L6 Summer Exam Flashcards
Revenue formula
Selling price per unit x number of units sold
Total Variable costs formula
Variable cost per unit x number of units sold
Total costs formula
Fixed costs + variable costs
Profit formula
Total revenue - total costs
Market capitalisation of a business, formula
Number of issued shares x current share price
Relationship between mission and objectives
A mission statement explains the company’s purpose and focus, while objectives outline a path for achieving the mission.
Common business objectives
Market share, profit, survival, growth, cash flow, social, ethical
Why do businesses set objectives?
Help to define goals, can guide the decision making
Reasons for choosing different forms of business
A company is
A business organisation that has its own legal identity and that has limited liability
Incorporation is
The process of establishing a business as a separate legal identity that allows it to benefit from limited liability
A shareholder
Is an investor in and one of the owners of the company
Limited liability and unlimited liability
Limited liability Means that in the event of financial difficulties, the personal belongings of shareholders are safe. And the opposite for unlimited
What are dividends
Are a a share in the profits of a company that are distributed to the holders of certain types of company shares
Net gain=
Expected value - initial cost of decision
Market growth (%) =
Change in the size of the market over a period/original size of the market X100
Market share (%) =
Sales of one product or brand or business/total sales in the market. X100
Added value formula
Sales revenue-costs of bought in goods and services
Labour productivity formula
Output over a time period/number of employees
Unit costs (average costs)=
Total costs/number of units of output
Capacity utilisation (%)=
Actual output/maximum possible output X100
Return on investment (%) =
Profit from the investment/cost of the investment. X100
Gross profit=
Revenue - cost of sales
1.Profit from operations=
2.profit for year=
1.Operating profit= gross profit-operating expenses
2.operating profit + profit from other activities - net finance costs - tax
- Private organisation
- Public organisation
- Private organisations benefit the owners, shareholders and investors. They are financed by private money from shareholders and by bank loans.
- Public organisations are owned by the government. They provide goods and services for the benefit of the community.
Market cap/capitalisation
Market capitalization refers to the total dollar market value of a company’s outstanding shares of stock.
Tannenbaum Schmidt model (autocratic - subordinate style of leadership) in order
Tell
Sell
Suggest
Consult
Join
Delegate
Abdicate
Blake mouton grid
Country club= high concern for people low concern for task
Impoverished= low concern for people low concern for task
Team leader= high concern for people high concern for task
Authoritarian=low concern for people high concern for task
Decision trees
Do some
Influences on decision making
External environment
Budgets
Availability and reliability of data
Attitude to risk, is it encouraged?
Role and importance of shareholders
The shareholder is the owner of the company that provides financial security for the company, has control over how the directors manage the company, and also receives a percentage of any profits generated by the company.
Stakeholder mapping (model)
Keep completely informed=high interest low influence
Manage most thoroughly=high interest high influence
Regular minimal contact=low interest low influence
Anticipate and meet needs=low interest high influence
Influences on relationships of stakeholders
Market size formula.
Just have to guess off what’s int he question
Outsourcing pros and cons
Pros:cheaper short term
Could be more efficient
Gives the company more time to focus on other matters
Cons: could sacrifice quality
Expensive long term
Could steal the ideas
Marketing mix
Price
Promotion
Place
Product
(People)
(Process)
(Physical environment)
Boston matrix
Star
Cash cow
Question mark
Dog
E-commerce
E-commerce is the activity of electronically buying or selling of products on online services or over the Internet.
Multichannel distribution
Multichannel distribution system is a method or structure in which a single company sets up two or more sales and marketing channels to reach one or more customer segments
Economies of scale and diseconomies
Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods. And the opposite for diseconomies.
Capacity and capacity utilisation
It is the relationship between output that is produced with the installed equipment, and the potential output which could be produced with it, if capacity was fully used.
Consequences of poor quality
Could lose customers, can also cause customers to take their business elsewhere, leading to job losses and a decrease in company productivity.
Quality control and quality assurance
quality assurance relates to how a process is performed or how a product is made, quality control is more the inspection aspect of quality management.
Flexible operations
A flexible organisation is one that is able to adapt and respond relatively quickly to changes in its external environment in order to gain advantage and sustain its competitive position.
Inventory management
Inventory management helps companies identify which and how much stock to order at what time
Inventory control charts
Highlights issues relating to inventory management such as the re-order level, re-order quantity, usage rates and lead time. PRACTISE SOME
1.gross profit
2.operating profit
3.profit for the year
1.all profit made
2. the total income a company generates from sales after paying off all operating expenses
3. the profit made after all other operating expenses have been deducted from the gross profit.
Cash flow objectives
Reduce borrowings
Minimise interest costs
Stay below limit for gearing
Capital structure
The capital structure of a business refers to the balance of its finance in terms of how much is equity (or share capital) and how much is is in the form of debt.
Variance analysis
A or F thing but have to work out first so try some out
Debt factoring
Is when a business can go to the third party of the debt factored to chase up the business’s receivable in exchange for a percentage of the money from the receivable. The debt factorers get the receivable to pay quicker by threatening legal action. This can prevent poor cash flow
Share capital
Money made from issuing and selling shares
Venture capital is
Receiving financial support from a third party in exchange for a percentage of the business
Retained profit
Retained profit is the amount of a business’s net income that is kept within its accounts, rather than paid out to shareholders.
Methods of improving cash flow
Negotiate quick payment terms.
Give customers incentives and penalties.
Check your accounts payable terms.
Cut unnecessary spending.
Common cash flow problems
Expecting profitability too quickly
Not creating a cash flow forecast
Collecting receivables too slowly
Low profit margins
1.Gross profit margin (%) =
2.operating profit margin (%) =
3.profit for year margin (%) =
1.Gross profit/revenue x100
2.operating profit/ revenue x100
3.profit for year/revenue x100
Variance =
Budgeted figure - actual figure
1.Contribution per unit=
2.Total contribution =
1.Selling price - variance costs per unit
2.contribution per unit x units sold or. Total revenue - total variable costs
1.Break even output=
2.margin of safety
1.fixed costs/contribution per unit
2.actual level of output - break even level of output
Labour turnover (%) =
Number of staff leaving/ number of staff employed x100
Employee retention rate (%) for a particular time period =
Number of staff who remained with the business for the period of time/ no. Of employees at the start of the time period x100
Employee costs as percentage of turnover =
Employee costs / turnover x100
Labour cost per unit =
Labour costs/ units of output
1.ROCE (%) =
2.capital employed=
1.Operating profit/ total equity + non current liabilities
2.where total equity + non current liabilities
Current ratio=
Current assets/ current liabilities
Gearing (%)=
Non current liabilities/total equity + non current liabilities x100
Payables days=
Payables/ cost of sales x365
Receivables days=
Receivables/ revenue x365
What is the resource mix?
The combination of capital and human resources utilised within a business to achieve the required output.
New product development pros and cons
Pros:
. Essential to organic growth of the business/ survival
.if a brand has a reputation of positive product development consumers could be eager to try out the new product.
Cons:
. Products can fail unexpectedly
.external events can change procedures or haunt production
.a lot of time and resources can be put into development but they could fail when tested within the market.
Product life cycle extension strategies
.Change product
.change price
.change place
.change promotion
Why are extension strategies beneficial?
It can save time instead of developing new products, they can change one in the decline stage.
How can profitability be improved?
reducing costs, increasing turnover, increasing productivity, and increasing efficiency.
Taylor theorist:
Taylor believed that all workers were motivated by money
Maslow theorist:
He proposed that humans have five tiers of needs: top level/self actualization, fourth level/esteem, third level/love and belonging, second level/safety needs, and bottom level/physiological needs like food and shelter.
Herzberg theorist:
hygiene” and motivation. Hygiene issues, such as salary and supervision, decrease employees’ dissatisfaction with the work environment. Motivators, such as recognition and achievement, make workers more productive, creative and committed.
Hackman and Oldham:
skill variety,
task identity,
task significant,
autonomy, and.
feedback
Value of good employer/employee relations
employee productivity, engagement, motivation and morale tend to be much higher.
What is sampling in market research
the process of creating a small unbiased population to be used in a test or experiment.
Pros:
. Realistic results on public opinion of the product
Cons:
. Lack of knowledge may mislead the results
.selection of good samples is difficult
