Nature + Purpose Flashcards
Why do businesses exist?
To provide goods + services on a commercial basis to customers.
What are goods?
Physical products
What are services?
Intangible products
Why create mission statement? (Reason 1)
It determines company direction
Why create mission statement? (Reason 2)
Focuses on the company’s future
Why create mission statement? (Reason 3)
Aligns what everyone should achieve
Why create mission statement? (Reason 4)
Makes decisions easier
Why create mission statement? (Reason 5)
Motivates staff members
What is an aim?
These are the overall long term goals/targets for the business.
What is a mission statement?
Sets out an overall business purpose
What are corporate objectives?
Medium/long term targets established to coordinate the business
What are functional objectives?
Those those relate to the specific functions of a business
Why is it important for businesses to set objectives?
To ensure everyone is working towards same goal
Motivate employees
Measure success of business
SMART
Specific= clearly + easily defined
Measurable= quantifiable (measured as a quantity)
Achievable= goals need to be reachable + realistic
Realistic= achievable + not in conflict with other objectives
Time bound= based on a explicit time scale
Profit
Is the surplus of the total revenue over total costs for a period of time.
Growth
A firm grows it should be able to exploit its market position and aim higher.
Survival
Aims for a business to continue to trade over a period of time
Cash flow
The movement of cash into and out the business
Social + ethical
Social responsibility is a business duty to make ethical decisions that positively impact society
Total Revenue formula
Selling price x Quantity sold
Revenue
The amount of money which a firm receives from selling its product
Fixed costs
Costs that do not vary with output, no matter how much is made, or how little is sold, they still must be paid.
Examples of fixed costs
Rent - Gas - Electricity - Salaries
Variable costs
Vary in direct proportion to output, as output increases variable costs increase, as output falls variable costs fall
