Role of Business Flashcards
What does a business satisfy through producing goods and services?
Wants and needs
Businesses produce goods and services to meet consumer demands.
What is the production process?
Input (Raw materials and resources) -> Transformed (4FoP) -> Output (G+S)
4FoP refers to the Four Factors of Production.
What is the difference between goods and services?
Goods = Tangible, Services = Intangible
What acronym summarizes key roles of business?
PEW IQ ICE!
Each letter represents a key concept: Profit, Employment, Wealth, Innovation, Quality of Life, Income, Choice, Entrepreneurship, and Risk.
Define profit.
The money generated from the sale of products minus costs and expenses.
What is Gross Profit?
Sales - COGS (cost of goods sold)
What is Net Profit?
Gross profit - expenses (all other expenses other than products)
How is profit calculated?
Profit = Revenue - Expenses
What are the two options for profit usage?
- Returned to owner(s)
- Reinvested in business
Why do businesses need employees?
To operate their business
What percentage of employment in Australia is provided by SMEs?
Over 80%
How do businesses create wealth?
- Providing profits/dividends to owners
- Capital growth in share price
What forms can income from businesses take?
- Wage
- Salary
What is a wage?
Money received, usually on an hourly or daily basis
What is a salary?
Fixed regular payment received fortnightly or monthly
How do businesses improve quality of life?
By providing goods and services that make life better/easier
What is innovation in the context of business?
The ability to create new products, improve previous designs, or enhance the production process
What is one common way to innovate?
Research and development
What does choice in business refer to?
The variety of products offered to consumers
What risks do entrepreneurs face?
No guarantee of profit and potential inability to pay back loans
What percentage of SMEs fail in their first 5 years?
Over 80%
