Unit 1 - Chapter 1 : Enterprise Flashcards
What is the nature of business?
Business activity aims to satisfy peoples needs. The purpose of business owners/managers is to add value to resources while meeting people’s needs.
What is a business?
An organisation which uses resources to meet the needs of customers by providing a good or service.
What do business do?
Identify the needs of customers
Purchase necessary goods to allow production to take place
Produce goods and services which satisfy customer needs
What are the 4 factors of production?
Land - General term which includes the land and also all the resources from nature e.g. coal, timber
Labour - Manual and skilled labour of which the workforce is made up from
Capital - Not just the finance (working capital & retained capital) to set up a business but also all the manufactured resources used in production including capital goods (the assets)
Enterprise - The initiative and coordination provided by risk taking individuals, enraptures. This provides managing and coordinating roles.
What are resources a business needs?
Capital
Customers
Enterprise
Government
Land
Labour (workforce)
Suppliers
What is the formula for adding value ?
Selling cost - purchasing price
What is adding value ?
The difference between the selling price and the cost of raw materials, a business wouldn’t survive without adding value as its where they gain profit
What is opportunity cost?
The cost of of the next best thing we lost in choosing the other e.g a customer choosing a new phone over new clothes
What are some common changes in the business environment?
New competitors
Legal changes
Economic change
Technological change
Name some reasons business succeeded
Good understanding of customer needs (Market research)
Efficient management of operations (HR and managers)
Flexible decision making to adapt to new situations
Appropriate and sufficient sources of finance (Crowd funding, investors, grants, loans)
Why would a business fail ?
Poor record keeping
Lack of cash (short on working capital)
Poor management skills
Why do business need to keep records?
Need for forecasts, accounting, HMRC, investors and shareholders -> Profit and loss accounts (A2)
How can a business reduce its cash flow problems ?
Keeping a cash flow forecast up-to-date, lets the business asses month to month
Injecting sufficient capital at start up
Good relations with the bank allows for short term loans
Effective credit control of customers
