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business > unit 1. > Flashcards

unit 1. Flashcards

1
Q

economic problem

A

when there is unlimited wants but limited resources to fulfil them, leading to scarcity

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2
Q

scarcity

A

when there is a lack of products/ services to fulfil the needs of the population

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3
Q

labour

A

the number of people available to make products/services

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4
Q

capital

A

the finance, machinery and equipment needed to manufacture the goods/services

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5
Q

enterprise

A

the skill and risk-taking ability of the managers and owners of the firm

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6
Q

opportunity cost

A

next best alternative given up by choosing another item

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7
Q

specialisation

A

when people and businesses concentrate on what they are best at

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8
Q

division of labour

A

when the production of process is split into different tasks and each worker performs one of the specific task only

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9
Q

advantage of division of labour

A

workers are trained in one task and specialised in that=increasing efficiency and output
less time wasted from one workbench to the other

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10
Q

disadvantages of division of labour

A

workers can be bored doing just one job=decrease efficiency
if one worker is absent no one else can do the job=production might be stopped

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11
Q

added value

A

the difference between selling price and the cost of bought-in materials
helps pay for operating expenses
helps make a profit if other costs are lesser than the added value

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12
Q

how to increase added value

A
  1. increasing the selling price=consumer may not want to buy at a higher price
  2. reducing cost of bought-in materials= consumer may think product is of low quality
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13
Q

classification of business

A

primary sector
secondary sector
tertiary sector

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14
Q

primary sector

A

this sector of this industry extracts and uses natural resources of Earth to produce raw materials used by other sectors in the industry

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15
Q

secondary sector

A

this sector of the industry manufactures goods using raw materials provided by the primary sector

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16
Q

tertiary sector

A

this sector of the industry provides services to consumers and to the other sectors of the industry

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17
Q

changes in sector importance

A

happens when primary product source depletes
developed economies are losing competitiveness
when higher disposable income and higher standards of living lead to more spending on services like travelling and fine-dining

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18
Q

private sector

A

businesses owned by private individuals and not the government

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19
Q

public sector

A

government of state owned and controlled businesses and organisations

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20
Q

privatisation

A

when public sector businesses are owned and managed by private sector to offer a more competitive and efficient good/service

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21
Q

private limited companies (LTD)

A

a business owned by shareholders, but they cannot sell shares to the public, they sell them to family and friends

22
Q

LTD advantages

A

can raise more capital from selling share compared to a ST and partnership
all owners have limited liability so less risk
can still maintain control of the business as they approve who they sell shares to

23
Q

LTD disadvantages

A

cannot sell shares to public, so limited ability to raise capital compared to PLC
expensive to be an LTD as a lot of legalities and paperwork to be completed

24
Q

public limited corporations (PLC)

A

a company owned by shareholders and shares can be sold to the public on the stock exchange

25
Q

entrepreneur

A

a person who organises operates and takes the risk of a business venture

26
Q

benefits of an entrepreneur

A

independence
able to put own ideas into practice
may be profitable
able to make use of personal interest and skills

27
Q

disadvantages of an entrepreneur

A

risk of fail
own capital
lack of knowledge/experience
opportunity cost

28
Q

characteristics of a successful entrepreneur

A

risk-taker
visionary
determined
creative
people-orientated
charismatic
passionate
brave
inspirational
ambitious
supportive
social
caring
lively

29
Q

benefits of PLC

A

can raise more capital from selling shares to the public compared to an LTD
all owners have limited liability-so less risk

30
Q

drawbacks of PLC

A

risk that the original owners loose control of the business when it goes public
need to pay shareholder dividends so less profit for original owner
expensive to be a PLC, lots of legalities and paperwork to complete

31
Q

unlimited liability

A

the owners of a business can be held responsible for the debts of a business and so their personal possessions are at risk if the business can’t pay off its debts sole traders, and partnerships have unlimited liability

32
Q

incorporate business

A

businesses that have separate legal status from their owners (PLCs and LTD)

33
Q

unincorporated business

A

when they do not have a separate legal status from their owners (ST and P)

34
Q

sole trader

A

a business owned and operated by one person, they have unlimited liability

35
Q

benefits of a sole trader

A

get to keep all the profit
owner is in complete control so can make all decisions
few legal requirements, so therefore easier and cheaper to set up

36
Q

drawbacks of a sole trade

A

unlimited liability
limited sources of finance as only has their own savings, no other financial input

37
Q

partnership

A

a business in which two or more people agree to jointly open a business

38
Q

partnership advantages

A

more finance can be invested into the business from all the partners
less stress as responsibilities of running the business are shared
more ideas from partners

39
Q

partnership drawbacks

A

profits have to be shared
disagreements can occur which can distract owners from focusing on quality of products/customer service
unlimited liability

40
Q

franchise

A

a business with a strong name and the franchisor sells the rights to use the brand name to a franchisee

41
Q

benefits to franchisor

A
  • franchisor receives a portion of profits from the branches, know as royalties
  • the responsibilities of day-to-day running of franchises is the responsibility of the franchisee, so less stress for the franchisor
42
Q

drawbacks to franchisor

A
  • bad reputation in one branch can risk ruining the entire brands rep
  • they don’t get to keep 100% of the profit
43
Q

joint venture

A

where two or more businesses start a new project together, sharing risks and profits

44
Q

joint venture advantages

A
  • both businesses share the costs of the new project
  • risk is shared
    -each business may benefit from the expertise of the other
45
Q

joint venture disadvantages

A
  • profits will have to be shared
  • disagreements may occur=impacting improvement of quality
46
Q

public corporation

A

a business in the public sector that is owned and controlled by the government

47
Q

benefits of public corporations

A
  • ensure customers are not taken advantage of
  • important for providing non-profitable but important services
48
Q

drawbacks of public corporations

A

no huge profit motive as they care more about providing the service=may not be as efficient as a private company

49
Q

business objectives (SMIG)

A
  • survival
  • make profit
  • increase market share
  • growth
50
Q

social enterprises

A

operated by private individuals but have other objective other than profit

51
Q

stakeholders

A
  • people who have direct interest in the performance and activity of the business
52
Q
A

business (5 decks)

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