Size of business Flashcards
5 ways to measure size of business
No of Employees, Revenue, Market Capitalisation, Market share, Capital employed
Revenue
Total value of sales made by a buisness in a given time period
Capital employed
The total value of all long term finance invested in the business
Market Capitalisation
The total value of a company issued shares
Market share
Sales of the business as a proportion of total market sales
Advantages of using no of employees as a measurement of business size?
Accurate measure as bigger businesses can handle the costs of a larger workforce
Disadvantages of using no of employees as a measure of business size
Large businesses may be highly automated and only need a few skilled workers
Pros of using revenue as measure of business size
Good at comparing size of firms from the same industry
Cons of using revenue as a measurement for size of business
Less effective when comparing firms in different industries
Pros of using Market Capitalisation as a measurement
Shows the size of the company compared to its industry
Cons of using Market Capitalisation as measurement
Industry could be niche so the business could actually very small
Pros of using market shares
Shows the size of the company compared to its industry
Cons of using market shares as a measurement
Industry could be niche so the business could actually very small
Pros of Capital employed as a measurement
Larger businesses will have a greater amount f capital employed A small business may have a lot of business invested into it so it doesn’t necessarily show how big the business is
Two firms could be the same size but different capital employment. For example, hair dresser and optician could have same amount of employees but an optician invests more capital due to it having more expensive equipment
