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Business Studies > Topic 1. Role of a Business > Flashcards

Topic 1. Role of a Business Flashcards

1
Q

Nature of Business

A

Profit
Employment
Income
Choice
Innovation
Entrepreneurship and risk
Quality of life
Wealth

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2
Q

Classification of business
Size

A

Small - Less than 20 employees
Medium - 20-199
Large - 200+

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3
Q

Classification of Business
Geographical

A

Local:
Restricted geographical spread, surrounding area

National:
Operates within just one country

Global:
Has a home base in one country that operates globally.

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4
Q

Classification of Business
Industry

A

Primary:
Businesses in which production is directly associated with natural

Secondary:
Taking a raw material and making t into a finished or semi finished product

Tertiary
Quaternary are services that transfer and process knowledge
Quinary services that are traditionally performed at home eg, cooking, cleaning childcare

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5
Q

Classification of Legal Structure

A

Incorporated:
refers to the process companies go through to become a separate legal entity from the owners.

Unincorporated:
Businesses that are not companies because they have gone through the legal process of incorporation

Unlimited liability:
Business owner is personally responsible for all the debts of the business. The business and its owner are one.

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6
Q

External influences
Economic

A

Economic environment of a business is dependent on the changes in economic growth

Business cycle High and low economic activity

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7
Q

External influences - Economic

Recessionary Cycle, Contacting economy

Boom Cycle, Expanding economy

A

Recessionary cycle
- Rising unemployment
- Decreased economic growth as reduced consumer spending
- Cost cutting, workers may be retrenched

Boom Cycle
- Increased employment
- Economic growth as increased consumer spending
- Increased spending will increase profits

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8
Q

External Influences
Finance

A

Changes in the global and domestic financial markets - influencing how much money borrowed - impact the investment level
- financial deregulation has resulted in the opening up of the financial industry to greater competition.

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9
Q

External Influences
Geographic

A
  • Where the Business is located
  • Demographic features impacting the business: age, sex, income
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10
Q

External Influences
Social

A

Changes to fashion and culture, have the capacity to affect business sales and profits
Businesses must remember to:
- Awareness of our vulnerable environment
-Business to provide family friendly workplaces
- Workplace diversity

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11
Q

External Influences
Political

A
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12
Q

Classification of Business legal structure
Unlimited liability Advantages/Disadvantages

A

Ad
- Low entry cost
- Simplest form

Dis
- Personal unlimited
- Liability for business debts

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13
Q

Classification of Business
Sole Trader

A

-incorporated business with one owner
- Provides all the finance, makes all the decisions and takes responsibility for business

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14
Q

Classification of Business
Partnership

A
  • owned and operated between 2 and 20 people
  • The owner and the business are regarded as the same, no legal entity. Unlimited liability
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15
Q

Partnership Advantages and Disadvantages

A

Ad
- Low start up costs
- Less costly to operate than a company

Dis
- Personal unlimited liability
- Liability for all debts, partners debts, before the partnership has begun

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16
Q

Classification of Business
Private company

A

-Incorporated business and has between 2 and 50 private shareholders
- Pty Ltd proprietary limited = private company
-Main advantage is that shareholders have limited liability protection.

17
Q

Legal structure:
Separate legal entity
Limited liability

A
  • Separate legal entity means that the company can sue and can be sued, lease, sell or own property
  • Limited liability is a feature of corporate ownership that limits each owner’s financial liability to the amount of money paid for business’s shares.
18
Q

External Influence
Institutional

A

Institutions that affect the business
Government - Federal, State, Local

19
Q

External Influence
Technological

A

How technology influences a business or how a business uses technology
eg social media

20
Q

Internal influences
Products

A

The type and range of goods and services produced affects internal operations

21
Q

Internal Influences Location

A

The location of the business
- demographic factors
- Factors vary in significance from business to business depending on the business’s main activity

22
Q

Internal Influences
Resources

A

Human
Employees

Physical
Equipment, machinery,

Information
Market research, sale reports, economic forecasts

Financial
Funds the business uses to meet its obligations to various creditors

23
Q

Internal Influences
Management

A

The management managing a business

24
Q

Internal Influences
Business Culture

A

Refers to the values, ideas, expectations and beliefs shared by the staff
The character of a business is reflected through its culture

25
Q

Internal Influences
Stakeholders

A

Managers
- Responsibility of running a profitable organisation
- Ethical and socially responsible activities lead to increased sales

Employees
- Manufacture the products
- Influence the business since the quality of the product depending on their skill and commitment to the process

26
Q

Stages of the Business cycle
Establishment

A

First stage of the business

Challenges
- Financial management
- Risk level

Strategies
- Prepare for cash problems with savings
- Effective marketing strategies to price and promote products

27
Q

Stages of the Business cycle
Growth

A

Increased sales
Regular customer base

Challenges
- Customers satisfying existing customer base while tapping into the new market
-Expanding too rapidly losing control of the business

Strategies
- Pick the time when professional managers are needed

28
Q

Stages of the Business Cycle
Maturity

A

Sales increase but at a slower rate, warning sign of possible decline

Challenges
- Cash flow if costs aren’t controlled cash flow deteriorates

Strategies
- Decrease product costs - grow value of business

29
Q

Stages of the Business Cycle
Post Maturity

A

Challenges
- Cash flow may decline as money is spent on research and development of new products

Strategies
- Improve competitive situation by cutting the cost of products

30
Q

Factors that can contribute to business decline

A

Lack of management expertise: lack of business experience

Lack of sufficient money: borrowing too much money, over debt

31
Q

Voluntary and involuntary cessation - liquidation

A

Voluntary cessation:
When the owner ceases to operate of their own accord

Involuntary cessation:
Owners are forced to cease trading by creditors

Creditors:
People or businesses who are owed money

Business Studies (2 decks)

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