Unit 1- What Is A Business? Flashcards
Business
Any organisation that makes goods or provides services
Suppliers
Firms selling products to other businesses and sell to customers
Consumer
Individual who uses the product
Adding value
Process of making a product more valuable to the purchaser
Ways of adding value:
•product features and benefits
•convience
•branding
•quality/design
•USP
•speed and excellent service
Mission statement
What the business wants to achieve
(The overall purpose of the business)
Corporate/strategic objectives
Goals of the business as a whole
Functional objectives
Objectives specific to a department
Define SMART objectives
S- specific
M- measurable
A- achievable
R- realistic
T- time specific
Public business
Owned and run by the government
(Aim is to provide for the public rather than making a profit)
Private business
Owned by private individuals
(Includes charities)
5 types of business ownership
• Sole trader
• Partnership
• Private limited companies (Ltds)
• Public limited companies (Plcs)
• social enterprise
Unlimited liability
The owner of the business being legally responsible for all the debts of the business
Limited liability
The owners of the business only having part responsibility for the debts of the business
Advantages and disadvantages of a sole trader
Individual owns the business
+quick easy set up
+simple to run
+easy to close
-unlimited liability
-harder to raise finance
-limited expertise
Advantages and disadvantages of a partnership
Started and owned by more than one person
+more expertise
+shared risk
+more ideas
-unlimited liability
-arguments
-share profit
-to close the business everyone must agree to shut down
Private limited company(Ltd)
•can’t sell shares to the public
•can sell shares to friends and family
•often family businesses
Public limited company (plc)
•can sell shares to the public
•shares are freely transferable and can be bought and sold through stockbrokers, banks and share shops
Advantages and disadvantages of public limited company
+limited liability
+generate capital
+potentially less tax
-disagreements between shareholders
-greater admin costs
-Must disclose company info
Ordinary share capital
Shares are sold by companies to raise money (this money is ordinary share capital)
Market capitalisation is the total of al the ordinary
The total of all the ordinary shares issued by a company
Market capitalisation= no. Issued shares x current share price
Shareholders
Owners of the company
(Must own at least one share)
Stock
•type of security that represents ownership in a corporation
•sold on the stock exchange
Roles of shareholders
•provide funds
•more shares = more power
•most shareholders are not involved in the running of the business
Dividends
•a payment from accumulated profits earned by a company to shareholders who qualify for payment
•can only be paid if the business makes a profit
•the payment of a dividend per share is authorised by the shareholders
Capital gain
Buying shares low and selling at a greater price
Causes for increase and decrease in share prices
•performance of the company
•speculation and rumours of new products
•current share price
•interest rates (if bank offering low interest rates could increase demand of shares)
•state of the economy/external factors
Rights issued
When a company issues existing shareholders a right to buy additional shares often at a discounted price
What does PESTLE stand for?
Political
Economical
Social
Technological
Legal
Environmental
3 types of sectors
•public
•private
•voluntary
Private sector
Businesses set up by entrepreneurs
Public sector
Goods and services produced by government owned organisations
Voluntary sector
Includes charities and societies that exist to help people
Privatisation
The government sells off some of what it owns to the private investors moving from the public to private sector
Satisfycing
Surviving comfortably
Business environment
Incorporates all the internal and external factors that affect how the company functions
Areas of business environment
Think about the factors of PESTLE
-physical environment
-culture
-safety
-happiness
-political factors
-business confidence
Reasons for a public business
1) private business may not be able to make profit
Eg. Street lights
2) Too important to allow private firms to run
Eg. Army
Ethics
Moral principles or standards that guide the behaviour of a person or business
