Topic 1 Flashcards
What is a Business ?
an organisation that transforms inputs (resources) into outputs (products/ services) that are purchased by their customers
Why do businesses exist?
Supply goods or services
Create Employment
provide source of revenue for government
Create wealth for country
Primary Sector
extraction of raw materials
Secondary sector
the part of the economy that transforms raw materials into manufactured goods
Tertiary Sector
involves services rather then manufacturing
How is the wealth of a country measured ?
GDP
What is GDP (Gross Domestic Product)?
value of everything produced in a country
Benefits of online retailing
Convenient, always a selection of products, requires little effort
Dont have to pay to keep branches open
can reach wider audience
Drawbacks of Online Retailing
Delivery Charge
Wait time
product can be damaged / arrive faulty
Wrong product
What is an Mission Statement ?
communicates the purpose of a business and why it exists
+ of setting objectives
Have vision / business plan
motivate employees
What is an objective ?
medium to long term plan to co ordinate business functions and act like a target
what do co operate objectives do ?
quantify the mission so its measurable
what are some co operate objectives ?
innovation , growth , shareholder value and social responsibility
What are functional objectives ?
Functional objectives are the objectives of each department. They are specific to each department.
What are the Main objectives of a business ?
Survival
Profit
Growth
Cash flow
Ethical objectives
Social objectives
Why do businesses set objectives ?
Provide steps to achieve aims
motivate and reward staff
measure success against targets
What does S.M.A.R.T stand for ?
Specific, Measurable, Attainable, Realistic, Timely
Some influences on objectives ?
How competitive market is
depends on the sector as public sectors are not driven by profit
What is revenue ?
total income earned by sales
Revenue formula
price x quantity
Fixed costs
costs that have to be paid regardless of output
variable costs
costs that change as output increases or decreases
total costs formula
fixed costs + variable costs
how would you increase revenue ?
increase price
have promotions
decrease VC
Importance of profit ?
funds expansion
suppliers may give longer credit periods as theyll trust youll pay
banks more likely to give you loan
what is liability?
refers to legal responsibility of a business towards their debt
Unlimited liability
The owner and the business are
the same entity
Limited liability
The business and owner are
separate
what are the advantages and disadvantage of sole trader ?
+ keeps all profit
has full control
quick decision making as does not need to consult shareholders
-
unlimited liabilty
long hours
no new ideas to business
wont benefit from economies of scale
who can an ltd sell shares too - private limited company
family friends
advantages and disadvantages of private limited company
+ limited liability
can sell shares privately and earn capital
retain control of company
-
has to publish financial info
profits have to be shared
how do ltds become PLCs?
stock market floatation
