Topic 1 Flashcards
The student: P1 discusses the nature of business, its role in society and types of business structure P2 explains the internal and external influences on businesses P6 analyses the responsibilities of business to internal and external stakeholders P7 plans and conducts investigations into contemporary business issues P8 evaluates information for actual and hypothetical business situation
Business
the organised effort of individuals to produce and sell, for a profit, the products that satisfy individuals’ needs and wants
Production
refers to those activities undertaken by the business that combine the resources to create products that satisfy customers’ needs and want
Goods
Items that can be seen or touched
Services
An intangible product performed for someone by another person + higher involvement of people in provision of service
Operating expenses
All the costs of running the business except the cost of goods sold
Entrepreneurship
the ability and willingness to start, operate and assume the risk of a business venture in the hope of making a profit
Entrepreneur
someone who starts, operates and assumes the risk of a business venture in the hope of making a profit
Risk
refers to the possibility of a loss
Income
Money received by a person for providing his or her labour, or a business from a return on its investments
Wage
Money received by workers, usually on an hourly or daily basis, for services they provide to an employer
Salary
a fixed regular payment, usually paid on a fortnightly or monthly basis but often expressed as an annual sum, made to a permanent employee of a business
Dividends
a distribution of a company’s profits (either yearly or half-yearly) to shareholders that is calculated as a number of cents per share
Bonus
money added to a person’s wage for good performance
Commission
the % of a sales price received by a salesperson
Fringe benefits
an extra benefit supplementing an employee’s salary
Profit
what remains after all business expenses have been deducted from sales revenue
Wealth
The wealth created by businesses is redistributed to employees, lenders, business owners/shareholders, governments and to the business itself
Shareholders
people who are part owners of a company because they own a number of shares
Choice
the act of selecting among alternatives
Quality of life
refers to the overall wellbeing of an individual, and is a combination of both material and non-material benefits
Innovation
either creating a new product, service or process, or significantly improving an existing one- drives economic growth + increase living standards
Research and development
a set of activities undertaken to improve existing products, create new products and improve production
Small to medium enterprises
defined by the Australian Bureau of Statistics as firms with fewer than 200 full-time equivalent employees and/or less than $10 million turnover
Medium business
a business with 20-199 employees
Micro business
a business with fewer than five employees
Large business
a business with 200 or more employees
Geographical spread
the presence of a business and the range of its products across a suburb, city, state or country, or the globe
Local business
a business that has a restricted geographical spread; it serves the surrounding area
National business
a business that operates within just one country
Multinational corporation
a company that has branches in many different countries
Industry
businesses that are involved in similar types of production
Primary industry
includes those businesses involved in the collection of natural resources
Secondary industry
includes businesses that take a raw material and make it into a finished or semi-finished product
Tertiary industry
involves people performing a vast range of services for other people
e.g., retailers, dentists, solicitors, bankers
Quaternary industry
includes services that involve the transfer and processing of information and knowledge
e.g., technology jobs, education, finance, telecommunication, libraries
Quinary industry
includes services that have traditionally been performed in the home
e.g., hospitality, childcare, tourism, domestic cleaning, maintenence
Incorporated
refers to the process companies go through to become a separate legal entity from the owner/s
Limited liability
a feature of corporate ownership that limits each owner’s financial liability to the amount of money he or she has paid for the business’s shares
Unlimited liability
when the business owner is personally responsible for all the business’s debt
Sole trader
a business that is owned and operated by only one person
Partnership
a legal business structure that is owned and operated by between 2 and 20 people with the aim of making a profit
Proprietary (private) company
an incorporated business and usually has between 2 and 50 private shareholders
Public company
have an unlimited number of shareholders and the general public may buy or sell shares on the ASX
Government Enterprise
Government-owned and operated businesses
Prospectus
a document giving details of a company and inviting the public to buy shares in it
Privatisation
the process of transferring the ownership of a government business to the private sector
Venture capital
money that is invested in small and sometimes struggling businesses that have the potential to become successful
Ownership
bringing in additional owners means giving up some control
Float
the raising of capital in a company through the sale of shares to the public
Business environment
refers to the surrounding conditions in which the business operates. It can be divided into two broad categories: external and internal
External environment
includes those factors over which the business has very little control
Internal environment
includes those factors over which the business has some degree of control
Economic influences
(on a business) relate directly to their economic environment, which is dependent on changes in economic growth.
Economic cycles
(or business cycles) the periods of growth (‘boom’) and recession (‘bust’) that occur as a result of fluctuations in the general level of economic activity
Financial influences
changes in the global and domestic financial markets will influence the cost of borrowing money and therefore directly affect the level of investment by a business
Deregulation
the removal of government regulation from industry, with the aim of increasing efficiency and improving competition
Geographic influences
3 main factors: location within the Asia-Pacific region, changing demographic factors, changes in age structure
Globalisation
the process that sees people, goods, money and ideas moving around the world faster and more cheaply than before
Societal attitudes
the ideas, values and beliefs held by people in society
Legal influences (regulations)
rules, laws or orders that businesses must follow
Political influences
derived from state and federal government policies, and include free trade policies and the process of deregulation
Federal government obligations
payment of taxes, provision of superannuation, abiding by relevant legislation
State government obligations
provision of employee entitlements, payment of payroll taxes, abiding by pollution controls and relevant state legislation
Local governments
approve development appplications, fire regulations, parking regulations, business signs
ASIC
provides protection in financial services and operates the Business Names Register
ACCC
administers the Competition and Consumer Act 2010 (cwlth)
NSW EPA
primary environmental regulator for NSW
NSW Fair Trading
provides information and assistance to individual consumers and business owners in NSW
Employer associations
represent employers in negotiations + lobbying to the government
Trade unions
represent employees- aim to improve pay and working conditions
ASX
operates a sharemarker where companies can raise funds by issuing shares
Technological influences
increase business productivity, efficiency and communication, quality of life
Market concentration
refers to the number of competitors in a particular market. There are four main types of market concentration.
Monopoly
complete concentration by one business in the industry (e.g. Australia Post)
Oligopoly
where a small number of larger firms have a greater control over a market (e.g. car manufacturers)
Monopolistic competition
where there is a large number of buyers and sellers in a particular market (e.g. local retailing shops)
Perfect competition
where there is a large number of small firms that sell similar products. They are unable to differentiate products from each other and so can only use price as a way of achieving market share (e.g. fruit and vegetable growers)
Product
A good or service that can be bought or sold
Finished product
One that is ready for customers to buy and use
Location
will have a direct impact on the sales and profits of some businesses
Human resources
the employees of the business; generally its most important asset
Information resources
the knowledge and data required by the business, such as market research, sales reports, economic forecasts, technical material and legal advice
Physical resources
the equipment, machinery, buildings and raw materials used by the business
Financial resources
the funds the business uses to meet its obligations to various creditors
Business culture
the values, ideas, expectations and beliefs shared by members of the organisation
Stakeholder
any group or individual who has an interest in, or is affected by, the activities of a business
Ecologically sustainable
when economic growth meets the needs of the present population without endangering the ability of future generations to meet their needs
Support services
the activities needed to assist the core operations or prime function of a business
Sustainable competitive advantage
refers to the ability of a business to develop strategies that will ensure it has an ‘edge’ over its competitors for a long period of time
Business life cycle
refers to the stages of growth and development a business can experience
Cash flow
the money coming into the business in the form of cash receipts, and the money leaving the business as cash payments
Merger
when the owners of two separate businesses agree to combine their resources and form a new organisation
Acquisition
when one business takes control of another business by purchasing a controlling interest in it
Horizontal integration
when a business acquires or merges with another business that makes and sells similar products
Vertical integration
when a business expands at different but related levels in the production and marketing of a
product
Diversification
(or conglomerate integration) when a business acquires or merges with a business in a completely unrelated industry
Voluntary cessation
when the owner ceases to operate the business of their own accord
Involuntary cessation
when the owner is forced to cease trading by the creditors of the business
Creditor
those people or businesses who are owed money
Bankruptcy
a declaration that a business or person is unable to pay his or her debts
Insolvent
when a company is not able to pay its debts as and when they fall due
Voluntary administration
when an independent administrator is appointed to operate the business in the hope of trading out of present financial problems
Liquidation
when an independent and suitably qualified person – the liquidator – is appointed to take control of the business with the intention of selling all the company’s assets in an orderly and fair way in order to pay the creditors
Receivership
when a business has a receiver take charge of the affairs of the business. Unlike liquidation, the business may not necessarily be wound up
Realisation
the process of converting the assets of a business into cash
