Unit 1 Flashcards
Percentage Change
Percentage Change = ((New Number - Old Number) / Old Number) x 100
Profit
Profit (or loss) = Total Revenue - Total Costs
Total Revenue
Total Revenue = Sales x Price of Product
Total Costs
Total Costs = Fixed Costs + Variable Costs
Variable Costs
Variable Costs = Variable Cost per Unit x Units produced
Average Unit Cost
Average Unit Cost = Total Costs / Units Sold (or Produced)
Sole Trader Pros
- Simple set-up
- No legal requirement to publish accounts
- Do not distribute profits
Sole Trader Cons
- Unlimited liability
- Fewer sources of finance
Partnership Pros
- Shared workload
- More finance
Partnership Cons
- Shared profits
- Unlimited liability
- Shared control
Private Limited Companies Pros
- Limited liability
- Additional sources of finance
- Control of who shareholders are
Private Limited Companies Cons
- Legal requirement to publish accounts
- More admin
- No stock exchange finance
- Shared profits
Public Limited Companies Pros
- Stock exchange finance
- Stable ownership structure
- More prestige
Public Limited Companies Cons
- Anyone can buy shares
- Risk of split between ownership and control
- Legal requirement to publish accounts
- Short-sighted shareholders
Not-for-profit Pros
- Do not pay tax
Not-for-profit Cons
- Unpredictable income
Business plans Pros
- Help business understand its finances
Business plans Cons
- Only a plan
Franchising Pros
- Additional revenue stream
- Lower risk
Franchising Cons
- Give up control
Outsourcing Pros
- Higher quality
Outsourcing Cons
- Give up control
New stores Pros
- Lower risk
New stores Cons
- New costs
E-commerce Pros
- Open 24/7
- Increased reach
E-commerce Cons
- Higher initial costs
Merger/Takeover Pros
- Horizontal-less competition / economies of scale
- Guaranteed outlet / deny rivals (forwards)
- Guaranteed supplies (backwards)
Merger/Takeover Cons
- Demotivating for employees
- Unproductive workers
- Diseconomies of scale
Business Aims & Objectives Pros
- Act as measure of success
- Useful to stakeholders such as shareholders
Business Location Factors
- Raw materials
- Employment
- Competition
- Infrastructure
- Proximity
- Finance (costs)
Types of Economies of Scale
- Purchasing
- Technical
Types of Diseconomies of Scale
- Employee Co-ordination
- Employee Motivation
- Employee Communication
Methods of Internal Expansion
- Franchising
- Outsourcing
- New stores
- E-Commerce
Methods of External Expansion
- Mergers
- Takeovers
