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a level business > UNIT 7 > Flashcards

UNIT 7 Flashcards

1
Q

whats a mission statement

A

a business’ statement of its purpose, and why it exists

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2
Q

what are 3 questions a mission statement should answer

A
  1. what does your company do?
  2. why does your company do this?
  3. how does your business do this
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3
Q

name 4 places mission statements come from

A
  • culture of a business
  • founders values
  • societys views
  • industry it operates in
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4
Q

whats a corporate objective

A

shareholders values, growth etc
quantify the mission to make it measurable
CEO’S SET THIS

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5
Q

4 internal influences on a corporate objective

A

poor performance
new leadership
business ownership
business growth

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6
Q

name 5 external influences on corporate objective

A

economy performance
competitors actions
global price
social desires
technological prices

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7
Q

whats the difference between a strategy and a tactic

A

a strategy is the end goal, however a tactic is the choices a business makes to help achieve their objectives

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8
Q

whats a SWOT analysis

A

a tool that identifies the strengths, weakness’, threats and opportunities of a business

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9
Q

name 3 advantages of a SWOT analysis

A

-allows a business to focus on strategy
- improves weakness to inc sales
- can combine SWOT and PESTLE

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10
Q

whats a ratio analysis

A

tool to assess performance, profitability and liquidity if a business

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11
Q

whats liquidity

A

converting assets into cash

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12
Q

what does return on capital employed show

A

how much profit has been made compared to how much money put into the business

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13
Q

how to calculate return on capital employed

A

profit/ capital employed X100

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14
Q

whats an income statement

A

profit and losses in last 12 months

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15
Q

whats a balance sheet

A

shows what the business has spent money on and where money invested has come from

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16
Q

what are current assets

A

assets owned for less than a year

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17
Q

what are non current assets

A

owned for over 1 year and depreciates in value

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18
Q

what are current liabilities

A

debts repaid within 1 year

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19
Q

what are non current liabilities

A

long term debt, taking more than 1 year to repay

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20
Q

how to calcaulte equity

A

total assets - total liabilities

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21
Q

how to calculate current ratio

A

current assets/ current liabilities

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22
Q

whats the ideal current ratio

A

2:1

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23
Q

what does current ratio and acid test show

A

can a business pay short term debts back when due

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24
Q

how to calculate acid test

A

current assets - inventory
current liabilities

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25
Q

ideal acid test

A

1:1

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26
Q

5 ways to improve liquidity

A
  • use overdraft
  • delay payments
  • longer credit times
  • encourage cash sales
  • destocking
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27
Q

whats gearing

A

shows how much of a business is financed by debt

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28
Q

how to calculate gearing

A

non current liabilities
total equity + NCL X100

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29
Q

whats considered high gearing

A

over 50%

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30
Q

3 characteristics of a low geared business

A

shareholders money
no big risks
can take a fall in profits better

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31
Q

3 characteristics of a high geared business

A

loans
need to be paid back regardless of performance
they take risks as they could loose assets secured

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32
Q

4 advantages of ratios

A

-allows comparison from previous years
-locate weakness and spot trends
-assess performance
-decision for stakeholders

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33
Q

6 disadvantages of ratios

A
  • no qualitative data
  • historical data
  • no full picture
  • external factors
  • has to be compared
  • no account of economic climate
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34
Q

define trade payable days

A

calculates time taken for a business to pay back creditors

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35
Q

how to calculate trade payable days

A

payables/ cost of sales X365

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36
Q

advantages ( 1) and disadvantages (3) of delaying payment

A

working capital ✅
X loss of discounts
X supplier goodwill loss
X withdrawl

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37
Q

define trade receivable days

A

calculates time taken for a business to collect debts that is OWED

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38
Q

trade receivable days aim

A

to convert debt into cash asap

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39
Q

ideal trade receivables days

A

30-45 days

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40
Q

why might a business increase credit terms

A

to attract and increase sales/ customers.
we can compare to past months or years to look for trends and progress

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41
Q

define inventory turnover

A

measures a company’s success at converting inventory into revenue

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42
Q

calculate inventory turnover

A

cost of goods sold/
average inventory
ALL DIVIDED BY 365

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43
Q

name 7 external factors on a business

A

social
technological
environmental
economic
legal
ethical
political

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44
Q

difference between import and export

A

import- money flows out of UK and goods come in
export- money flows into UK, goods go out

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45
Q

define exchange rate

A

the value of one currency expressed in terms of another

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46
Q

give 2 ways exchange rates can affect a business

A

price of exports in international markets
cost of goods bought from overseas

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47
Q

advantage and disadvantage of a strengthening exchange rate

A
  • lower prices to limit impact
  • inc promotion in foreign markets when weak

may switch international suppliers must bulk stock and materials when weak

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48
Q

strength and weakness of a weak exchange rate

A

increased exports, more revenue
- imcreased costs for imported stocks

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49
Q

acronym to remember exchange rates effect

A

S P I C E D
strong
pound
imports
cheap
exports
dear

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50
Q

how does the change in strength of £ affect exporters

A

exporters must lower prices to limit impact
of expense and inc promotion in foreign markets

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51
Q

how does weakening exchange rate affect importers

A

may switch international suppliers
stockpile stock and materials

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52
Q

name 5 factors affect significance of exchange rates on a business

A
  • how much the business exports
  • competition from overseas
  • reliance on importing
  • PED for business’ products
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53
Q

name 3 things that may cause an increase in exchange rate

A

speculation- traders may bet they will ride
increase in interest rates
foreign direct investment

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54
Q

define inflation

A

sustained increase in general level of prices ( a fall in the value of money )

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55
Q

whats the CSI ( consumer price index )

A

a weighted basket of goods, which measures the monthly change in price of over 700 different goods and services

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56
Q

define disinflation

A

a period of slower inflation

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57
Q

define deflation

A

decrease in general level of prices

58
Q

prices are set by supply and demand explain

A

lots of supply, little demand - DEC
lots of demand, little supply- INC

59
Q

causes of inflation ( PUSH AND PULL )

A

costs PUSH up prices
demand PULLS up prices

60
Q

cost- push factors

A

rising cost of raw materials forces producers to charge higher prices to avoid not making any profit

61
Q

demand pull factors

A

rising demand of goods and services- sellers inc prices
reduced tax- inc disposable income
fast growth in other countries

62
Q

3 effects of inflation on a business

A

inc cost of supplies
cut back on investments
consumers have less disposable income

63
Q

effect of inflation on consumers

A

fall in value of their money
( loans dont increase ) ✅

64
Q

effect of inflation on firms

A

costs increase, prices increase, creates uncertainty

65
Q

effect of inflation on government

A

less export, less economic activity, less GDP

66
Q

define the fiscal policy

A

refers to the use of government spending and taxation to influence economy

67
Q

name 4 taxes for small businesses

A
  • VAT- value of sales, 20%
  • INCOME TAX- tax on income
  • NIC- tax on earnings
  • CORPORATION- tax on profits
68
Q

define progressive taxation

A

as income rises, a larger % of income is paid in tax

69
Q

define proportional tax

A

the % of income paid in tax is constant, regardless of income

70
Q

define regressive tax

A

a smaller % of income is paid in tax as income rises

71
Q

expansionary fiscal policy

A

tax decrease
gov spending increase

72
Q

contractionary fiscal policy

A

gov spending decrease
tax increase

73
Q

define interest rates

A

cost of borrowing money or the reward for saving money

74
Q

who sets the interest rates

A

the bank of england
they promote and maintain the monetary and financial stability in the economy

75
Q

whats the MPC

A

the monetary policy commitee

76
Q

an increase in interest rates means…

A

an inc in loan costs
borrow less

77
Q

define aggregate demand

A

the total demand for goods and services within a country

78
Q

how to bring price down using interest rates

A

inc incterest rates
people spend less
demand decrease
price decrease

79
Q

define protectionism

A

the act of protecting a country’s business from foreign competition, by imposing restrictions on free trade

80
Q

name 5 protectionism goals

A

protect domestic business
protect infant industries
raise tax revenue
prevent entry of undesirables
improve balance of payments

81
Q

3 ways gov protects businesses in their country

A

tarifs
quotas
subsidy

82
Q

whats a tarif

A

a tax that raises price of imported goods

83
Q

define dumping

A

exporting at a price lower than cost of production
seen as unfair
inc unemployment in countries
TARIFFS DETER DUMPING

84
Q

define quotas

A

a physical limit on imports

85
Q

define a subsidy

A

a payment by the government to help domestic businesses become more competitive eg: lower prices

86
Q

name 2 other forms of protectionism

A

undervaluing exchange rate
safety standards

87
Q

3 short term effects of protectionism

A

protect domestic businesses
increase prices for individuals raise tax revenue
GDP growth

88
Q

3 long term affects of protectionism

A

businesses might not be as innovative due to less competition
less choice for consumers
GDP decline as not benefitting from other specialisation

89
Q

whats a trade bloc

A

an agreement between a group of countries that promotes trade between member states

90
Q

3 advantages of trade blocs on a business

A

increased business due to no tarifs
economies of scale
labour easier to recruit

91
Q

2 disadvantages of trade blocs on a business

A

increased competition
pressure to increase efficiency

92
Q

what are supply side policies

A

policies that focus on increasing supply of goods and services in an economy with the aim that the economy will grow and become more productive

93
Q

4 examples of supply side policies

A

tax cuts: more money to invest
deregulation: reduce costs
education and training: inc skills and productivity
infrastructure investment

94
Q

define globalisation

A

companies operating internationally or on a global scale.

95
Q

define international trade

A

flow of goods and services between countries

96
Q

5 reasons why international trade has increased

A

improvement in transport infrastructure
improvements in communication technology
growing influence of global countries
trade liberalisation ( reducing barriers to trade so countries can free trade )
different policies

97
Q

impact of globalisation on government and countries

A
  • rising income, rising tax collected
  • increased migration
98
Q

impact of globalisation on consumers

A
  • lower prices
  • cheaper production allows firms to lower prices
  • increased choice
99
Q

impact of globalisation on producers

A

lower costs ( can access products from a range of countries )
increased competition
tax avoidance

100
Q

impact of globalisation on workers

A

higher economic growth, rising employment, increased wages

101
Q

impact of globalisation on environment

A

resource depletion- greater production of goods requires the use of finite sources
higher CO2 emissions from inc transport

102
Q

define emerging economy

A

a market where there is rapid growth, but a lot of risk eg: BRICS and MINTs

103
Q

emerging economy description
x5

A

moving away from primary sector
inc productive secondary sectors
rising levels of capital investment
often in collaboration w MNCs
attractive as production location

104
Q

define MINTS

A

Mexico, Indonesia, Nigeria, and Turkey, which are considered smaller economies that may succeed the BRICS

105
Q

define BRICS

A

BRICS is an acronym for Brazil, Russia, India, and China, which are considered emerging-market economies that have driven strong growth worldwide.

106
Q

5 impact of a rise in interest rates on economy

A
  • interest rate increase
  • cost of borrowing inc
  • aggregate demand dec
  • prices decrease
  • inflation decrease
107
Q

define a social change

A

relates to changing demand of society for goods and services- business must keep up with these to remain competitive

108
Q

name 5 social factors of change

A

demographic issues
urbanisation- moving from rural to city
migration
changes in lifestyle and buying habits
growth of online businesses

109
Q

name 5 changes in lifestyle

A

use of technology
urbanisation
time
single occupancy
health conscious

110
Q

demographic change affecting businesses

A

ageing population will provide inc opportunities for businesses targeting older consumers

111
Q

define technological change

A

technological change which can create oppourtunity for new goods and services and how businesses produce these goods

112
Q

4 technological change

A

opportunities for small businesses
access to global market
fraud through commerce sites
growth of direct delievery

113
Q

define CSR

A

the extent to which a business addresses the concerns to its wider stakeholders

114
Q

whats the CSR PYRAMID

A

philanthropic- give back to society
ethical- be ethical
legal- obey law
economic- be profitable
‘THE 4 RESPONSIBILITIES’

115
Q

name 4 other words for ‘CSR’

A
  • corporate citizenship
  • sustainable business
  • social responsibility
  • corporate responsibility
116
Q

3 strengths of CSR

A
  • easy to understand
  • simple message ( more than 1 element )
  • emphasises importance of profit
117
Q

weaknesses of CSR

A

too simplistic?
dont always do what they claim

118
Q

strengths of doing CSR on a business

A
  • good publicity
  • attract ethically orientated customers
  • attract ethically orientated customers
  • attract motivated employees
119
Q

disadvantages of CSR on a business

A

cost
shareholders may withdraw as they see it as waste of funds

120
Q

whats the STAKEHOLDER concept

A

businesses should recognise they depend on society
they rely on inputs from society
social contract

121
Q

3 arguments for CSR from stakeholder concept

A
  • ethical thing to do
  • improves image
  • attracts investors
122
Q

whats the difference between shareholder and stakeholder concept

A

stakeholder: management take into account views of different stakeholder in decision making
shareholder: management should only aim to meet their responsibilities to shareholders

123
Q

define the competitive environment

A

the number and strength of competitors in the same market as a business

124
Q

what are porters 5 forces

A

supplier power
threat of subs
threat of new entrants
buyer power
competitive rivalry

125
Q

competitive rivalry

A

competition is fierce if
- easy to enter market
- little differentiation

LOWER COSTS

126
Q

power of suppliers

A

supplier power is high if
- few suppliers
- supply is essential for production
- not many subs

127
Q

buyer power

A
  • little difference in products compared to other markets
  • product is price sensitive
    customers buy in bulk
128
Q

threat of subs

A

threat high
- alternative products exist
- price fall

129
Q

define investment appraisal

A

refers to techniques used to judge whether an investment is worthwhile

130
Q

payback calculation

A

amount remaining/amount next year
ALL TIMES 12

131
Q

4 strengths of payback

A
  • simple and easy to calculate
  • easy to understand results
  • emphasises speed of return
  • straightforward to compare
132
Q

4 drawbacks of payback

A
  • ignores cashflow after payback recieved
  • no account of time value of money
  • may encourage st thinking
  • doesn’t create decision
133
Q

how to lower inflation from interest rates

A

heighten interest rate
higher borrowing cost
low spending
low demand
lower prices

134
Q

ARR calculation

A

annual profit ( total profit/ years)
cost of investment
ALL TIMES 100

135
Q

define ARR

A

the average rate of return expected on investment as compared to initial investment cost

136
Q

strengths of ARR

A

simple method
easy calculation

137
Q

drawback of ARR

A

doesnt show which year return occurs due to average

138
Q

define net present value

A

calculates monetary value now of a projects future cash flow

139
Q

calculation for NPV

A

cash flow x discount value= PV

140
Q

strength and weakness of NPV

A

considers future cash flow
choosing discount can be difficult

141
Q

name 3 influences in investment appraisal

A
  1. management appraisal
    eg: want to grow
  2. non financial factors
    eg: reputation, skills
  3. risks
    eg: natural causes

a level business (9 decks)

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