putting a business idea into practice

Question 1

.1 why set an objective

Answer 1

setting an objective gives you a focus on what you are doing and allows you to look back and see if you have achieved what you wanted to.

Question 2

.1 objectives help with…

Answer 2

> decision making and establishing priorities.e.g. sell locally, or grow business overseas???
helps investors to understand the direction in which the business is heading
provides targets-compare actual with planned
motivate everyone- connecting with other businesses to measure their success

Question 3

.1 financial objectives include

Answer 3

> SURVIVAL >PROFIT >MARKET SHARE >FINANCIAL SECURITY >SALES

Question 4

.1 non-financial objectives include

Answer 4

> SOCIAL OBJECTIVES e.g. paying staff decent wages, treating customers with respect.
PERSONAL SATISFACTION >CHALLENGE >INDEPENDENCE >CONTROL

Question 5

.1 effective objectives should state…

Answer 5

> WHAT the target is e.g. making £20,000 profit
WHEN it should be achieved e.g. next 2 years
WHO is to achieve it e.g. who is in charge

Question 6

.1 non-profit making organisations

Answer 6

e.g. hospitals, schools, police&raquo_space; all aim to provide a public service without making any profits

Question 7

.1 you can use objectives to measure performance

Answer 7

you know if you have been successful if you know what you wanted to achieve e.g. if you make £20,000 profit and your aim was £15,000 then your target was a success, however if your target was £40,000 then you did not accomplish your target

Question 8

.1 why objectives differ between businesses

Answer 8

> different owners e.g. different reasons for setting up a business
different stages e.g. first year, survival is the main objective
different industry e.g. clothing shops or schools

Question 9

.2 business revenue, costs and profits

Answer 9

> running costs >start-up costs >fixed cost >variable cost >indirect costs >direct costs >revenue >costs >profit

Question 10

Running costs

Answer 10

paid either daily, weekly, monthly. you pay them on an ongoing basis (e.g. wages, rent, materials)

Question 11

start-up costs

Answer 11

have to be paid before you start running the business. (e.g. chairs, tables, computers)

Question 12

fixed costs

Answer 12

do NOT change with every item made or sold, they might be changed but it would not be as a result of making or selling more products. (e.g. rent, wages, advertising)

Question 13

variable cost

Answer 13

they vary with every item made or sold (e.g. raw materials, packaging)

Question 14

indirect costs

Answer 14

basically same as fixed costs, costs not directly contributing to the actual making of the item

Question 15

direct costs

Answer 15

basically the same as variable costs includes anything that goes directly into the making of the item (e.g. materials)

Question 16

revenue

Answer 16

money from sales: selling price x amount sold

Question 17

total costs =

Answer 17

fixed costs + variable cost

Question 18

profit =

Answer 18

total revenue - total costs

Question 19

interest

Answer 19

what you pay on money you have borrowed e.g. if you borrow £10,000 at an interest of 5% per year then the total interest per year is 10000 x 0.05 = £500 so total payment = £10500 per year

Question 20

to work out the total percentage of interest in a loan…

Answer 20

(total repayment - borrowed amount) / borrowed amount x 100 = interest in %

Question 21

break-even level of output

Answer 21

point where total revenue exactly equals total costs. it is the number of units a business needs to sell to cover its costs. fixed costs / (selling price - variable cost)

Question 22

margin of safety

Answer 22

total number of sales - break-even number

Question 23

if revenue increases…

Answer 23

then so long as costs do not rise by the same amount,their will be an increase in profits.

Question 24

if revenue falls…

Answer 24

profits may also fall

Question 25

it cost increases…

Answer 25

profits can be reduced

Question 26

if cost increases…

Answer 26

increase in profits usually