Unit 1 Flashcards
A business
Any organisation that sells goods or provides services
Goods
A physical product
Eg. A car
Service
Non-physical items
Eg. A haircut
Small business
- has less than 50 staff
- solo ownership
- usually operate in one area
Reasons to start a business
- Money
- independence (flexible hours)
- doing something they enjoy
- gaps in the market
Entrepreneur
Someone who sets up a business
Risk
The chance of a loss or damage/ the probability of something going wrong
Calculated risk
A risk which has been given consideration
Costs and potential benefits have been weighed up and compared to the probability of failure
Examples of risk
- going bankrupt
- no sales
- lack of security
- poor execution
- aggressive response from competitors
Examples of reward
- earning money
- building something
- seeing hard work go somewhere
Adding value
Adding value to each part of the production
Eg. Growing trees
|
Cut trees
|
Season timber
|
Construct furniture
|
End product
Examples of adding value
- branding
- quality
- USP
- Speed
- convenience
Wants
A want is something you would like but can live without
Eg. A car
Needs
A need is something you rely on to live and is a necessity
Eg. Food
Internal finance
Money earned within the business
Eg. Profit
External finance
Money obtained outside the business
Eg. Loans
Short term finance
Sources of money which can be paid back quickly
Long term finance
Sources of money which are paid back over a period of time (over a year)
Trade credit
When a supplier allows you to pay later for goods or services
Overdraft
An overdraft is when you can withdraw more money than you have
Break even
Break even is the point at which the total revenue of a business equals the total costs
Cash inflow
Money coming into the business
Eg. Sales
Cash outflow
Money coming out of the business
Eg. Rent
Primary research
Research a business does themselves
Market research
The process of gathering information about the market and customers needs and wants in order to inform the business’s decisions
Margin of safety
How many sales made after the break even point has been reached
Advantages and disadvantages of personal savings
+security
+quick
+no interest
-limited amount
Advantages and disadvantages of crowdfunding
+quick
+alternative to a loan
-lots of work
-if target isn’t reached money has to be given back
Advantages and disadvantages of long term loans
+quick
+fixed interest rate
-high interest
Advantages and disadvantages of venture capital
+skills from investors
+money
-lose a percentage of the business
Advantages and disadvantages of share capital
+raise large amounts of money
-may be tension between shareholders
Advantages and disadvantages of retained profit
+it’s your money
+no interest
-no guarantee the business will make profit
Advantages and disadvantages of questionnaires
Primary research \+up to date data \+easy to analyse \+cheap online -people may find it a nuisance -online may not be honest
Advantages and disadvantages of focus groups
Primary research \+up to date \+in depth response -time consuming -costly
Advantages and disadvantages of interviews
Primary research \+detailed response \+cheap over the phone -expensive in person -time consuming
Advantages and disadvantages of observations
Primary research \+in depth \+up to date -expensive -may give misleading responses -time consuming
Secondary research
Research published by people or organisations that are not related to the business specifically
Advantages of secondary research
- quick
- gathered on a larger scale
- may be cheap or free to access
Disadvantages of secondary research
- biased
- not specific to the business
- may be costly
- may be outdated
Market segmentation
Grouping the market into categories to know who you’re selling to and how to advertise to them
Eg.age
Pros and cons of market maps
+straight forward
+clear to see gaps in the market
-they’re subjected (based of opinions)
-doesn’t tell the full story
Qualitative data
(pros+cons)
Usually opinions
+detailed descriptions
-costly
-time consuming
Quantitive data
Pros+cons
Usually numbers and statistics \+quick to understand \+easy to analyse -not much detail -lacks opinions
Equation for total revenue
Price x quantity = total revenue
Revenue
How much the business earns
Fixed costs
Costs which do not vary with output
Eg. Rent
Variable costs
Costs which change directly with the output
Eg. Packaging
Limited liability
The businesses finances are separate from the owners meaning if the business goes into debt the owner won’t lose personal assets
Un-limited liability
The owner has full responsibility for the businesses finances so if the businesses goes into debt the owner may have to sell personal assets
Sole trader
One person running a business themselves
Advantages and disadvantages of a sole trader
\+cheap \+simple \+don’t need to publish accounts -un-limited liability -fewer sources of income (eg.shares)
Partnership
Several people running the business
Advantages and disadvantages of a partnership
\+wider expertise \+share risk \+easier to grow business finance -share profit -potential arguments -decisions affect everyone
Private limited company
The shareholders (owners) have a separate legal identity to the company
Advantages and disadvantages of a private limited company
\+limited liability \+additional sources of finance \+control who shareholders are \+selling shares -no access to stock exchange -legal requirement to publish financial accounts
Franchise
When a business gives another business permission to trade using its name and products in return for fees and shares of its profits
Advantages of a franchise
\+branding \+lower risk \+training \+skills \+advertising already done
disadvantages of a franchise
- limited growth
- lack of freedom
- brand reputation can be damaged by other franchises
Location
Where the business decides to operate
Things a business must consider when choosing location
- competitors
- cost of rent
- traffic
- distance from suppliers
E-commerce
Selling and buying online
M-commerce
Using mobile technologies (apps) to carry out business transactions
Business multichannel
Operating in a physical location and an e-commerce site
Business plan
Written document that describes things such as objectives, strategy, market, financial forecast etc
What’s included in a business plan?
- aims
- people (skills, employees)
- products/services
- the market
- competition
- marketing
- finance
- operations
Stakeholder
Someone with an interest for the business
Eg. Customers,government etc
Legislation
Rules/law of the country that customers and businesses must follow
Trades description act
Prevents manufacturers misleading consumers as to what they’re spending money on
Sales of goods act
The goods should match any sample you were shown and should be the right quality for the price
Consumer rights act
What should happen if goods are faulty and unfair contracts, consumer had rights (receipts)
What happens when interest rates are high?
- consumers spend less as they have less money
* may lead to fall in demand for businesses
What happens when interest rates are low?
- people get more loans
- people have more disposable income
- higher demand for businesses
Inflation
The increase of the prices overtime
This means everyday items increase in price (usually 2% a year)
Exchange rate
The price of one currency in terms of another
Eg. £1 = $1.50
Appreciation
An increase in the value of a currency
Depreciation
A decrease in the value of a currency
What does SPICED stand for?
Strong Pound Imports Cheap Exports Dear (expensive)
Tax
Taxation is the process of imposing charges on a business and individuals by the government
Types of taxes
- VAT (value added tax)
- income tax
- corporation tax
How to answer 3 mark questions?
1x BLT
How to answer 6 mark questions?
2x BLT
+context
How to answer 9 mark questions?
Pro
Con
Conclusion:
AJIM
How to answer 12 mark questions?
Agree
Disagree Or 2 separate points
Conclusion- AJIM
What does AJIM stand for?
Answer
Justify
It depends on
Most important
