Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business > Theme 1 Business > Flashcards

Theme 1 Business Flashcards

1
Q

Unlimited Liability

A

The owner is responsible for the businesses debts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

3 disadvantages of a partnership

A

1) Unlimited liability
2) Profits are shared
3) There may be disagreements
4) 20 people max
5) Partnership may end when one person leaves
6) Decisions made by one partner can affect all

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

3 disadvantages of a franchise

A

1) Unlimited liability
2) Franchises need to pay an initial fee as well as ongoing fees (royalties) and/or share their profits
3) Less control for the franchise as they will have to run with promotions currently being advertised
4) Cannot make independent decisions
5) Brand reputation can be damaged by other franchises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

3 advantages of a franchise

A

1) Lower risk as business model is already successful
2) Support and training provided by the franchisor
3) Franchisees benefit from national marketing campaigns
4) Market research done at head office level, the business will get the benefit of the promotional activity and signage all done on a national level
5) Less competition as territories divided up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

3 advantages of a partnership

A
  1. Very few procedures to set up
  2. Partners may have a wider expertise and can share ideas
  3. Decision making is shared
  4. Financial information is kept private
  5. More sources of finance
  6. Risk is shared
  7. Easier to raise finance to establish or grow a business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Partnership

A

A business owned by 2-20 people who share the financial risk, decision making, and the profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Franchisor

A

The person or business who offers to franchise other businesses its trading methods, products, and business logos

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Royalty

A

A payment made to the franchisor based on the sales turnover of the franchise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Sole trader/proprietor

A

A business owned by one person who has unlimited liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Franchisee

A

A person or business buying the franchise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

3 advantages of sole proprietorship

A
  1. They make all decisions
  2. No disagreements and quick decisions
  3. They keep all the profit
  4. Quick and easy to set up
  5. All financial information kept private
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

3 disadvantages of sole proprietorship

A
  1. Unlimited liability
  2. May be difficult to raise money to start or grow a business
  3. A lot of pressure on just one person
  4. Difficult to run if the sole trader is sick or needs time off
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Franchise

A

One business gives another business permission to trade using its name and products in return for a fee and a share of its sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Private Limited Company (Ltd)

A

A company made up of people who know each other and with limited liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Limited liability

A

Risk is limited to the amount of money invested into the business. Personal assets are not at risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

3 advantages of a private limited company

A
  1. Limited liability
  2. Term ‘ltd’ makes the business seem bigger or a more long-established business
  3. Can be easier to raise finance to establish or grow the business
  4. Business continues to trade even if the shareholders change
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

3 disadvantages of a private limited company

A
  1. More complex to set up than a sole proprietorship or partnership
  2. Disagreements between share holders
  3. Financial information is published
  4. More requirements to report information to organisations such as HMRC and Companies House
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Business Risk

A

The possibility that an enterprise may have lower profits than expected or experience a loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

A business could create a new product by…

A
  1. Mix and match
  2. New version of an old product/service
  3. Cheaper version of an old product/service
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Service

A

An act that a business person carries out for you in exchange for money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Product

A

Anything capable of satisfying customer needs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the key reason for business failure?

A

Poor cash flow
- inflows are lower than expected or outflows are higher than expected

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

3 main risks are…

A
  1. business failure
  2. financial loss
  3. lack of security (entrepreneur)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Name 3 changes in technology and why new business ideas have developed

A
  1. The invention of the internet. Businesses have found a new cheaper way to reach the consumer - online
  2. New tech in VR means there are lots of new products on the market.
  3. Advancements in new products (e.g. robotics)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Explain how changes in what consumers want can develop new ideas. (3)

A

POINT
- Consumers want organic, free range, sustainable, eco-friendly products
LINK 1
- Therefore, there is a gap in the market for these products
LINK 2
- As a result, businesses will spot this and come up with new ideas to fill this new gap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

E-commerce

A

Purchasing and selling goods through a laptop, iPad, etc.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

M-commerce

A

Purchasing and selling goods through a mobile device.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Why do original ideas come about?

A
  1. To solve problems
  2. An entrepreneur has a passion or interest
  3. A business carried out research into the wants and needs of shoppers and created products to meet those ends
  4. A gap in the market may have been spotted
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Business reward

A

A business reward is a benefit that it brings to the owner. For example, better working conditions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

3 aspects of business reward

A
  1. Business success
  2. Profit
  3. Independence
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Profit

A

Total revenue - total costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

3 purposes of business activity

A
  1. Produce goods and service
  2. Meet customer needs
  3. Add value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

4 things needed to produce goods/services

A
  1. Land - somewhere to produce the goods
  2. Labour - people to work in the business
  3. Capital - money to start the business
  4. Enterprise - drive/motivation by the owner
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Added value

A

The difference between what a business pays its suppliers and the price it is able to charge for its product/service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

5 ways to add value

A
  1. Branding
  2. Design
  3. Unique selling point
  4. Quality
  5. Convenience
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

3 roles of an entrepreneur

A
  1. To organise resources
  2. To make business decisions
  3. To take risks
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

4 customer needs

A
  1. Price
  2. Quality
  3. Choices
  4. Convenience
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

4 ways to generate sales

A
  1. Lower prices
  2. Promote the product through advertisement
  3. Run a competition or other promotional activity
  4. Improve the product
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

2 step plan for business survival

A
  1. Find out what the customers want and need from a product and service
  2. Provide that product or service
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

The purpose of market research

A
  1. To identify and understand customer needs
  2. To identify gaps in the market
  3. To reduce risk and make informed business decisions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Primary research

A

Original data gathered by the researcher

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

4 main primary research methods

A
  1. Survey
  2. Questionnaire
  3. Focus groups
  4. Observation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Secondary research

A

The information already exists in some format, someone has already collected the data

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

2 main secondary research methods

A
  1. Internally sourced information
  2. Externally sourced information
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Internally sourced information

A

The data, statistics, and research that a business has accumulated in the past

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Externally sourced information

A
  1. The internet
  2. Market reports
  3. Government reports
47
Q

Segmentation

A

The process of dividing a target market into smaller categories by grouping customers/consumers with a particular characteristic

48
Q

5 main ways to segment a market

A
  1. Location
  2. Demographics
  3. Lifestyle
  4. Income
  5. Age
49
Q

Market mapping

A

Measuring where existing brands sit on a 2 factor grid

For example, low price/high price and low quality/high quality

50
Q

2 benefits of market mapping

A
  1. Can spot a gap in the market where there are no competitors
  2. Identify competitors so they can try to gain competitive advantage
51
Q

3 limitations of market mapping

A
  1. Just because there is a gap in the market does not mean there is a market in the gap
  2. It is subjective, so therefore may not be accurate
  3. Has to be updated regularly as new customers are always entering the market
52
Q

Competitive environment

A

The dynamic external system in which a business competes and functions

53
Q

2 types of competitors

A
  1. Businesses that sell the same type of products (Direct competitors)
  2. Businesses that do not sell the same product but are still in competition with each other (Indirect competitors)
54
Q

4 things a business can do when operating in a competitive environment

A
  1. Extra advertising and branding
  2. Lowering the price
  3. Adding value
  4. Creating a unique selling point (USP)
55
Q

Aims

A

Strategic goals of a business (very general)

56
Q

Objectives

A

Specific steps to achieve your aim

57
Q

Why does a business set aims and objectives?

A
  1. To set specific targets by which business performance can be measured
  2. To motivate workers to achieve
  3. To clarify business direction and decision making
58
Q

5 financial objectives

A
  1. Survival
  2. Profit
  3. Sales
  4. Market share
  5. Financial security
59
Q

5 Non-financial objectives

A
  1. Social objectives
  2. Personal satisfaction
  3. Challenge
  4. Independence
  5. Control
60
Q

Sales revenue equation

A

revenue = selling price x quantity sold

61
Q

Fixed costs

A

Costs which don’t vary with the level of output or sales. They need to be paid even if the business produces no products

62
Q

3 examples of fixed costs

A
  1. Rent
  2. Advertising
  3. Insurance
63
Q

Variable costs

A

Costs which vary with the level of output or sales

64
Q

3 examples of variable costs

A
  1. Raw materials
  2. Distribution costs
  3. Temporary staff wages
65
Q

Total cost equation

A

Total cost = total fixed cost + total variable cost

66
Q

Profit

A

The amount of money left after all business costs have been paid

67
Q

Gross profit equation

A

Gross Profit = Sales Revenue - Cost of Goods Sold

68
Q

Net profit equation

A

Net Profit = Gross Profit - Expenses

69
Q

Interest equation

A

Interest % = (total repayment - borrowed amount)/borrowed amount
- then x100

70
Q

Break-even equation

A

BE = fixed costs/(selling price-variable cost)

71
Q

Margin of safety equation

A

Total Sales - Break Even Sales

72
Q

What 4 things do businesses need cash for?

A
  1. To pay suppliers
  2. To pay overheads
  3. To pay employees
  4. To prevent business failures (insolvency)
73
Q

Cash

A

Money available in the business to pay the bills, cash may not come in the same month as it goes out

74
Q

Cash flow forecast is a…

A

prediction

75
Q

Cash flow

A

The relationship between the money flowing into a business and the money flowing out

76
Q

Opening balance (cash-flow forecast)

A

If the business has been trading then it will be whatever cash is available at the start of the month

77
Q

Closing balance (cash-flow forecast)

A

This is how much cash is available at the end of the month to be carried over to the next month as an opening balance

78
Q

Why would a business need finance? (4)

A
  1. Everyday bill repayments
  2. Internal growth
  3. Fixed costs
  4. Expansion
79
Q

Internal sources of finance

A

Finance which is remained internally, it does not increase the debts of the business. (Personal savings, retained profit)

80
Q

External sources of finance

A

Finance provided by people or institutions outside the business, creates a debt that will require a payment.

81
Q

Short-term finance

A

Needed for day-to-day running of a business and is usually up to a period of three years.

82
Q

3 inflows for a business

A
  1. Sales revenue
  2. Loans
  3. Grants
83
Q

Overdraft

A

A facility offered by a bank that allows an account holder to borrow money at short notice.

84
Q

3 benefits of overdraft

A
  1. They are extremely flexible and can even be used for a single day if the business has a temporary cash-flow problem
  2. Interest is only paid on the amount of the overdraft being used rather than the maximum level allowed
  3. Security is not usually required
85
Q

3 limitations of an overdraft

A
  1. The interest rate charged is usually higher than for a loan
  2. Banks can demand immediate repayment (this is rare)
  3. Banks may refuse to give an overdraft until the business is established
86
Q

Trade credit

A

The practice of buying goods and services now and paying for them later

87
Q

2 benefits of trade credit

A
  1. The business will never run out of products to sell
  2. The business can sell the products first THEN pay the supplier so they won’t have to raise finance for the goods
88
Q

2 limitations of trade credit

A
  1. The supplier may charge a higher cost for the products because of the credit arrangement
  2. If this is the first year that the business has asked for trade credit, the supplier may say no
89
Q

Personal savings

A

The owner may have personal savings which they can dip into to help finance the business further

90
Q

3 benefits of personal savings

A
  1. Easy access to the money through the owner’s bank accounts
  2. No complicated paperwork
  3. No interest to pay on the money, so much cheaper than the loan
91
Q

1 limitation of personal savings

A

The owner will not be able to spend it on something else like a car or holiday - this is opportunity cost

92
Q

Venture capital

A

Venture capital businesses are ones that specialise in financing high-risk start-ups where there is lots of potential for a big return on their investment

93
Q

3 benefits of venture capital

A
  1. Venture capitalists can bring knowledge to businesses to help them expand
  2. They take on high-risk businesses
  3. They can help by providing the businesses with growth capital and strategies
94
Q

2 limitations of venture capital

A
  1. Owners may lose some of the control over the business
  2. Owners may have to give up a large share of the profits to the venture capitalists
95
Q

Share capital

A

Limited companies can issues shares in return for money, to raise funds, to grow, or to expand.
- Private limited companies can only issue shares to friends and family of the owner
- Public limited companies can float the share issue on the stock market and sell to anyone

96
Q

3 benefits of share capital

A
  1. You don’t have to pay the money back or pay interest to the investors
  2. Attracts new finance
  3. Acts as an incentive for staff using shares or share options as a motivation tool
  4. A way to raise your business’ profile
97
Q

3 limitations of share capital

A
  1. Shares represent ownership of a business
  2. When an individual buys shares in a business, they become one of its owners
  3. Shareholders choose who runs a company and are involved in making key decisions, such as whether a business should be sold
98
Q

Loans

A

An amount of money provide by one party to another with the understanding that the money will be returned, in full, often with interest.

99
Q

2 benefits of loans

A
  1. A medium to long-term business loan can help with all the costs of setting up a business, from cash flow to expenses and paying staff
  2. The longer the term of the loan, the lower the monthly payments will be, as they are spreading the cost over a long period of time
100
Q

2 limitations of loans

A
  1. The amount of interest you pay on a business loan will depend on your individual circumstances, including how much you want to borrow and over what period of time
  2. Each month the business will have to pay back some of the loan and some interest too, they will have to do this even if they have a bad month
101
Q

Retained profit

A

Profit which is kept back in the business and used to pay for investment in the business. Businesses in their first year of trading will not have retained profit as they will not have made any to retain

102
Q

2 advantages of retained profit

A
  1. There is no interest to pay on a loan, so this is the cheapest method of finance
  2. Access to the funds can be quick and easy
103
Q

2 disadvantages of retained profit

A
  1. It is spent then it cannot be used for any other purpose e.g. to invest in a new machine, this is the cost of using this money
  2. Not applicable in the first year of trading as the business has not made any profits to retain
104
Q

Crowdfunding

A

The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.

105
Q

3 advantages of crowdfunding

A
  1. May be the only way some small business ideas can get funding - if they have been turned down for a bank loan
  2. Also acts as an advert for the business
  3. May attract advice as well as funds
106
Q

3 disadvantages of crowdfunding

A
  1. May not attract any other investors
  2. May be a waste of time which could be used to source funds elsewhere e.g. applying for a bank loan
  3. Alerts your competitors to your need for funds
107
Q

6 factors that influence start-up location decisions

A
  1. the availability of raw materials
  2. transport link/infrastructure
  3. labour
  4. competition/other businesses
  5. proximity to market
  6. costs
108
Q

4 components of marketing mix

A

Product, Price, Place, Promotion

109
Q

Business plan

A

A document that outlines how an entrepreneur is going to set up a business

110
Q

Parts of a Business Plan

A
  1. identify business idea
  2. business aims and objectives
  3. target market
  4. forecast revenue, costs and profit
  5. cash flow forecast
  6. sources of finance
  7. location
  8. marketing mix
111
Q

3 benefits of producing a business plan

A
  1. If a business owner has clear plans, aims and objectives, then they are more likely to be focused on achieving those goals - which can lead to increased motivation
  2. A business plan can help to reduce the risk of failure when a business first starts up as it will allow the owners to identify potential problems so that they can try to solve them
  3. Helps to understand what resources are needed
112
Q

Explain one benefit to an entrepreneur of buying a franchise to start a business.

A

One benefit is brand recognition. Therefore, customers are more likely to trust the business. As a result, there will be a higher chance of success when starting up the business as it already has loyal customers.

113
Q

Explain one way a small business could use market segmentation to target customers.

A

One way is by targeting a specific segment such as fashion-conscious teenage girls. As a result, they can direct the promotion of their product specifically to that market segment, such as using social media. This would lead to an increase in brand awareness within the target market.

Business (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions