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business > topic 1- what is business > Flashcards

topic 1- what is business Flashcards

1
Q

what are the 5 objectives for a business ?

A
  • profit
  • growth
  • cash flow
  • survival
  • social and ethical
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2
Q

what is profit objective ?

A

that business either want to make a profit or increase their profit
- can have a profit target
- primary function

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3
Q

how can business achieve a profit objective ?

A

by setting functional objectives
eg) decreasing costs, increasing sales

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4
Q

what is a growth objective ?

A

the business wants to grow within the market

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5
Q

why do business wants to grow in the market ?

A

as they will then earn a higher profit

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6
Q

what can help measure growth within a business ?

A
  • revenue
  • market share
  • expansion
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7
Q

what is the cash flow objective ?

A

the amount of money which moves in and out the business over a period of time
- business wants to increase cash flow

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7
Q

what can grow within a business ?

A
  • revenue
  • amount of locations
  • amount of employees
  • product range
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8
Q

what does an increased cash flow do ?

A

increase the rate of survival

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9
Q

what do business use cash for ?

A

to pay for payments and if they can’t they are in serve danger

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10
Q

how can business improve cash flow ?

A

by negotiating longer term credit with suppliers and shorter term credit with customers

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11
Q

what is the survival objective ?

A

it is being able to continue the trade for the business

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12
Q

what happens when business run out of money ?

A

they are forced to exit the market

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13
Q

what business main objective is often survival ?

A

new business

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14
Q

when does survival become a key objective for business ?

A

during times of:
- strong competition
- economic decline
- in a recession

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15
Q

what is a social objective ?

A

setting objectives that benefit the society or people in need

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16
Q

what are ethical objectives ?

A

objectives that include moral principles and treat the environment kindly

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17
Q

where is social and ethical objectives mainly found in business ?

A

non- profit business

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18
Q

why is having social and ethical objectives beneficial for a business ?

A

it shows the business has a wider aim which is to help others and that they aren’t there just for a profit

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19
Q

what is an important part of having social and ethical objectives ?

A

having good relations with the local community and allowing resources to benefit them

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20
Q

what do business need to do once they have been established ?

A

make sure to
- cover costs
- make reasonable profit
- being able to survive

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21
Q

what does a mission statement tell us ?

A

the business intentions

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22
Q

what does a mission statement include ?

A

qualitative description about the organisations purpose and corporate aims

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23
Q

what does a mission statement do for shareholders ?

A

all them know the business intentions

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24
Q

what does a mission statement do for employees ?

A
  • allow them to be encouraged to see what they are working towards
  • feel a sense of shared purpose
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25
Q

what stakeholder does business not have to show their mission statement ?

A

consusmers

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26
Q

what are objectives ?

A

they are the aims from the mission statement that are turned into specific goals that must be met

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27
Q

what are the 3 types of objectives ?

A
  • corporate
  • functional
  • individual/ personal
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28
Q

what are corporate objectives ?

A

overall objectives for the business which has been driven from the mission statements aims

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29
Q

what do corporate objectives give the business a sense of ?

A

a sense of direction to and guide the whole organisation

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30
Q

what are functional objectives ?

A

objectives that are for each department in the business that are driven from corporate objectives as need to be set to achieve those aims
- it is more detailed

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31
Q

what are the 4 departments of a business ?

A
  • finance
  • HR
  • operations
  • marketing
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32
Q

what are individual/ personal objectives ?

A

where team managers give a team or individual staff members an objective themselves which is based on the functional objectives

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33
Q

why is it good for business to have objectives ?

A
  • measure the business success
  • focus and direction for employees to broaden/ grow the business
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34
Q

what is the order of missions and objectives ?

A
  • mission statement/ corporate aims
  • corporate objectives
  • functional objectives
  • individual/ personal objectives
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35
Q

what are 5 reasons as to why profit is important ?

A
  • good source of finance
  • attracts new investors/ suppliers
  • not-for-profit organisations
  • motivate employees
  • rewarded for taking a risk
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36
Q

what is 4 things as to why profit a good source of finance ?

A
  • it is retained
  • so can be used to invest and expand the business
  • pay for debts
  • helps the business grow
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37
Q

how can profit motivate employees ?

A

as they can have a scheme called profit sharing so will increase the productivity

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38
Q

what is profit sharing ?

A

where each employee gets a percentage of the businesses profit

39
Q

why does profit reward the risk takers ?

A
  • as the owner who is an entrepreneur gets to keep a profit
  • shareholders get to earn their dividends to keep them interested in the business
40
Q

why is profit going to attract suppliers/ investors ?

A
  • suppliers will trust the business and could allow them to have LT credit terms as know they will get payed
  • shareholders like it as like business with larger profits as get a greater dividend
41
Q

why is profit good for not-for-profit organisations ?

A

they can use their profit to fund back into the business and continue to complete their mission

42
Q

what are the 4 measurements for profit ?

A
  • revenue
  • fixed costs
  • total costs
  • variable costs
43
Q

what is 6 ways to maximise profit ?

A
  • advertising to attract new consumers
  • cheaper suppliers
  • increase sales
  • lower unit costs
  • redundancy
  • new product range to attract a wider target audience
44
Q

what is revenue ?

A

the amount of money generated from sales before deductions are made

45
Q

what can revenue also be known as ?

A
  • turnover
  • sales
46
Q

what can affect revenue ?

A
  • selling price
  • sales volume
47
Q

what happens to revenue if selling price increases ?

A

then revenue will increase (normally)..Ped

48
Q

what are fixed costs ?

A

costs that don’t change with output

49
Q

what are variable costs ?

A

costs that fall or rise with output

50
Q

what are total costs ?

A

FC and VC added together

51
Q

what is a shareholder ?

A

anyone who owns at least one share in a business

52
Q

what 3 types of shareholders invest in a business ?

A
  • individuals
  • companies
  • institutions
53
Q

what is an example of an institution in business ?

A

pension funds

54
Q

what are the shareholders for Ltd.’s ?

A

family or friends of the owner

55
Q

what is the main role of a shareholder ?

A

to provide funds

56
Q

what are other roles for a small Ltd shareholder ?

A

can often be the director
- so have the most shares and most power

57
Q

what are the other roles for a PLC shareholder ?

A

most aren’t involved in running the business but do have rights within the business

58
Q

what do many shareholders have to attend ?

A

annual general meetings

59
Q

what are annual general meetings for shareholders ?

A
  • they meet with the board of directors
  • for PLC these meetings have to happen by law
  • the shareholders have a right to vote on key decisions and performances
60
Q

what is a majority shareholder ?

A

when a shareholder owns 50+% of a business
- they have the most power in decision making

61
Q

what liability do shareholders have ?

A

limited liability
- only lose what they invested into the business if they fall through as the business doesn’t pay their debts

62
Q

what are the 6 possible reasons as to why shareholders may invest within a business ?

A
  • achieving capital gain
  • want to see the business survive and grow
  • potential a business succeeds
  • believe in the aims/ objectives
  • want to be involved in running the business
  • payed dividends
63
Q

why would shareholders invest to achieve capital gain ?

A
  • they can buy shares when the share price is low
  • then see it when the share prices rise
  • so they make a profit
64
Q

why would shareholders invest in a business for dividends ?

A
  • as they get payed for investing
  • the more shares they have then the greater the funds they are owed
65
Q

why would shareholders invest in a business for wanting to be involved in a business ?

A
  • they would invest in small Ltd.’s
  • or be a majority shareholder in a PLC
  • so they can influence the decisions being made
66
Q

why would shareholders invest when they believe in the aims and objectives ?

A
  • they want to see ethe business succeed
    eg) companies with social and environmental objectives
67
Q

why would a shareholder invest in a business because they want to see a business grow or survive ?

A

would be for a Ltd
- so they can support their friends or family

68
Q

why would shareholders want invest in a business they see potential in ?

A

even though it is a potentially a big risk it can also potentially have a big reward
- venture capitalists are the ones interested

69
Q

what are venture capitalists ?

A

a particular type of shareholders
- they invest in a business as they see it potentially having a chance of being successful

70
Q

what is share price ?

A

the price of which a share is sold at

71
Q

what are PLC shares determined by ?

A

the supply and demand

72
Q

what happens to the share price if supply increases ?

A

it decreases

73
Q

what happens to the share price if supply decreases ?

A

increases

74
Q

what happens to the share price if demand increases ?

A

it decreases

75
Q

what happens to the share price if demand decreases ?

A

it increases

76
Q

what are 6 factors that influence demand and supply ?

A
  • business performance
  • interest rates
  • economy
  • rival performance
  • share buybacks
  • takeovers and mergers consensus
77
Q

how does a business performance influence supply and demand ?

A
  • if it has a high performance then demand increases so price will as well
  • if it has low performance then they may sell their shares so increases supply but decreases share price
78
Q

how does interest rates influence demand and supply when they low ?

A
  • when low the reward for saving is low so they want to increase demand for shares
  • if increase in demand of shares then financial reward is greater then interest
79
Q

how does interest rates influence demand and supply when they high ?

A

it causes supply to increase so price decreases

80
Q

how does a strong economy influence to demand and supply of shares ?

A
  • influences the demand and supply
  • people have more money to invest and confidence of a good return
  • it increases demand and share price
81
Q

how does a weak economy influence to demand and supply of shares ?

A
  • less take a risk
  • so decreases the demand and share price
82
Q

what do business offer when the economy is weak for share prices ?

A

business offer more shares to try and raise share capital as will increase supply

83
Q

how does a rivals performance influence supply and demand for share prices ?

A
  • if rivals are good then your business shares will decrease in price as that other business sells more ( sell-off can happen)
  • if rivals are bad then for your business demand and price increases
84
Q

how does share buybacks influence supply and demand of shares ?

A
  • tax cuts so will increase investors
  • demand and price increase as shares are bought back
85
Q

how does takeovers/ mergers consensus influence supply and demand ?

A
  • if a good one then increases the demand so can increase the price
  • but if they seem like they wont work then may lead to a sell off which increases supply and reduces price
86
Q

what happens for shareholders if share prices fall ?

A

it will cost shareholders money
- for when selling shares but can hold onto them

87
Q

what happens for shareholders if share price rise ?

A

it will make shareholders make a profit
- for when they sell shares but can hold onto them

88
Q

what is less likely to affect shareholders who buy shares in a long term investments ?

A

when the short term prices change

89
Q

what happens when share prices decrease ?

A

it reduces the overall value of the business

90
Q

what is the short term affect when share prices fall ?

A

isn’t much problems as the business already has the share capital

91
Q

what is the long term affect when share prices fall ?

A

can reduce the confidence of the company so makes it difficult to attract new investors

92
Q

what is market capitalization ?

A

total value of business share’s
- the amount the business could be bought for

93
Q

what is right issue ?

A

when existing shareholders are given the opportunity to buy new shares the business owns

94
Q

what is share capital ?

A

money raised by a company through the sale of common or preferred stock

95
Q
A

business (10 decks)

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