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AQA A-Level Business > Section 1 - What is Business? > Flashcards

Section 1 - What is Business? Flashcards

1
Q

Define mission

A
  • purpose a business exists for
  • generalised statement with overall aim
  • clear goal, sense of direction, communicates to stakeholders
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2
Q

Define objectives

A
  • more specifc goals
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3
Q

State 4 reasons why businesses exist

A
  • there is a gap in the market
  • create a living for an entrepeneur
  • a passion of the entrepeneur (must be a need)
  • social/ethical aim – 1 item sold = 1 item donated to those in need
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4
Q

State 6 aims of businesses

A
  • profit maximisation – allows expansion, growth, machines replacement, shareholder payment
  • survival – get through first year, build customer base, reliable re-achievable goal
  • cash flow
  • to make profit (total revenue > total costs)
  • social and ethical objectives
  • growth – expanding to new markets, new geographical markets
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5
Q

Describe the 2 types of growth

A
  • organic = more staff, more stores, more goods
  • inorganic = merging or taking over another company
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6
Q

Define profit

A

a financial gain
- total revenue - total costs

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7
Q

Define total costs

A

all the costs incurred in producing something
- variable costs + fixed costs

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8
Q

Define fixed costs

A

costs that do not change with output
- rent, mortgage, loans, insurance, lease of machinery, salaries

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9
Q

Define variable costs

A

costs that vary with output
- raw materials, fuel, packaging, wages, cost of stock

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10
Q

Define revenue

A

the amount of money coming into a business
- quantity x price

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11
Q

Define gross profit

A

amount that business has made from sales (normal trade) minus cost of goods sold
- sales revenue - cost of sales

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12
Q

Define LTD and PLC

A

LTD = private limited company
PLC = public limited company

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13
Q

Give 4 examples of a public sector company (gov owned)

A
  • NHS
  • fire services
  • schools
  • charities
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14
Q

Give 4 examples of private-sector companies (private owned)

A
  • sole trader
  • PLC
  • LTD
  • partnerships
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15
Q

Define limited liability

A
  • owner has no personal liability for debt
  • separate legal identity
  • not liable for debt payment from personal accounts
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16
Q

Define unlimited liability

A
  • if business goes bust – owner must pay
  • only in sole trader/partnership
  • eg. re-mortgage, sell cars, use own savings to pay
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17
Q

Describe sole trader

A
  • owned by one person (unless you become a partnership
  • full control of business – own boss
  • profit is own
18
Q

Describe advantages of being a sole trader

A
  • easy to set up
  • quick decisions
  • less finance
  • personal customer attention
19
Q

Describe disadvantages of being a sole trader

A
  • unlimited liability
  • risk – hard to expand financially
  • no economies of scale
  • no one to take over if ill (unless staff employed)
20
Q

Describe advantages of being a private limited company

A
  • limited Liability
  • can raise sell shares (fam + friends)
  • employ a manager
  • separate legal status
21
Q

Describe disadvantages of being a private limited company

A
  • accounts not private
  • harder to set up – expensive, requires admin
  • cannot sell shares on the stock market
22
Q

Describe advantages of being a public limited company

A
  • limited liability
  • shares can be sold to the public
  • shares can be traded on stock market
  • banks + investors more likely to invest
23
Q

Describe disadvantages of being a public limited company

A
  • lawyers needed
  • expenses must be published
  • advertising and admin
  • must have $50,000 in share capital
24
Q

Describe a non-profit organisation (charity)

A
  • has a social objective
  • all profits go to helping cause (doesn’t distribute dividends)
  • run by volunteers, community and donors
  • not driven by profit
25
Q

Describe a non-profit organisation (mutual)

A
  • benefits a select group of people
  • aim is to help members
  • revenue comes from memberships
  • eg. unions, trade groups, property management, chambers of commerce
26
Q

What factors influence choice of business form

A
  • objectives of the business
  • how the business is financed
  • what products and services are offered
27
Q

State 4 reasons a business may want to change business forms

A
  • may need more finance as it grows and expands
  • sole trader may want to sell shares (+ limited liability benefit)
  • LTD may want to expand and float on stock market
  • become a PLC to attract public and governmental investment
28
Q

Define ordinary share capital

A
  • allows investors to vote (one share = one vote)
  • represents proportionate ownership of company
  • ordinary shareholder receives fluctuating dividends (depending on company preference)
  • ordinary shareholders receive dividend payment after preferred shareholder
29
Q

Define market capitalisation

A
  • total value of company or total shares value
  • current share prices x number of issued shares
  • can fluctuate depending on performance
30
Q

Define dividends

A
  • if investors own a share – paid dividends (if company profits)
  • paid 3x a year (or once)
  • reward for continued investment
  • if shares sold – no longer eligible for payment
31
Q

Describe the role of shareholders

A
  • owners of a company
  • provide financial backing (in returns for dividends)
  • make decisions – approve company accounts for publication
  • decisions made at AGM (annual general meeting)
32
Q

State 3 reasons why shareholders invest

A
  • hope of return in capital investment (better than bank savings)
  • paid dividends
  • may benefit if share value rises (capital gain)
33
Q

What 4 factors affect share prices?

A
  • supply and demand in market
  • interest rates
  • political climate
  • management of company
34
Q

Define external environment

A

anything outside business that could impact the way it operates
- (eg. Customers, investors, politics)

35
Q

State the 6 PESTLE factors and an example for each

A
  • political – protectionist policies
  • economic – interest rates
  • social – demographic change
  • technological – automated production
  • legal
  • environmental – pollution
36
Q

Describe political impacts on costs

A
  • any governmental decisions that affect business
  • corporation tax raised or lowered
  • VAT can be raised or lowered
  • high taxation = more money for government, lower business profit
37
Q

Describe political impacts on demand

A
  • inc. protectionist policies (protecting domestic industries for foreign competition)
  • impose tariffs (tax charged based on value) and quotas (restrict quantity of a good important) to deter company exports
  • less likely to demand foreign goods
38
Q

Describe economic impacts on costs

A
  • if economic growth ↑, consumer growth ↑ = spending
  • business can employ more staff
  • in recession, staff made redundant (no longer needed) = save costs
39
Q

Describe economic impacts on demand

A
  • GDP – gross domestic product
  • inflation
  • interest rates
  • exchange rates
  • income ↑, demand less inferior goods, more necessity

Strong Pound Imports Cheaper, Exports Dearer
Weak Imports Dearer, Exports Cheaper

40
Q

Describe social impacts on cost

A
  • migrant worker ↑ - producers have staff willing to work on minimum wage (costs lower)

AQA A-Level Business (7 decks)

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