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Business A Level > UNIT 1 > Flashcards

UNIT 1 Flashcards

1
Q

Why do businesses exist?

A

Businesses provide goods and services for the market.

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2
Q

Who supplies goods and services?

A

Businesses supply goods and services to consumers and other businesses.

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3
Q

What is the impact on the country and its residents? Name 1

A
  • Businesses provide employment which allows individuals to earn an income and purchase goods and services.
  • Businesses create new goods and services which can enhance the lives of consumers.
  • Businesses can allow a country to improve and develop the country’s reputation.
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4
Q

What is the transformation process?

A

Businesses convert inputs (for example, raw materials) into outputs (finished goods) to satisfy the needs, and wants of other consumers and businesses.

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5
Q

What is a good?

A

Goods are tangible products which can be physically held.

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6
Q

What is a service?

A

Services are intangible products.

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7
Q

What is B2C?

A

Some businesses sell their goods and services directly to consumers and these businesses are known as business to consumer (or B2C) organisations.

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8
Q

What is B2B?

A

Other businesses sell their goods and services to other businesses and these are known as business to business (or B2B) organisations

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9
Q

What is a sector?

A

Businesses being categorised according to the type of product they supply

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10
Q

What is the primary sector?

A

Primary sector businesses extract or grow raw materials including fishing, mining, and forestry.

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11
Q

What is the secondary sector?

A

Secondary businesses manufacture goods using raw materials such as clothing and mobile phones.

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12
Q

What is a tertiary sector?

A

Tertiary businesses provide services such as hotels and cinemas.

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13
Q

What does the mission statement do for the business?

A

The mission statement sets out the business’s beliefs and values.

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14
Q

How does a business use its mission statements for the corporate aims?

A

A business will use its mission statement to create corporate aims which are the long-term goals of the entire business and it will allow the business to work towards its overall mission.

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15
Q

How do corporate objectives work?

A

Corporate objectives that contain the specific tasks and activities a business must accomplish in order to satisfy its corporate aims are written down.

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16
Q

What can corporate objectives be broken down into?

A

Functional (departmental), team and individual objectives.

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17
Q

Business Objectives
What does the S stand for in SMART and why is it used?

A

Specific- so employees know exactly what they are working towards.

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18
Q

Business Objectives
What does the M stand for in SMART and why is it used?

A

Measurable- so that employees can actually work out whether they have met their objectives.

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19
Q

Business Objectives
What does the A stand for in SMART and why is it used?

A

Attainable/ Achievable- so that employees are committed to achieving them.

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20
Q

Business Objectives
What does the R stand for in SMART and why is it used?

A

Realistic- otherwise employees may feel demotivated and overwhelmed.

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21
Q

Business Objectives
What does the T stand for in SMART and why is it used?

A

Timely- so that employees know when they must achieve them by.

22
Q

Business Objectives
What is profit maximisation?

A

A business objective that requires (a business and its management) to achieve the highest amount of profit for shareholders/

23
Q

Business Objectives
What is survival?

A

A business objective which requires a business to continue trading despite challenges in the external environment.

24
Q

Business Objectives
What is growth?

A

A business objective that requires the growth of stores or location, sales value/volume or product range.

25
Q

Business Objectives
What are the social objectives?

A

They are social, ethical and environmental.

26
Q

What is the benefit of setting objectives?

A

They can provide direction and support planning.

27
Q

What is the benefit of setting objectives?

A

Allows a business to co-ordinate resources and ensure all employees are working towards the same overall goal.

28
Q

What is the equation to work out revenue?

A

Revenue= number of sales x sales price

29
Q

What is a fixed cost?

A

Fixed costs don’t vary as the business changes its output.

30
Q

What is a variable cost?

A

Variable costs are the costs that change directly with output.

31
Q

What is the equation for profit?

A

Profit= total revenue - total costs

32
Q

What is the equation for average unit cost?

A

AUC: total cost/ output (total number of units produced)

33
Q

What is the equation for interest?

A

Interest= interest rate x the size of the loan

34
Q

Name 2 advantages of being a sole trader

A

-They are the easiest type of business to set up.
-The sole trader gets to be their own boss.
-They decide what do with their profit.
-It’s easy to change the legal structure if circumstances change

35
Q

Name 2 disadvantages of being a sole trader

A

-Unlimited Liability means that there is no legal distinction between the sole trader’s assets and the business’ assets.
-It can be hard to raise finance. Banks often see sole traders as riskier. Having someone to share decision making with, can improve performance.
-It can be harder to retain (keep) good employees as they aren’t necessarily given a share of the profits.

36
Q

Name 2 advantages of a public limited company

A

-The key advantage over sole traders and partnerships is that shareholders have limited liability.
-The fact that ownership is restricted means that all shareholders must agree to sell shares. This means that the owners retain (keep) a lot of control over how the business is managed.
-It is normally easier for a limited company to get a loan than it is for partnerships, as a company is normally seen as less risky. This should increase a company’s access to finance.

37
Q

Name 2 disadvantages of a private limited company

A

-Finance is needed to incorporate a business. There is an upfront fee as well as costs associated with paperwork. This means that it may not be possible for smaller firms (or brand new firms).
-Unlike sole traders and partnerships, the company is legally obliged to publish their accounts each year and competitors may use these to become more competitive.

38
Q

Name 2 advantages of public limited company

A

-Selling shares on a stock exchange allows companies to raise money for investment, which enables the company to grow faster or bigger.
-It is much easier to companies to raise capital (money) from banks if they are public limited companies because they present less of a risk.
-Shareholders have limited liability because the company is incorporated.

39
Q

What are type of organisation is a charity and why is it good to have charitable status?

A

Charities, like Oxfam or Save the Children, are a type of not-for-profit organisation.
Getting charitable status lets a business get tax relief and lets it apply for certain grants. For a business to get charitable status, they must follow rules and regulations.

40
Q

Can not-for-profit organisations choose to be an unincorporated association?

A

Yes, not-for-profit organisations can choose to be an ‘unincorporated association’ but, like sole traders and partnerships, the people who manage it have unlimited liability.
This means that they get no profit and they are legally responsible for all of the organisation’s debt.

41
Q

What is a social enterprise?

A

Social enterprises are another form of not-for-profit organisation.
They are more similar to for-profit businesses in that they make a surplus through selling goods or services. This profit is reinvested to support the social enterprise’s aim.

42
Q

What is franchising?

A

Franchising is where a business gives someone the right to sell its products and use its trademarks.

43
Q

Name 2 advantages of franchising.

A

-The business can expand without needing large amounts of investment. The firm does not incur the costs involved with opening new stores.
-The business also does not have to be concerned about some of the risks of becoming a larger corporation, for example, diseconomies of scale (which may be caused by the growth from opening and operating new stores themselves).
-Franchising increases brand awareness of the firm’s products or services

44
Q

Name 2 disadvantages of franchising.

A

-A disadvantage of franchising is that the franchiser does not have complete control over how they operate.
-If a franchise is run badly, then a single franchise or store can negatively affect the brand image.

45
Q

What is the external environment and its impact?

A

The external environment covers the range of factors which may affect a business but are outside the business’ control. External environmental factors can affect a business’ costs and demands.

46
Q

What does competition for a business effect?

A

-Can affect a business’ costs and demands as the presence of competitors may reduce demand for a business’ product or service.
- Can increase business costs as they may increase their spending on promotion and advertising.

47
Q

How can market conditions affect a business?

A
  • Market conditions can affect a business’ costs and demands.
  • If a market is increasing in size, a business must ensure it competes against other competitors to secure its own share of the increasing market, and this increases costs.
48
Q

How can consumer income affect a business?

A
  • Consumer income can affect a business’ costs and demands.
  • If consumer incomes are decreasing, demand for luxury items, like watches and cars may decrease as people make decisions to stop purchasing these products.
  • Businesses may also invest more heavily in promotional and advertising campaigns to try and increase demand, and this also increases business costs.
49
Q

How can interest rates affect a business?

A
  • Interest rates can affects a business’ costs and demands.
  • An increase in interest rates may increase the costs of the business’ borrowing whilst also reducing the amount spent by consumers as they make decisions to save instead of spend.
50
Q

How can demographical changes affect a business?

A

Demographical changes, such as an ageing population, can affect a business’ costs and demands.

51
Q

How can environmental and ethical factors affect a business?

A
  • Can affect a business’ costs and demands.
  • As consumers become more

Business A Level (5 decks)

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