Topic 1: Business In The Real World Flashcards
What is an Enterprise?
- another name for a business
- describes the actions of someone who takes risk by setting up, investing in and running a business
Who is an Entrepreneur?
Someone who takes calculated risk through starting a business.
What do Entrepreneurs do?
- takes initiative
- calculates risks involved
- makes investment
- goes ahead - even if there is a risk of business failure
What are the Chracteristics of an Entrepreneur?
- Innovative
- Organised
- Risk Takers
- Persuasive
- Hardworking
- Leadership Skills
- Lucky
What are the Objectives of an Entrepreneur?
- Be their own boss
- Flexible working hours
- Pursue an interest
- Earn more money
- Identify a gap in the market
- Dissactistfaction with current job
- Self - esteem
- Personal Development
What is a Business?
An organisation that exists to produce goods or supply services to customers.
What are Goods?
Goods are tangible objects that can be touched and felt, they are produces & consumed.
What are Services?
Services are intangible and are provided by other people or business.
What is a Needs?
Needs are goods & services that we must consume or that we require if we are to live like, food, shelter and warmth.
What are Wants?
Wants are goods & services that we would like e.g phones, holidays and other luxuries.
What is Opportunity Cost?
Cost of what has been given up, sacrifices or forfeited when another option has been chosen.
What are some reasons for starting a business?
- To produce goods
- Supply services
- Distribute products
- Fulfil a business opportunity
- Provide goods or services to benefit others (social enterprise)
What are not for profit organisations?
These organisations are set up to help others in need by providing goods or services, any surplus of money generate is used to meet the aims and objectives of the organisation. E.g Charities
What are the 3 business sectors?
- Primary
- Secondary
- Tertiary
What is the primary sector?
Producing raw materials/ extracting like fishing, farming or mining
What is the secondary sector?
Manufacturing goods, turning raw materials into finished goods like car manufacturing
What is the tertiary sector?
Providing goods or services like shops i.e the distributing process
What are the 4 factors of production?
- Land
- Labour
- Capital
- Enterprise
What is land in production?
The land where the business is located, but also includes natural resources
on or under that land.
What is labour in production?
People working for that business - involved in manufacturing the product, etc.
What is Capital in production?
Any money invested into the business - machinery or building needed to produce the product.
What is enterprise in production?
The entrepreneur who sets up the business - running the business by organising the factors of production and takes the risks involved in running the business.
What is dynamic nature business?
- Constantly faced with many changes outside of the control of the organisation
- Successful businesses will be able to meet these changes and demonstrate flexibility in the way they operate.
What are some changes in the business environment that may occur?
- Legislation
- Exonomic
- Technological
- Environmental
- Social
- Staff training
Who is a sole trader?
The individual who has sole ownership of the business, e.g hairdressers or gardeners - they may also employ people but they do not share the ownership.
What are some drawbacks of being a sole trader?
- Unlimited Liability
- Can be difficult to raise finance
- Heavy workload
What is a partnership?
A partnership is formed where a business is started and owned by more than one person.
What are some examples of partnerships?
Doctors, Solicitors and Vets, etc.
What is the legal document between a partnership?
Partnership agreement, is always recommended and sets out how a partnership is run and how profits as divided
What are 3 benefits of a partnership?
- Simple to form a business
- Any loses will be shared
- Greater potential to raise finance
What are 3 drawbacks of a partnership?
- Unlimited Liability
- Profits have to be shared
- Decisions can take a long time
What is Unlimited Liability?
- It is a big risk when operating as a sole trader or partnership
Having to use their own personal funs to pay for any debts gathered by the business. The owner(s’ are liable for any debts that the business incures.
What are limited companies?
- A company formed when a business is set up to have a separate legal identity from its owners.
What does the ownership of a limited company look like?
Owners = Shareholders - each owns a share of the company
What is a Dividend?
Shareholders receive a share of the profits known as a dividend as a reward for being a shareholder.
What are limited companies run by?
Board of Directors - people who make important decisions - they are also appointed by the shareholders.
What is Limited Liability?
- Within limited companies, shareholders are not responsible for the company’s debts
- meaning share holders many only loose the money they invested in to the company to help pay off any outsanding debts or liabilities.
How to calculate unites costs (cost per unit)?
Average cost per unit = Total Costs (£) / Output (units produced)
What does the average unite cost increasing mean?
The Business is becoming less efficient
What the average unit cost decreasing mean?
The Business is becoming more efficient
What is economies of scale?
Economies of scale are achieved when the average cost per unit falls as the scale of production increases
What is business plan?
A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts
What is the difference between a stakeholder and a shareholder?
STAKEHOLDERS have an interest in the business but do not own it, they may also work with the business (employee) oe even be transact with the business. Whereas SHAREHOLDERS actually OWN THE BUSINESS, they may also work for the business, they are mainly interested in frowning the value of their shareholding and a shareholder is an EXAMPLE of a Stakeholder
