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Business Studies > Production, Finance and the External business environment > Flashcards

Production, Finance and the External business environment Flashcards

1
Q

Define mechanisation

A

When machinery is used, but labour is still required to work the machinery

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2
Q

Define automation

A

When machinery is used and a computer controls it

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3
Q

What are the advantages of using technology?

A

Large amounts economies of scale
Higher productivity
Quality increase machines make less mistakes
Repetitive/dangerous jobs done by machines
Flexible production-machines programmed to produce variety

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4
Q

What are the disadvantages of technology?

A

Workers become redundant
Business have to recruit new staff to operate machinery
Existing staff need retraining
Break down stops all production

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5
Q

Define job production

A

Involved producing each product individually

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6
Q

What are the advantages of job production?

A

High quality items as more time spent on them
Tailored to customers individual needs
Motivated workers as task aren’t repetitive

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7
Q

What are the disadvantages of job production?

A

Cost of production is higher

Labour costs higher due to skilled labour needed

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8
Q

Define batch production

A

Set stages that the production process needs to go through. One process has to be completed before the next, products are similar but can vary

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9
Q

What are the advantages of batch production?

A

Needs of customers met as different batches can be made
Possible to use machinery which will save costs
Produce larger quantities

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10
Q

What are the disadvantages of batch production?

A

Takes time to switch production of batches
Repetitive tasks for workers
Lots of ‘work in progress’ as batches have to complete one stage before the next

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11
Q

Define flow production (mass)

A

Continuous movement of items through production progress. Next task must start immediately after the next

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12
Q

What are the advantages of flow production?

A

Large amounts made
Costs are low Benefit from economies of scale
Improvement in technology means a variation in design can be programmed
Machinery used keeping costs low

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13
Q

What are the disadvantages of flow production?

A

Mass produced- lower quality
Large stocks of material have to be kept to keep production line going- expensive
Repetitive jobs
Expensive to set up production line
If one part breaks down the whole process stops

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14
Q

Define division of labour

A

Organisation of production into a number of specialised repetitive processes

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15
Q

Define specialisation

A

Occurs where workers specialise in carrying out simple production tasks

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16
Q

Define process production

A

Method of production involving a series of automated processes, which when applied to a variety of raw materials which results in a large quantity of finished products

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17
Q

what are the advantages of process production?

A

large amounts can be made

most processes can be automated, keeps costs low

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18
Q

what is the disadvantage of process production?

A

expensive to set up an automated system of production

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19
Q

what is added value?

A

the increased worth that a business creates for a product. difference between the cost to produce and the price it is sold at

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20
Q

what are the six possible ways value could be added to a product?

A 
quality
design and formula
convenience
speed and quality of service
branding
unique selling point
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21
Q

define quality in terms of added value

A

product that is of high standard compared to those of the competitors

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22
Q

define design and formula in terms of added value

A

product or service may contain distinctive features. e.g shoe may be more comfy due to a special built in feature

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23
Q

define convenience in terms of added value

A

customers pay more for products they can have straight away

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24
Q

define speed and quality of service in terms of added value

A

customers pay more for products that can be delivered more quickly

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25
Q

define branding in terms of added value

A

a distinctive product that stands out from competitors e.g nike vs tesco

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26
Q

define unique selling point in terms of added value

A

characteristic which makes a product or service diffeent from a similar one

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27
Q

define efficiency

A

achieving maximum productivity with minimum wasted effort/expense

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28
Q

define just in time (JIT) as a method of increasing efficiency

A

stock of materials and components are not stored but used immediately when they arrive at a factory

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29
Q

define total quality management (TQM) as a method of increasing efficiency

A

process where all workers are responsible for quality throughout the process of production. this ensures faults are found early

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30
Q

why is good quality important to a business?

A

may be unable to sell poor quality goods
price of poor quality goods may be reduced
customers unhappy with quality giving a bad rep

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31
Q

why might a business need to raise money?

A 
start up business 
invest in business growth 
develop a new product
buy new equipment 
solve cash flow problems 
move location
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32
Q

define grants

A

money given by government or council for specific purpose. doesn’t need repaying but can’t be spent on whatever you want

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33
Q

define owner investment

A

existing owners invest money, used for a takeover or long term debt pay off. structure of business may change

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34
Q

define cash in bank

A

money owned by a business built up over time. used for day to day operations e.g purchasing assets

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35
Q

define share issue

A

used by limited companies to raise finance in return for a share in the business. dividends may be paid on shares

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36
Q

define retained profit

A

profit made by business kept back for own use. can pay for dividends

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37
Q

define sale of assets

A

selling off, turning into cash something the business owns. e.g to buy new equipment

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38
Q

define mortgage

A

borrowing money to help fund purchase of a property. money paid back with interest

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39
Q

define overdraft

A

business can draw more money from bank account than it actually has. helps overcome short term shortage of fund

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40
Q

define bank loan

A

money borrowed from bank, can be used to fund development. has to be paid back with interest

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41
Q

define leasing/renting

A

monthly or annual pay on an item that’s returned to the owner (cars,lorries)

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42
Q

define hire purchase

A

obtaining item in return for monthly payment. item becomes yours once all is paid (company cars, lorries)

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43
Q

define taking a new partner

A

sell off part of business to new partner

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44
Q

define trade credit

A

business allows another business to take goods without paying. goods are paid for within an agreed period of time

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45
Q

define internal finance

A

comes from within the business

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46
Q

define external finance

A

comes from outside the business

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47
Q

which internal sources of finance are short term? (up to 12 months)

A

cash in bank

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48
Q

which internal sources of finance are medium term? (1-3 years)

A

retained profit

sale of assets

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49
Q

which internal sources of finance are long term? (3+ years)

A

retained profit

owners investment

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50
Q

which external sources of finance are short term? (up to 12 months)

A

overdraft

trade credit

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51
Q

which external sources of finance are medium term? (1-3 years)

A

bank loan
lease
hire purchase
grant

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52
Q

which external sources of finance are long term? (3+ years)

A 
bank loan
mortgage 
new partner 
share issue
lease 
hire purchase
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53
Q

define opportunity cost

A

the cost of missing out on something else e.g

if business pays for new product they cant pay for new premises

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54
Q

define price elasticity of demand

A

sensitivity of a product to change in price

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55
Q

what might effect the sensitivity of a change in price to a product?

A

if there are substitutes
if the product was already cheap
whether competitors change prices
if there are any competitors

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56
Q

how do you calculate revenue?

A

quantity sold X selling price

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57
Q

define revenue

A

the money a business receives from selling goods and services

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58
Q

define variable costs

A

costs that can as output changes

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59
Q

define fixed costs

A

costs which remain the same regardless of output

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60
Q

define average cost

A

all the costs of producing a particular product or service divided by the number sold

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61
Q

define total costs

A

all the costs of producing a particular product or service

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62
Q

how do you calculate average cost?

A

total cost/amount sold

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63
Q

how can a business reduce their average costs?

A

reduce amount paid for materials
reduce wages
increase efficiency of production (change from batch to flow)

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64
Q

define break even

A

the point at which the sales are exactly the same as the costs

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65
Q

how do you calculate break even?

A

total fixed costs/(selling price -variable cost)

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66
Q

define margin of saftey

A

the difference between the actual level of output and the break even output

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67
Q

how do you calculate margin of saftey?

A

actual sale-break even sales

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68
Q

why is break even useful for a business?

A

can set minimum sales target
can be useful when trying to get a bank loan
can use to make a decision to increase prices
can use to make a decision to reduce cost

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69
Q

what are the limitations of break even

A

forecast figures may turn out to be different to actual figures
the figures only usually relate to one product
assumes all output is sold

70
Q

how do you calculate total cost?

A

variable + fixed cost

71
Q

define cash flow

A

the movement of money in and out of a business bank account

72
Q

define inflows/income

A

the amount of money received by a business

73
Q

define outflows/expenditure

A

money that goes out of a business

74
Q

how do you calculate net cash flow

A

inflows-outflows

75
Q

define positive net cash flow

A

where the inflows are greater than the outflows

76
Q

define negative cash flow

A

inflows are not enough to cover outflows

77
Q

define opening/closing balance

A

the amount of money in a business account at a particular time

78
Q

whats the difference between a cash flow forecast and a cash flow statement?

A

cash flow forecast= prediction

cash flow statement=what actually happened

79
Q

how do you improve your cash flow position?

A

lower costs
increase sale revenue
consider a loan or putting more money of their own in

80
Q

how do you calculate closing balance?

A

net cash flow+opening balance

81
Q

what does a positive net cash flow mean in a cash flow forecast?

A

it means the flow of money into the account that month just so happens to be greater than the outflow

82
Q

does a positive cash flow mean a business is making profit

A

no

83
Q

what will happen to a business if it consistently has a negative net cash flow

A

may go out of business as it doesn’t have enough money to pay for the day to day running- doesn’t always mean it is unprofitable

84
Q

how can a business prevent having a negative cash flow?

A

get a loan
cut costs
sell more products

85
Q

what are the benefits of cash flow forecasts?

A
  • enable business to asses their ability to meet debts
  • identify cash flow problems and enable business to to plan in advance to prevent cash shortage
  • secure external finance as bank can asses their ability to meet payments
  • help business make key decisions e.g invest in additional resoruces
  • control a business by setting targets relating to cash flow
86
Q

what are the limitations of cash flow

A
  • figures may be different to actual one if they’re based on inadequate research/info
  • difficult to do accurately as external factors out of business control can have an effect
87
Q

why would a business want to make a profit?

A

reward for risk taken by shareholders or owners

re-invest in the business for growth

88
Q

what options can increase income?

A

increase revenue
invest own money
apply for a bigger loan

89
Q

what options can decrease expenditure?

A

cut wages
cut expenses
ask suppliers if payment can be delayed

90
Q

define gross profit

A

amount of profit made by a business as a result of buying and selling goods or services but without paying for any of the day to day running

91
Q

define net profit

A

takes into account the profit made as a result of buying and selling goods,but also makes an allowance for the costs involved in running the business

92
Q

how do you calculate gross profit?

A

revenue- costs of buying goods

93
Q

how do you calculate net profit?

A

gross profit- expenses

94
Q

define expenses

A

cost of running a business that occurs as part of a company’s operating activity

95
Q

define accounting

A

process of keep financial records

96
Q

why is keeping financial records important?

A

know whether the business is making profit or not
be prepared for external organisations such as auditors and inland revenue
able to use records to plan for the future

97
Q

define profit margin

A

ratio of profit over revenue. mainly an idication of a company to control costs

98
Q

how do you calculate gross profit margin?

A

gross profit/revenue X100

99
Q

how do you calculate net profit margin?

A

net profit/revenue X100

100
Q

why is calculating net profit and gross profit margins important?

A

profit can be compared with competition

compared over time

101
Q

define exchange rate

A

the value of one currency in terms of another

102
Q

what is a strengthening exchange rate?

A

pound increases in value

can buy more foreign currency

103
Q

what is a weakening exchange rate?

A

pound decreases in value

buy less foreign currency

104
Q

where does the money go when goods are imported?

A

out of the uk

105
Q

where does the money go when goods are exported

A

in to the uk

106
Q

what is the acronym for exchange rates?

A 
Strong
Pounds
Imports
Cheap 
Exports 
Dear (expensive)
107
Q

in what three ways do interest rates effect a business?

A

cost to business of borrowing money
cost to customer of borrowing money
reward for saving

108
Q

what could a weakening pound mean for toms toys?

A

has to give up more pounds to buy stock from EU supplier= increase costs

109
Q

what could toms toys do to stop costs increasing from the weakening pound? what could happen as a result?

A

could increase prices

may not be effective- could reduce price competitiveness

110
Q

will all of toms toys costs increase as a result of the weakening pound

A

only 30-40% are stock costs

not all costs will increase

111
Q

will all of toms toys stock costs to be negatively effected by the weakening pound?

A

no only 40% stock fro EU

rest unaffected

112
Q

how do a rise in interest rates effect a business?

A

loads to expand cost more

less people will be buying goods and services

113
Q

what are the positives of unemployment for Bowton?

A

more workers available

employ workers more cheaply

114
Q

What are the negatives of unemployment in Bowton?

A

people stop buying toys
shop at cheaper shops
workers are demotivated

115
Q

to what extent is it good news Bowton are giving grants to new businesses?

A

more employment should lead to increase spending but:
1-parts time low paid work (less disposable income)
2-no figures to indicate how much employment increased
3-businesses selling luxury products might not see benfit

116
Q

What will higher levels of employment in Bowton due to grants mean? (2)

A

higher rates of income tax

less well-fare payment

117
Q

How does the council and area of Bowton benefit from grants?

A
  • encourage new businesses
  • businesses create jobs
  • increase corporation tax + business rates
  • visitors attracted
118
Q

What does the success benefit of the council depend on?

A
  • amount of jobs created
  • if theres increase in income tax
  • whether there’s a reduction on benefit spending
119
Q

What is the European Union?

A

political and economic union of 28 member states

120
Q

What is the Eurozone?

A

group of countries in the EU that share the same currency

121
Q

what are the advantages of being in the EU?

A 
access to single market
access to greater amount of potential employees
increase market size 
common standards 
grants and subsidies
122
Q

what is the single market?

A 
based on four freedoms, free movement of:
people
goods
services 
capital
123
Q

What is a tariff?

A

a tax paid on imports

124
Q

what is a quota?

A

limit on the amount of product that can be supplied to a market

125
Q

What are the advantages to Toms Toys of being in the single market?

A
  • tariffs aren’t paid on 40% of their imports

- if they wanted to export in the future they would not be subject to EU tariffs

126
Q

what are the opportunities to Tom’s Toys of brexit?

A

encourage more domestic trade

new trade deals with non Eu countries- Australia,New Zealand, Canada and USA

127
Q

what are the problems of being an EU member?

A

environmental standards
minimum wage
social charter

128
Q

How do common standards apply to GG toys?

A

georgie doll-safety checks

129
Q

what are common standards?

A

standards on safety, quality and labelling.

Benfit because means don’t have to make different products to fit different regulation standards

130
Q

How do grants and subsidies apply to GG toys?

A

grants for robots

131
Q

what are environmental standards?

A

new standards on waste recycling and pollution.

adds costs to a business

132
Q

how does environmental standards apply to GG toys?

A

pollution transporting from China to UK

133
Q

What is globalisation?

A

Process by which business activities in different countries become more connected with each other

134
Q

what are the advantages of globalisation for the UK?

A

increase choice for customer
lower price
larger market
economies of scale

135
Q

what are the disadvantages of globalisation for the UK?

A

lower profits
lower sale(increase competition)
business closures + job losses

136
Q

Why might China not benefit from GG toys locating it’s factory there?

A

exploiting workers
pollution
local culture lost

137
Q

why might China benefit from multinationals such as GG toys?

A

creates jobs

pays higher wages than local businesses

138
Q

what is inflation?

A

when prices of goods and services are generally rising

139
Q

why does inflation occur?

A

excess demand in economy

if costs are increasing businesses will increase prices

140
Q

what happens if inflation is too high?

A

bank of england will raise inerest rates to reduce the demand

141
Q

What is income tax?

A
  • tax on persons income.
  • In Bowton central government will collect income tax if employment increases
  • sole trader + partnerships pay it
142
Q

what is national insurance?

A
  • supports NHS and state pensions
  • In Bowton central government will collect if employment increases
  • Sole traders + partnerships pay it
143
Q

what is corporation tax?

A
  • Tax that limited companies will pay

- In Bowton, central government will collect if GG toys make higher profits

144
Q

what are business rates?

A
  • tax paid on property business uses

- If more businesses open Bowton council will collect

145
Q

what is council tax?

A
  • paid by homeowners

- In Bowton local council will collect

146
Q

what is VAT?

A

tax on spending- 20%

147
Q

How can we compete with counties such as China and India? (5)

A
  • innovative products+services
  • prices low by increasing productivity through machinery
  • create a brand
  • add value through quality
  • recruit the right people`
148
Q

How will recruiting educated workers help to compete globally?

A

highly skilled workforce who can compete in global environment

149
Q

How will recruiting low skilled workers help compete?

A

hard working individuals who do not demand very high wages

150
Q

How does cutting corporation tax help to improve international competitiveness?

A

lower prices/encourages inward investment

151
Q

How does cutting income tax help to improve international competitiveness?

A

productivity will increase as people work harder as they have more disposable income

152
Q

How does investing in infrastructure help to improve international competitiveness?

A

goods can be distributed more efficiently

153
Q

How does investing in education+training help to improve international competitiveness?

A

workforce becomes more skilled

154
Q

How do grants to a business help to improve international competitiveness?

A

invest in growth and innovative product offerings

155
Q

what is inward investment?

A

when foreign firms set up in the UK, leading to the need for other businesses in the UK to supply raw materials

156
Q

what is happening to the UK’s population?

A

its becoming more ethnically diverse and is ageing

157
Q

what does the change in population mean for the type of products being demanded?

A
  • ageing=more retirement villages

- more ethnically diverse=polish supermarkets

158
Q

What is a monopoly market?

A

A market dominated by one seller

159
Q

What is perfect competition?

A

Market in which there are a larger number of sellers

160
Q

What are the features of a competition market?

A

Lots of firms
Lots of product choice
Low prices

161
Q

What are the features of a monopoly market?

A

Few firms
Few products
High prices

162
Q

How can GG toys be better than their rivals? (4)

A

Reduce costs to lower prices
Improve quality of products
Better customer service
Larger product range

163
Q

What are the pressures for GG toys operating in a highly competitive market?

A

Pressure to keep prices low

Pressure for on time delivery

164
Q

What is the equation for calculating market share?

A

(Sales of the business/ total sales in the market) X100

165
Q

How can competition be increased?

A

New businesses entering the market
Selling new product
Cutting rices
Increase advertising

166
Q

How can completion be decreased?

A

Takeover/ merger

Internal growth

167
Q

Does the government prefer competition?

A

Yes it means more choice and lower prices for customers

168
Q

Are monopolies illegal?

A

No but anti-competitive behaviour can lead to an investigation

169
Q

What is the CMA?

A

Competitive markets authorities

Have the power to stop mergers/ takeovers and fine businesses

170
Q

How can monopolies benefit customers?

A

If profits are reinvested to improve service and economies of scale savings are passed on

Business Studies (3 decks)

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