understanding nature and purpose

Question 1

Name 6 business objectives

Answer 1

1. Profit (to achieve sales revenue that is higher than total costs)
2. Growth (to increase by size or volume of sales, organically or externally)
3. Survival (to continue to exist as a business, PRIMARY objective for a start up or a business experiencing difficult trading conditions)
4. Cash flow (ensure sufficient cash is available to meet day to day expenses)
5. Social (to behave in a way which benefits society, could be to create jobs, support local community, improve education)
6. Ethical (to behave morally correct eg treating key shareholders like suppliers and employees fairly and decrease environmental impacts)

Question 2

What is revenue?

Answer 2

Revenue is the income a business receives from selling its products or services, turnover = revenue, there are different strategies to maximise revenue i.e high price low volume, low price high volume, formula = selling price x volume sold

Question 3

What are costs?

Answer 3

Expenditure a business makes as part of its trading, fixed costs = irrespective with output (doesnt change) e.g salary, rent, mortgage,advertising)
Variable cost= does change with output e.g utility bills, wages, raw materials,
Formulas:
Tot variable costs = variable cost per unit x output
Variable cost per unit = tot variable cost / output
Tot costs = fixed + variable

Question 4

What are profits?

Answer 4

Formula = total revenue - total costs
Profit is what the business makes over a period of time when its revenue exceeds its total costs

Question 5

Why is profit important?

Answer 5

-businesses often judged on their profits
-a profitable business can attract investors + shareholders
-a profitable business will attract customers
-a profitable business can enjoy economies of scale

Question 6

Why do businesses set objectives?

Answer 6

-common sense of purpose
-motivate employees
-helps create reward systems
-measure + review performance
-inform decisions to improve performance

Question 7

What is a mission statement?

Answer 7

A brief written statement of the purpose of a company or organisation (shows goals and targets) it is the overall reason for a business existence

Question 8

What are corporate aims?

Answer 8

Long term targets and plans to fulfil mission statement

Question 9

What are corporate objectives?

Answer 9

Medium to long term quantifiable targets to fulfil the mission statement

Question 10

What is corporate strategy?

Answer 10

Actions to be taken by the business to achieve the objectives

Question 11

What are business tactics?

Answer 11

Actions taken on a day to day basis to support the strategy.