topic 1 (what is business ) Flashcards
why do business exist?
to create employment, wealth, develop new goods/ services
business objectives are
more précised + detailed goals or targets that must be achieved in order to achieve the corporate aims + missions
what are problems with building a business to quickly?
control issues
high costs
low profits
what is a mission statement?
is the overriding goal of the business and the reason for its existence.
what is cash flow?
the amount of money coming in and out of the business
advantages of having objectives
can motivate workers
gives a clear set of guidelines
helps decision making
what is the calculation for profit/loss?
profit/loss = revenue - total costs
how do you work out total revenue?
total revenue = price x quantity sold
what is the calculation for total cost?
total cost = fixed costs plus variable costs
what are fixed costs?
costs thar do not change with output e.g rent
what are variable costs?
cost that change with output
what is a sole trader?
a business owned and run by one individual
advantages of a sole trader
decisions made quickly
keep all the profits
setting up is easy
own boss
disadvantages of a sole trader
UNLIMTED LIABLITY
hard to get loans
long hours
who is in the private sector?
all business and companies + sole traders,
who is in the public sector?
non-profit organisations and the government
what are private limited companies (LTD)?
small to medium businesses that are usually run by the family that owns it
advantages of a private limited company
LIMITED LIABILITY
easier to raise capital
more flexible then a PLC
disadvantage if a private limited company
cant sell share publicly
more legal formalities
what is a public limited company (PLC)?
a company with a share capital of over £50,000 and a wide spread of shareholders
advantages of a public limited company
LIMITED LIABLILTY
easier access to finance
can sell shares on the stock exchange
disadvantages of a public limited company
have to publish accounts
risk of takeover
what are non-profit organisations?
non- profit organisations are things like Charites and mutual
what is unlimited liability?
when owners of a business are liable for all debts the business may incur
