Key terms business activity Flashcards
What is a need?
A good or service essential for living.
Needs are fundamental requirements for survival.
What is a want?
A good or service which people would like to have, but which is not essential for living.
Wants are unlimited and vary among individuals.
What is the economic problem?
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants.
This creates the concept of scarcity.
What does scarcity mean?
The lack of sufficient products to fulfil the total wants of the population.
Scarcity forces choices to be made about resource allocation.
What are the factors of production?
Resources needed to produce goods or services.
There are four factors of production: land, labor, capital, and entrepreneurship.
What is opportunity cost?
The next best alternative given up by choosing another item.
Opportunity cost reflects the value of the foregone alternative.
What is specialisation?
When people and businesses concentrate on what they are best at.
Specialisation can lead to increased efficiency and productivity.
What is division of labour?
When the production process is split up into different tasks and each worker performs one of these tasks.
It is a form of specialisation that enhances efficiency.
What is added value?
The difference between the selling price of a product and the cost of bought-in materials and components.
Added value is crucial for profitability in businesses.
What is the primary sector of industry?
Extracts and uses the natural resources of Earth to produce raw materials used by other businesses.
Examples include agriculture, fishing, and mining.
What is the secondary sector of industry?
Manufactures goods using the raw materials provided by the primary sector.
This includes industries such as construction and manufacturing.
What is the tertiary sector of industry?
Provides services to consumers and the other sectors of industry.
Examples include healthcare, education, and retail.
What is de-industrialisation?
Occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.
This can lead to economic shifts and changes in employment patterns.
What is a mixed economy?
Has both a private sector and a public (state) sector.
Mixed economies combine elements of capitalism and socialism.
What is capital in a business context?
The money invested into a business by the owners.
Capital is essential for starting and running a business.
What is an entrepreneur?
A person who organises, operates and takes the risk for a new business venture.
Entrepreneurs are essential for innovation and economic growth.
What is a business plan?
A document containing the business objectives and important details about the operations, finance and owners of the new business.
A well-structured business plan is crucial for attracting investors.
What does capital employed refer to?
The total value of capital used in the business.
This includes both equity and debt financing.
What is internal growth?
When a business expands its existing operations.
Internal growth often involves increasing sales, production capacity, or investment in new products.
What is external growth?
When a business takes over or merges with another business.
This form of growth is often referred to as integration.
Define a takeover or acquisition.
When one business buys out the owners of another business, which then becomes part of the ‘predator’ business.
Takeovers can be friendly or hostile.
What is a merger?
When the owners of two businesses agree to join their businesses together to make one business.
Mergers typically aim to achieve synergies and reduce competition.
What is horizontal integration?
When one business merges with or takes over another one in the same industry at the same stage of production.
This can lead to increased market share.
What is vertical integration?
When one business merges with or takes over another one in the same industry but at a different stage of production.
Vertical integration can be forward (towards the consumer) or backward (towards raw materials).
Define conglomerate integration.
When one business merges with or takes over a business in a completely different industry.
This is also known as diversification.
What is a sole trader?
A business owned by one person.
What does limited liability mean?
The liability of shareholders in a company is limited to only the amount they invested.
What is unlimited liability?
Owners of a business can be held responsible for the debts of the business they own, with liability not limited to their investment.
Define partnership.
A form of business in which two or more people agree to jointly own a business.
What is a partnership agreement?
The written and legal agreement between business partners, recommended but not essential.
What is an unincorporated business?
A business that does not have a separate legal identity, such as sole traders and partnerships.
Define incorporated businesses.
Companies that have separate legal status from their owners.
Who are shareholders?
The owners of a limited company who buy shares representing part-ownership.
What are private limited companies?
Businesses owned by shareholders that cannot sell shares to the public.
What distinguishes public limited companies?
They can sell shares to the public and their shares are tradeable on the Stock Exchange.
What are dividends?
Payments made to shareholders from the profits of a company, representing returns for investing.
Define a franchise.
A business based on the use of the brand names, promotional logos, and trading methods of an existing successful business.
What is a joint venture?
An arrangement where two or more businesses start a new project together, sharing capital, risks, and profits.
What is a public corporation?
A business in the public sector owned and controlled by the state (government).
What are business objectives?
The aims or targets that a business works towards.
Business objectives guide the strategic direction of a company.
Define profit in a business context.
Total income of a business (revenue) less total costs.
Profit indicates the financial health of a business.
What is market share?
The percentage of total market sales held by one brand or business.
Market share is a key metric for assessing competitiveness.
What characterizes a social enterprise?
Has social objectives as well as an aim to make a profit to reinvest back into the business.
Social enterprises prioritize social impact alongside financial performance.
Who is considered a stakeholder?
Any person or group with a direct interest in the performance and activities of a business.
Stakeholders can include employees, customers, investors, and the community.
