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Business > Role of a business,factors of a business,finance,opportunity costs,liability and added value > Flashcards

Role of a business,factors of a business,finance,opportunity costs,liability and added value Flashcards

0
Q

What are the factors of production

A

Capital
Enterprise
Land
Labour

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1
Q

Define what a business is

A

It’s an organisation that tries to make as much profit as possible by producing a good or a service

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2
Q

Define capital

A

The machinery used during production of a good or service

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3
Q

Define enterprise

A

The three other factors of production create the enterprise (capital,land,labour)

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4
Q

Define land

A

The land used for production of the good or service but also could be used for natural resources e.g. Diamonds/coal

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5
Q

Define labour

A

This is the workforce used to produce the good or service for wages

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6
Q

What are the 10 internal factors of a business

A 
Human resources
Sales
Administration 
ICT  
Customer services
Distribution 
Finance
Production
Research and development 
Marketing
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7
Q

What are the 8 external factors of a business

A 
World affairs
Social factors
Environmental factors
Consumers tastes 
Competition
Pressure groups
Legislations
Population trends
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8
Q

Define opportunity cost

A

The loss of an alternative when another is chosen

Since every resource can be put to an alternative use then every decision involves opportunity cost

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9
Q

What are the two types of consumer good or service (include examples)

A

NON DURABLE
Packet of crisps
A match

DURABLE
Cooker
Toaster

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10
Q

What are the two types of capital good or service (include examples)

A

NON DURABLE
fuels

DURABLE
Machinery / tools

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11
Q

Where is value added

A

During the production service

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12
Q

What is the formula for value added

A

Value of output -value of input

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13
Q

How does a business add value

A

By…..
Building a brand from good quality or reputation

Convenience , customers will pay more to have the product or service straight away

New product features like updated software or models

Delivery of good customer service

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14
Q

What is an internal factor in a business

A

It’s a factor that happens inside of a business they can be easily controlled or predicted

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15
Q

What is an external factor in a business

A

It’s a factor that happens outside of a business they cannot be easily controlled or predicted

16
Q

Define economies of scale

A

The reduction in unit costs (average cost) as the level of output increases

17
Q

What are the internal economies of scale and explain

Think FAT MP

A

Purchasing- if a large business purchases in bulk then they pay less per item than a smaller business

Managerial- if a business is larger than they’re able to employ more people to specialise in certain departments rather than a small business having to deal with all departments

Financial- banks will lend at a lower rate of interest the larger the business

Technological- use of more sophisticated equipment due to being able to pay for it

Advertising- the price does not increase as a firm gets bigger so therefore they’re able to pay for more adverts than a smaller business

18
Q

What is the formula for average cost

A

Number of units produced

19
Q

What are the external economies of scale and explain

Think LIE

A

Education- local schools and colleges run courses in appropriate skills so businesses may be able to provide apprenticeships and therefore gain potential employees

Infrastructure- transport and support systems

Local population- skills and experience in the industry, if the local community have the skills required for jobs this helps gain social benefits for the local community

20
Q

Define diseconomies of scale

A

It’s when there is an increase in unit cost as a firm grows and there is an increase in the scale of production

21
Q

What are the 3 diseconomies of scale

A

Communication problems within the business or through multiagency

Problems in managing the production process

Reduction in employee morale

22
Q

Why is it hard for a new business to obtain finance

A

There is no record of success or progression

They’re High risk

23
Q

Why do firms need finance (7 reasons)

A 
New equipment
Pay workers
Starting a new venture
Expansion
Buying premises
Buying stock
Paying bills
24
Q

What are internal sources of finance and give two examples

A

It’s finance obtained sighing the business. It is the cheapest type of sourcing finance
E.g. Sale of assets and retained profit

25
Q

What are external sources of finance and give 6 examples

A 
Finance obtained from outside of the business, it usually costs more than internal 
E.g.
Overdraft
Leasing
Trade credit
Venture capital
Debentures
Loans
26
Q

What is sale of assets

A

It’s the selling of a tangible or non tangible item for revenue

27
Q

What is a loan

A

A loan is given by the bank

It’s usually paid back with interest and paid in periods

28
Q

What is a debenture

A

A debenture is a loan given to a business by another company with the security that if payments back don’t occur then assets can be taken for the value of the debenture

29
Q

What is a venture capital

A

Money provided by investors of a business for start up costs
It’s very high risk but it’s the most important source of funding for startup costs

30
Q

What’s trade credit

A

It’s the extended period of time for payment from suppliers until sufficient cash flow is available

31
Q

What is leasing

A

It’s where you rent an asset and pay a payment each period over a span of time, but the asset still stays the leasing firms after the period of lease

32
Q

What is an overdraft

A

It’s an agreed amount of credit that a business can go past £0 in an account without permission from the bank, interest is added periodically

33
Q

What is retained profits

A

It’s profits a business has made but haven’t used (saved)

They can be the easiest source of finance

34
Q

What are the two things a business must consider when obtaining finance

A

How long is it needed for

Can the business do certain things to raise cash flow

35
Q

What are the types of timeframe in a business

A

Short term - maximum of 12 months

Medium term - more than a year , less than 5 years

Long term - more than 5 years

36
Q

What does unlimited liability mean (give 2 business types who have unlimited liability)

A

It means those who are the owners of the business are liable for any debts which may occur
E.g.
Sole trader
Partnership

37
Q

What does limited liability mean (give 2 business types who have limited liability)

A

It means the shareholders are liable for debts
They pay the percentage they put in (e.g. 20% of business means 20% of debts liable for)
Private limited company
Public limited company

38
Q

What is cash flow

A

It’s the flow of cash through a business

Business (12 decks)

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