Nature And Purpose Of Business Flashcards
Why do businesses exist?
Businesses create employment
Businesses create wealth
They create new products and services
Can enhance a country’s reputation
What does a business do?
Production:
The process of resources being converted into a product or service that is intended to satisfy the needs of consumers
What does added value mean?
The process of modifying resources with the intent to add worth to them. Generally businesses develop their Unique Selling Point.
What are factors of production?
C - capital- goods that are made in order to produce other goods services
E - enterprise -the act of bringing all the factors of production together in order to provide a product or service
L- land- all the natural resources that could be used for production
L- labour- describes the mental and physical effort involved in production
What is mission statement?
It is the overall purpose or main corporate aims, intended to make stakeholders aware of what the business does and why, encouraging employees to work towards its aims
What is a corporate objective?
The goals of the business as a whole, it will depend of the size of the business.
What are functional objectives?
The objectives of the departments, they are more detailed than corporate objectives, they help the business work towards the corporate objectives.
A functional objective must be SMART, what does this stand for?
Specific Measurable Agreed Realistic Timely
What are the four main objectives that businesses will produce and follow?
Profit objectives
Growth objectives
Survival objectives
Cash flow objectives
What are social objectives?
They relate to benefiting society or people in need
What are ethical objectives?
Based on moral principles about how businesses treat people and the environment
What type of businesses set and work towards social and ethical objectives?
Non profit organisations such as charities or social enterprises
What is the difference between short term and long term objectives?
- long term objectives tend to set the direction of a business, such as long term growth
- short term objectives includes survival and making short term profit
What is revenue?
The value of sales - amount of money generated by sales of a product before any deductions are made.
How would you work out the revenue?
Revenue = selling price per unit x quantity of units sold