Unit 1 Flashcards
what is the transformation process?
where inputs are processed within a business to add value and create outputs
why do businesses exist?
employ = tax = develop.
create wealth
enhance reputation
increase efficiency
what tax do employees pay?
income tax
define business
organisation that exists to provide goods or services to an individual on a commercial basis.
equation for added value (transformation process)
selling price - cost of bought materials = added value.
what does primary business sector do?
extract raw materials
what does secondary business sector do?
manufacture / process raw materials = products
what does tertiary business sector do?
provide a service to community or business
what does quaternary business sector do?
provide information/knowledge or ict
what is a mission
the overall purpose of a business
what is an objective?
a target to be achieved
what’s the acronym for setting objectives?
SMART
what does SMART acronym stand for when setting objectives?
specific, measurable, achievable, relevant, time bound.
define aim
a long term plan that is used to make objectives
define corporate vision
what a business aspires to be
define mission statement
a qualitative statement of an organisations aims which describes the general purpose of business.
what is the benefits of having objectives?
provides focus and target, measures performance, motivate employees, reduce uncertainty, unity.
what is the difference between a corporate and functional objective?
corporate = whole business
functional= individual department so more detailed
factors that influence objectives
- aims
- risk
- economy state
- market conditions
- legislation
- competition
- demand
- social attitudes
- ownership style
- forecasting levels
what is the difference between a strategic and tactical objective?
TACTICAL = shorter time, lower risk, more achievable, require minimal investments
STRATEGIC = longer term, high risk, challenging, high investment required
what’s a tactical objective?
short term low risk and achievable target often needing low capital investment
what’s a strategic objective?
long time, high risk, challenging and needs high capital investments. set by the board.
revenue formula
selling price x total item sold
profit formula
total revenue - total costs
define variable costs
costs that change directly with output eg materials
total cost formula
variable + fixed costs
importance of profit
-allowing to reinvest
-owners happy
-dividends
-exterior finance access
-pay taxes
what is an incorporated business?
the business is registered with the companies house so has certificate of incorporation and has limited liability
advantages of being a sole trader
owning all of the profits, low admin, easy to set up
disadvantages of being a sole trader
liability debt, raise own finances.
define company
legal entity where the owners of it are shareholders
what is a limited company aka incorporated?
registered with companies house = limited liability
what’s the difference between a private and public limited company?
private = shares sold privately and share prices determined internally.
public = no control over share price & sold on stock exchange.
what is a mutual (business forms)?
where the organisation is run for interest of future and current members
profits all reinvested
what’s a social enterprise/ not for profit organisation?
when its run for social benefit, instead of interest of gaining ownership profits
advantages running a social enterprise
tax reductions, benefits communities, employment for locals
disadvantages of running a social enterprise
the regulations are strict, profits must be given to charity but also employees
define a share
equity in a company meaning they are entitled to dividends
what are the two methods of a shareholder getting return on investment?
dividends, capital gain/growth
what is capital gain/growth?
increase of share value when bought vs sold.
dividend yield formula
div per share/ share price X100
What happens to share price if share > supply?
increases share price
What happens to share price if share < supply?
decreases share price
what is market capitalisation?
total market value of share capital ( if you were to sell)
what is dividend yield?
% reward for investing
Market capitalisation formula
share price x no. shares
How does the fluctuating share price affect a business?
- displays managers performance
- changes public perception
- affects ability to raise finance
Internal influences on plc share price
- management changes
- amount of shareholders
- change of advertising
- expansion or rationalisation
- product releases
External influences on plc share price
- interest rates
- demand
- competition
- media
- market share
what are the two types of issuing shares?
Flotation and Rights issue
what’s an IPO
an initial public offering
( LTD TO PLC = issuing for first Time)
what is flotation aka IPO?
going public, stock exchange for first time = ltd to plc for first time. shareholders in ltd can see value of their share for first time.
benefits of having selling shares
finance source, no debt instead of from loans.
drawbacks of selling shares
- costly ( give profits by dividends)
- lose control
- high admin
- cost of capital gain often more in long term than a loan
what’s a private sector business?
not ran by the government
what’s a public sector business?
owned by government
acronym for the external environment
PESTLE
What does PESTLE stand for?
Political, economic, social, technological, legal, environmental
What political factors may affect a business?
conflict,laws, taxes, trading limitations
What economic factors may affect a business?
GDP, exchange rates, interest rates, consumer incomes
What social factors may affect a business?
demographic changes, trends, competition, lifestyle
What technological factors may affect a business?
production process, innovation of tech, mobile, online presence, social media
What environmental factors may affect a business?🌳
pollution, carbon cycle, sustainability, waste disposal, recycling, materials used
What legal factors may affect a business?
employment laws, minimum wages, health and safety regulations, pollution regulations
what is an inferior good?
demand falling when customer incomes change
define interest rate
cost of borrowing money and the return for lending
define demand
amount of good/service that a customer or organisation want and can afford.
define market conditions
features of a market eg sales growth or market share.
what is disposable income?
money a person has after tax
Advantages to a business of being environmentally good
good reputation, improves brand image, better share prices, attractive to investors ( eg. venture cap: Deborah meaden wont invest if not).
Drawbacks to a business of being environmentally good
increased costs, must be monitored heavily, shareholders less dividends if less profits, inventory may not be used as efficiently, against objectives
