan
Confidence
Likeability
Experience
Risk taking
Resilience
Enthusiasm/passion
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28
Q

07/10/16

What are the essentials thing you need for writing a business plan

A 
Business idea and target market 
Production operations
Finance
Sales and marketing
Future direction
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29
Q

12/10/16

Why should you have a business plan

A 
To have a clear direction 
To predict future problems 
To apply for a loan
Cash flow
Predict how much profit you'll make
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30
Q

12/10/16

What could be some of the impacts of having a crisis like the Alton Towers crash

A 
Higher insurance
Bad reputation
Loss of trust
Loss of customers
High compensation fees
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31
Q

12/10/16

What are porters 5 forces

A 
Threat of new entrants 
Bargaining power of suppliers
Degree of rivalry
Bargaining power of buyers 
Threat of substitutes
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32
Q

20/10/16

What are risks and solutions concerning a business

A

Poor quality staff - sack them and get new staff or motivate them non financially
Deserting customers - ask them why or put promotions in place to bring them back
Poor quality equipment - get different equipment or have promotions for customers to buy more to fund the better quality machinery

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33
Q

04/11/16

What is an opportunity cost

A

This is the best alternative given up

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34
Q

10/11/16

Arguments for being an ethical producer

A

Improves the business image
Gives you a better image than competitors
Customers care about it (especially middle class people)
Being an ethical producer means more sales and profits
It’s morally right to treat people fairly

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35
Q

10/11/16

Arguments against being an ethical producer

A

Raise costs
Competitors might become cheaper than you
Many customers don’t truly care
Most ‘reports’ of unethical suppliers are lies. Everyone is ethical now

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36
Q

11/11/16

What is sustainability

A

This is meeting today’s needs without taking away resources from the future

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37
Q

18/11/16

What is the local council responsible for

A 
Parking 
Maintenance on roads (potholes)
Planning permission
Public transport
Bins
Trees
Meals on wheels
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38
Q

18/11/16

Where do councils receive their money from

A

Central government
Business rates
Council tax

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39
Q

24/11/16

Key points about interest rates

A

The cost of borrowing money
The money you receive from the bank on your savings
It is the Bank of England who set the base rate on this
Sometimes they keep interest rates low and other times they decide to increase interest rates

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40
Q

30/11/16

What is the government expenditure spent on

A

Expenditure :
Public sector
Local government

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41
Q

02/12/16

What is the European Union

A

28 European countries who work together politically and economically

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42
Q

24/11/16

What is the Bank of England responsible for

A

Making decisions on interest rates

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43
Q

24/11/16

What are interest rates

A

The cost of borrowing money

The money you receive from the bank on your savings

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44
Q

30/11/16

Where do the government get revenue from

A

Income tax
VAT
Business rates
Corporation tax

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45
Q

30/11/16

What do the government spend their money on

A

Public sector

Local government

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46
Q

09/12/16

What would increasing the capacity in the economy lead to

A 
Investment in education
Build new infrastructure (e.g. roads)
Give grants for training 
Invest in healthcare
Cut benefits 
Encourage 'young business'
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49
Q

02/12/16

What is the European Union

A

28 European countries who work together politically and economically

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50
Q

08/12/16

What are some businesses that are successful in a boom and what could happen during a boom

A

Banks
Travel agents
Housing agencies

More production, low unemployment, new products and new opportunities could happen during a boom

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51
Q

09/12/16

What does having a deficit mean

A

You’re importing more than you’re exporting

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52
Q

05/01/17

What is a negative externality

A

A negative effect on a third party from a transaction (e.g. passive smoking)

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53
Q

06/01/17

What are fixed costs and what are variable costs

A

Fixed costs stay the same no matter what

Variable costs change according to what you make

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54
Q

11/01/17

What do we mean by contribution

A

This is the mark up on each product (selling price - variable cost)

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55
Q

11/01/17

What do we mean by margin of safety

A

This is how many products you are above the breaking point

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56
Q

11/01/17

Why do you need to know your break even

A

Helps set targets
Helps monitor the business success
Tells you if you are wasting your time
Helps to justify you borrowing money

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57
Q

11/01/17

Limitations of break even

A

Fixed costs can change (stepped fixed costs)
It’s only a prediction
Unexpected costs can arise
It assumes prices never change
It assumes everything you make will get sold
Selling price and variable cost figures are just averages

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58
Q

14/12/16

What things are included in the contract of employment

A 
Pay (wage)
Hours
Location
Uniform
Bonuses
Position in business
What the job involves
Rules of the workplace
59
Q

14/12/16

What is redundancy

A

When your job no longer exists. The business needs a fair redundancy procedure

60
Q

14/12/16

What are the working time regulations

A

May only work an average of 48 hours in a week
Must have a day off each week
May only work a maximum 12 hours a day
Young people (under 18s) cannot work nights

61
Q

14/12/16

What are the impacts of overworked staff

A

Health issues of employees
Employees are demotivated
Tiredness affects a person and then there could he conflict in the business
Poor customer service leads to unenergised employees
Wages

62
Q

14/12/16

Key information about health and safety

A

Health and safety is everyone’s responsibility
Staff are entitled to training and equipment
Risk assessments must be carried out all the time
The business must have a safety policy

63
Q

14/12/16

What does HSE mean and what does their job involved

A

HSE is a health and safety executive

Their job involves overseeing all safety laws and inspections

64
Q

02/02/17

What is investment appraisal

A

This is how a business decides if an investment project is worthwhile, or where alternatives exists, which option is likely to be the best

65
Q

02/02/17

What are the advantages of payback

A

Simple to calculate

An early return is especially important when liquidity is more important than profitability

66
Q

02/02/17

Disadvantages of payback

A

It disregards all cash flows beyond the payback period so fails to measure overall profitability
It discriminates against projects which involve a long payback period

67
Q

02/02/17

What is the formula for calculating the accounting rate of return

A

ARR = (average annual accounting profit/initial investment) x 100

68
Q

02/02/17

What is meant by net present value (NPV)

A

This takes into account the time value of money. It’s based on the principle that money is worth more than it is in the future. The principle exists for two reasons:

  • risk (money in the future is uncertain)
  • opportunity costs (could be in an interest account earning interest)
69
Q

03/02/17

What is budgeting

A

Allocating a set amount of money each month for various expenses

70
Q

03/02/17

What is variance

A

When there is a difference between planned budget and the actual outcome of the budget

71
Q

03/02/17

Benefits of budgeting forecasts

A

Knowing how much money should be spent on each cost
Stops wastage
Stops unnecessary spending
Simple to calculate

72
Q

03/02/17

Problems with budgeting

A

Costs might not stay the same so the budget could change
Unforeseen circumstance
Only a prediction

73
Q

03/02/17

What is zero budgeting

A

The money is given as and when it is needed

74
Q

10/02/17

What is meant by personal savings

A

How much assets any individual retains and puts this money into the business

75
Q

10/02/17

What is meant by retained profits

A

Where you keep profits for the last year then invest it (this could be more than one year, dependant on how much profit you’re making)

76
Q

10/02/17

What is meant by sales of fixed assets

A

Selling bigger items off like machinery

77
Q

10/02/17

Benefit and risks of personal savings

A

Benefit - immediate & no interest charge

Risks - could lose all money

78
Q

10/02/17

What is meant by factoring

A

Where you sell a debt to a debt collecting company

79
Q

10/02/17

What is meant by divestment

A

Closing or selling off some parts of the business

80
Q

10/02/17

Benefits and risk of factoring

A

Benefit - gets debt off employers responsibility

Risk - could lose some money & looks bad on the business

81
Q

10/02/17

Benefits and risks of sale of fixed assets

A

Benefit - more storage space available & raise a lot of capital
Risk - may regret it in the long run

82
Q

10/02/17

Benefits and risks of sale/lease back

A

Benefit - large amounts of revenue

Risk - have to pay back

83
Q

10/02/17

Benefits and risk of retained profits

A

Benefit - no time/ interest period

Risk - opportunity cost

84
Q

10/02/17

Benefits and risks of divestment

A

Benefit - gain a large amount of capital

Risk - may be needed later on

85
Q

23/02/17

State the 5 long term methods of external finance

A 
Loan (mortgage)
Issue shares
Grants
Selling equity
Venture capital
86
Q

23/02/17

What is meant by a loan (mortgage)

A

Where you borrow a lot of money to invest in big assets like a house

87
Q

23/02/17

What is meant by issue shares

A

Where the business creates new shares and sells them

88
Q

23/02/17

What is meant by a grant

A

Where the government gives money to people in order to continue what they’re doing (e.g. Studying or selling). You don’t have to pay these back

89
Q

23/02/17

What is selling equity

A

When someone is interested in the business and buys part of the business

90
Q

23/02/17

What is meant by trade credit

A

Where you buy things, sell them then pay back say 3 months later when the stock is sold

91
Q

23/02/17

What is venture capital

A

When someone invests in your business to receive high % profits each year then repaid after around 5 years

92
Q

23/02/17

Name the 3 short term methods of external sources of finance

A

Trade credit
Overdraft
Credit card

93
Q

23/02/17

What is an overdraft

A

Extra money from the bank out of your account

94
Q

23/02/17

What is a credit card

A

Paying your bills for you then paying back over a period of time

95
Q

01/03/17

What is an income statement

A

A statement of income, expenditure, profits and losses

96
Q

01/03/17

What are the 3 elements of an account

A
  • trading account (gross profit)
  • income account (operating profit)
  • appropriation account (retained profit after deductions)
97
Q

01/03/17

What do you do with index numbers

A

Use a set number in year 1 then compare it to all new numbers in other years

98
Q

03/03/17

What is a balance sheet

A

This shows the value of the business at any one time

99
Q

03/03/17

What is business value

A

How its financed

100
Q

03/03/17

What is meant by assets and liabilities

A

Assets - what you own

Liabilities - what you owe

101
Q

03/03/17

What is meant by depreciation

A

This is a method of reallocating the cost of a tangible asset (fixed asset) over its useful life span

102
Q

09/03/17

What is the formula for liquidity ratio?

A

Current assets/current liabilities

103
Q

09/03/17

What is included in current assets and current liabilities

A

Current assets - stock, cash, debtor

Current liabilities - creditors, overdraft

104
Q

09/03/17

What is the formula for acid test ratio

A

Current assets - inventory (stock)/current liabilities

105
Q

09/03/17

What is the ideal current ratio and ideal acid test ratio

A

Ideal current ratio = 2:1
Ideal acid test ratio = 1.5:1
Anything more suggests way too much cash/trade receivables/stock
Anything below suggests liquidity problems

106
Q

09/03/17

What is included in the 3 shareholder ratios

A
  • dividend per share (total dividend/number of shares)
  • earnings per share (profit for the year/number of shares)
  • price earnings ratio (market price per share/earnings per share)
107
Q

09/03/17

What is the gearing ratio

A

What % of the business is financed by long term loans

108
Q

09/03/17

What is the formula for calculating gearing ratio

A

(non current liabilities/capital employed (investment)) x 100

109
Q

10/03/17

Benefits of being heavily geared

A
  • suggests the bank is a big stakeholder
  • but, not a problem if the business can service its debt
  • also, a good way to finance the business if interest rates are low
  • finally, helps you avoid paying dividends
110
Q

10/03/17

What is the formula for calculating non current assets turnover

A

Revenue/non current assets

111
Q

10/03/17

What is the formula for calculating stock turnover

A

Cost of stock/average stock

112
Q

10/03/17

What is meant by debtor days and what is the formula for calculating this

A

This is how quickly debts can be turned into cash
Formula:
(trade receivables/revenue) x 365

113
Q

10/03/17

What is meant by a debtor

A

Someone who you’ve sold something to and you’re awaiting payment (trade receivables)

114
Q

10/03/17

What is the formula for calculating creditor days and what is meant by creditor days

A

This is how quickly our short term debts can be paid
Formula:
(trade receivables/purchases) x 365

115
Q

What is meant by job production

A

This often involves producing a single item/product. Various teams are attributed to job production, such as bespoke, unique, tailor-made and one off. It is usually concerned with satisfying a customers specific needs

116
Q

What is meant by cell production

A

This can be defined as a production system that has employees working in teams, who are responsible for the whole of the production process for a given product

117
Q

What is meant by batch production

A

This is used when there is a set procedure and stages that the production process needs to go through in order to create a product. One process has to be completed before the next stage of the production process can be started

118
Q

What is meant by flow production

A

This is a continuous process, utilising a conveyor-belt approach, whereby the product is assembles on a production line wth employees undertaking specific repetitive tasks for each stage of the individual processes

119
Q

Give 3 characteristics of job production

A

Produced to satisfy customers needs
Unique
Specifically requested

120
Q

Benefits of job production

A

Meet customer needs exactly
Quality of work is high
Easier to motivate workers
Flexibility to produce whatever is required
Little stock is tied up
Easier to add value due to highly specialist work that is undertaken

121
Q

Limitations of job production

A

Usually no opportunities for benefitting from economies of scales
Higher costs of production
More skilled labour so more expensive to train and employ
Slower process
Difficult to gauge the costs for the job

122
Q

Benefits of batch production

A 
Large quantities produced 
Some economies of scales 
Generally faster process 
As greater quantities of goods are produced, the unit costs should be lower 
More flexibility than flow production
123
Q

Limitations of batch production

A

Could be a time delay
More stock is held, adding cash outflows of the business
Storage space for products waiting to go in the next batch process may be needed but could have been used for productive purposes
Not much variation
Lower skilled jobs

124
Q

Benefits of flow production

A

Economies of scales
Benefit from division of labour
Continuous so little downtime and therefore production levels are optimised.
Enables a business to remain competitive
Offer more opportunities for the division of labour (specialisation)

125
Q

What is meant by ‘downtime’

A

When there is a time delay between batches which means that nothing is being produced

126
Q

Limitations of flow production

A

High start up costs
Lot of time to plan to organise the flow system
Lacks flexibility
If the line stops for any reason, the whole production process is stopped
Any significant fall in demand will make the process uneconomical
Employees are less likely to be motivated as its repetitive
Large amounts of stock
Greater reliance on suppliers to deliver on time

127
Q

Benefits of cell production

A

Improved working conditions
High quality of work as employees are responsible for the work in their cell
Encourages a sense of responsibility
Opportunities for job rotation
Allows the employee to set their own pace of work

128
Q

15/03/17

What is meant by differential pricing and give an example

A

Where a business charges different groups of consumers different prices for the same product
(E.g. Trains)

129
Q

15/03/17

What is meant by market skimming and give an example

A

This is a method of pricing where the business has a higher price than competitors because it has a better product, for which consumers are willing to pay a higher price
(E.g. Cars)

130
Q

15/03/17

What is meant by cost plus pricing and give an example

A

This is a method of pricing where the business looks at the price it paid for the product and then adds on profit to arrive at the price to be charged
(E.g. Restaurants, jam)

131
Q

15/03/17

What is meant by penetration pricing

A

Where a business lowers the price of products or services to gain customers from other businesses
(E.g. Supermarkets)

132
Q

15/03/17

What is meant by competitor pricing and give an example

A

This is a method of pricing used when there are a lot of other businesses selling the same or similar products
(E.g. Mobile phones)

133
Q

15/03/17

What is meant by promotional pricing and give an example

A

Prices are reduced for a short period of time, often to sell off old stock
(E.g. Clothes)

134
Q

15/03/17

What is meant by psychological pricing and give an example

A

Where prices are 9.99 rather than 10 to make the product seem much less expensive and so attract extra sales
(E.g. Consoles)

135
Q

17/03/17

What is meant by a product mix

A

This is the overall range of products a business produces and sells

136
Q

17/03/17

What are the 4 aspects to the Boston matrix

A

Stars
Question marks
Cash cows
Dogs

137
Q

17/03/17

Explain each aspect of the Boston matrix

A

Stars - a product that has high market growth
Question marks - you’re questioning whether a new product will be successful
Cash cows - this is the product that has huge volumes of sales with high market share
Dogs - small & specific but appeals to enough people

138
Q

17/03/17

What is meant by the product lifecycle

A

This is the life of a product from its introduction right through to its potential decline/withdrawal

139
Q

17/03/17

What is meant by extension strategies

A

These are strategies to keep customers interested

140
Q

17/03/17

What are the 4 stages if a product lifecycle

A

1) introduction
2) growth
3) maturity
4) decline

141
Q

23/03/17

What does it mean by promotion

A

This is trying to make customers aware of the brand and seeks to encourage customers to buy. Businesses also make the brand unique/different

Business Studies AS (4 decks)

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