Understanding Business Flashcards
What are the two types of providers/funders?
- Debt Providers:
- Want to be comfortable that the capital portion of the loan will be paid off.
- Businesses must be able to meet interest obligations. - Equity Providers:
- Business can service debt.
- Potential dividends and future capital growth.
- In liquidation, equity providers are only repaid afterward.
- Debt and other claims are settled, which is a higher risk and thus a higher expected return.
What are the components of a business plan? (11)
- Executive Summary
- Business Description
- Ownership and Management Team
- Product/service offered
- Market/Industry Analysis and Sales Strategy
- Facilities and Resources
- Business Model
- Capital requirements and milestones
- Financial data and Forecasts
- Stakeholders and Sustainability
- Risk and risk management
Define what a value creation model is?
Value can only be created if:
- A clear strategy exists that accounts for external and internal business environment.
- Which meets the needs of its stakeholders.
- The availability, affordability and quality of resources
- There is good corporate governance from the Management.
What are the six capitals?
- Financial Capital
- Natural Capital
- Human Capital
- Manufactured Capital
- Intellectual Capital
- Social and Relationship Capital
What is Entrepreneurship?
Entrepreneurship is the process of:
- Identifying an opportunity to solve a problem
- Taking both the risk and rewards associated with the venture.
- Starting a business venture to convert opportunity into value.
- Sourcing and organizing the required resources.
What are the three main risks associated with a business?
- There is no demand or need for a product/service.
- Being undercut by competitors.
- There may be employee problems as well.
What are the three main rewards associated with a business?
- Wealth
- Self fulfilment
- Influence
What qualities should any entrepreneur have?
- Confidence
- Discipline
- Creativity
- Failure and resilience with it
What are the goals of profit-driven entities?
- To maximise shareholder wealth
- Create value for stakeholders
- Minimize or avoid negative impact on society and the natural environment.
What are the goals for non-profit entities?
To create value through the use of the resources in a manner which is:
- Economic
- Effective
- Efficient
What should the overall goal of an entity be?
Is to create long term sustainable value for its stakeholders.
The mentality has shifted from maximizing shareholder wealth to long-term sustainable value-creation.
What are the different types of entities?
Look at the last PowerPoint presentation in week 2 sides?
