Unit 1 Flashcards
Key issues with different forms of business
Unlimited/ limited liability, Ordinary share capital, Market capitalisation and Dividends.
Budgets
Agreed ceiling on the monthly spending by any department or manger.
Corporate Objectives
Targets for the whole business, such as profit to rise by 20% a year for the next 3 years for the whole business.
Delegated
Decision making power is passed down the the hierarchy.
Entrepreneur
Person with the initiative and drive to make a business idea happen.
Mission
Over riding motivation or purpose of a business
Mission Statement
A short, powerful expressed sentence or two that explains the business aims clearly yet motivationally.
Objectives
Targets precise enough to allow praise or blame for the person in charge.
Profit Optimisation
the process of maximizing profits by finding the optimal balance between the prices of products or services and the costs associated with producing and selling those products or services.
Strategy
Medium to long term plan for meeting objectives
Four business functions
Marketing, Human Resources, Finance and Operations.
Reasons businesses exist
create a profit or surplus funds, sell or provide goods or services, survive, expand, maximize sales, improve product quality, beat the competition, provide voluntary services, be kind to the environment
Set businesses objectives
Managers cannot make every decision. Contributes towards achieving goals.
Benefits of setting objectives
Motivating for managers and for all staff to have a clear goal to aim towards. Also, they are the basis for devising a strategy.
Key Business Objectives
Profit Maximisation, Profit Optimisation, Growth, Cash Flow, Survival and Social and Ethical
SMART stands for - write each word
Specific
Measurable
Achievable
Realistic
Timebound
Bankrupt
INDIVIDUAL is unable to meet personal liabilities, some or all of which can be as a consequence of business activities.
Creditors
individuals or entities that have lent money to another individual or entity
. For example, suppliers and bankers.
Incorporation
Establishing a business as a separate legal entity from its owners, and therefore giving the owners limited liability.
Limited Liability
Owners are not liable for the debts of the business; they can lose no more than the sum they invested.
Monopoly
Where the sales of one business have a dominant share of its marketplace.
Registrar of Companies
Government department where firms register to be incorporated.
Sole Trader
Business owned by one person with unlimited liability.
Unlimited Liability
Owners are liable for any debts incurred by the business, requires them to sell their personal assets and possessions and become personally bankrupt.
Advantages of Limited Liability
- Owners may feel more secure in taking business risks e.g. expanding business; 2. Owners can sell shares to raise finance = advantages for Ltd and pic
Private Limited Company
Low start up capital, can be wholly owned by the entrepreneur, or investors. Shares cannot be bought and sold without agreement, cannot be listed on stock market. For example, Aviva.
Public Limited Company
Share capital of more than £50,000 required to float on stock market, members of the public can buy shares. Increases company’s access to share capital, e.g. Tescos.
Co-Operatives
a business or organisation that’s owned and controlled by its members, to meet their shared needs.
Mutual Business
This includes building societies/ mutual life assurance. They have no shareholder or owners. Exists solely for best interests of members; Customers. For example, Nationwide.
Charities
e.g. Oxfam, includes pressure groups, such as Greenpeace. Contributors are are not liable for any debts, but receive significant tax benefits.
Public Corporation
Government owned businesses - trade mainly within the private sector. Most have been sold to the private sector, often forming a private monopoly. Crown Estate is one example - earns rental income for the government from publicly owned lands.
Local Authority Service
Care homes for the elderly etc run by this public sector, even though there was alternative provision from the private sector. Priced below the private sector level or even free.
Private Public Partnerships
Public services run in partnership with the private sector. Idea promoted by the Government as being more efficient
Annual General Meeting (AGM)
Yearly meeting in which company directors invite all shareholders to come to hear results and vote on new resolutions. A legal requirement for PLCs.
Dividend Cover
Measures how well a firm’s dividends are covered by its profits for the year. Accountants recommend a figure of at least 2, company should pay out no more than half its profits to shareholders.
Market Capitalisation
Value placed on the business by the stock market, calculated as; share price x number of shares issued.
role of shareholders
They literally own a share of the business, proportionate to their shareholding. It is to provide the capital to get the business going and to keep it growing
shareholder rewards
Annual dividend payments and rise in the value of shares.
Key term:
Statergy
The medium-to-long term plans through which an organisation intends to achieve its objectives
Why do businesses set objectives?
- Act as a focus for decision making and effort
- can help measure out successes or failures
Key term:
Corporate objectives
- Govern objectives set by each department
- determinate how the business will develop ~ which intern provide a clear focus on how the business objectives can be set
Key term:
Business objectives
-Enable a business to achieve its aims or missions
- can be set at the corporate level and functional level
Key term:
Mission statement
-communicating to key stakeholders( shareholders, employees, customers, suppliers)
-what the organisation is doing
-what a business ought to be doing
How to calc total revenue
-total rev( or turnover or sales rev) the income received from an organisations activities
- total rev = price per unit x quantity of units sold
Key term:
Cash flow
-the amount of money flowing into and out of a business over a period of time
Key term:
Fixed cost
Costs that do not vary directly with output in the short run (e.g rent)
Key term:
Variable cost
-costs that vary directly with output in the short run (e.g raw materials)
Key term:
Mission
-purpose or intentions
-main aim or aims of a business
-stated in qualitative terms rather than numerical
