Microeconomics 1 Flashcards
Definition of Organisations
Social arrangements for the controlled performance of collective goals.
Organisations allow people to?
- Share goals
- Specialise
- Pool results
What is social arrangement?
More than one person.
What is controlled performance?
Must be a way of monitoring performance:
- Sales
- Profit
What is Collective goals?
A set of goals that a team will strive to achieve together.
3 types of ‘Profit seeking’ organisations?
- Sole trader
- Partnership
- Limited Liability Company
3 types of ‘Not for Profit’ Organisations?
- Public Sector
- Private Sector
- Non-Governmental Organisation (NGO)
Two ways to maximise shareholder wealth?
- Share price growth
2. Dividends
Issues with maximising shareholder wealth?
- Cash is preferable to profit
- Dividends exceeding cost of capital
- Long term and Short term perspectives.
What is ROCE? and what does it calculate?
Return on capital Employed
Measure of the flow of profits compared to the capital employed into the organisation.
How to calculate ROCE?
Profits before Interest and Tax / Average Capital Employed X 100 = a %
What is EPS and what does it calculate?
Earnings per share
It is a indicator of how profitable the organisation is.
What is a stakeholder?
Someone who has an interest in a business.
Types of stakeholders?
- Internal Stakeholders
e. g. Employees and management - Connected Stakeholder
e. g. Shareholders, Customers, Suppliers - External Stakeholder
e. g. Government, Community, Pressure Groups - Primary stakeholders
e. g. Contractual relationships - Secondary stakeholders
e. g. No-contractual stakeholders
Stakeholder Conflicts?
Employees v Managers = Jobs/Wages vs cost efficiency
Customer v Shareholders = Product quality/service levels vs profit/dividends
General Public v Shareholders = Effect on environment vs profit and dividends
Managers v Shareholders = Growth v Independence
