The Role Of Shareholders and businesses and the external environment Flashcards
What is the definition of a shareholder?
Anyone who owns a share in the company
Who can buy shares from a public limited company?
Individuals, companies or institutions
Give three possible reasons for buying shares in a company?
- In order to receive a capital gain
- They receive a dividend of the profits
- Because they want to become involved in the running’s of the business
How does a private limited companies share prices vary?
They have control over their share price
How would a public limited company’s share price vary?
Through Supply and Demand, this means if more people want to buy the shares than the amount that is being sold, the demand for shares goes up and the price increases. However, if more people want to sell shares more than they’re buying them, then the supply is greater than the demand which means the share price goes down.
What factors could affect demand and supply of shares?
- The performance of the company
- Current share price
- Interest rates
- The economy
What are the long term and short term effects of share price changes?
Higher or lower dividend payments to the shareholders
Reduction of the overall value of a company
What is mean’t by the term “Market Conditions”?
It describes a wide range of factors affecting the market
Give examples of political factors that could affect the market and the consequences from the factors?
The government will increase the demand for product if demand is too low, one way they can do this is via cutting taxes so that people have more money to spend.
The government can influence demand for a product by putting taxes on certain products but not others, for example road tax has increased for high emission vehicles.
Explain how labour supply could affect business costs?
High unemployment rates means costs can be kept low because businesses can hire staff easily and won’t have to pay high wages
A low rate of unemployment will increase costs for a business because they may have to pay higher wages and pay for training.
How will the state of the economy affect demand and costs?
In a recession, people have less money to spend, which means demand for products decreases.
Whereas, in an economic boom, wages rise and more people are employed which leads to greater costs because of the high wages. Although, higher incomes means people have more money to spend, increasing the demand for products.
What is meant by seasonality?
Variations in demand and supply throughout the year, for example Christmas.
How would seasonal changes create variations in demand?
At Christmas time, there is a huge demand for products like Christmas trees and decorations, however, in summer time there is a huge demand for ice lollies, paddling pools and air conditioning units.
How can seasons create variations in supply?
Variations in supply mainly affects foods like fruit and vegetables. A shop that sells strawberries will be able to buy more in the summer, reducing costs for the shop.
How would a competitor entering the market increase the costs of an existing business?
The existing company is likely to increase its marketing costs or spend more on improving the product. Alternatively, they might try to keep the costs low in order to increase demand. This will increase costs for the business.
