vocab 😇 Flashcards
Ways of being enterprise at school
using technology for learning
working as a team
problem solving
Ways of being enterprising at home
organizing a household job
taking responsibility for younger children
earning money for the family
Enterprise process (stage 1)
identifying the problem or need or want
Enterprise process (stage 2)
exploring creative solutions
Enterprise process (stage 3)
action planning
Enterprise process (stage 4)
implementing the plan
Enterprise process (stage 5)
monitoring progress
Enterprise process (stage 6)
evaluation of successes and failures
Sole trader
a business that is owned and run by just one person. The owner has unlimited liability for all the debts of the business
Pros of sole trader
simple to establish take decisions independently flexibility in hours of work can provide a more personal service usually no legal requirement to publish account
Cons of sole trader
unlimited liability -> responsible for all debts
difficult to raise finance as likely to go bankrupt
may lack the skill to make decisions
difficult to compete with larger firms, they purchase for large quantity -> discounts
Partnership
a business that is owned by two or more people. This sort of a business organization is unincorporated and so the owners have unlimited liability
Pros of partnership
easy to form
easy to raise money
no need to public partnership’s accounts
easier in gaining cost advantages (ex: discounts)
specialize in different aspects of the work
share the decision making
Cons of partnership
ordinary partners have unlimited liability
disagreements internally
decision made by one partner affect the whole
one of them dies -> partnership dissolved
shared profits
Limited private company
a company that is legally independent from its shareholders, who as a result have limited liability
Private limited company (Ltd)
Company owned by shareholders, but shares only sold privately, not on the stock exchange; owners have limited liability
Public limited company (plc)
A limited company, often a large business, with the legal right to sell shares to the general public. Its share price is quoted on the national stock exchange
Pros of limited company
easily raise money (especially public limited company)
shareholders have limited liability -> cant lose their personal possessions if the company goes bankrupt
usually able to gain economies of scale
continue even one of the owners dies
Cons of limited company
accounts must made public (plc)
may lose control as people buy shares
minimum capital is needed for establishment
share profit to many people
for ltd, they can not sell shares > limited capital raised
large size > inflexible
Co-operative
a type of business organization owned and managed by people who use its services or who work there
Pros of co-operative:
shareholders have limited liability
in a producer co-op, workers are shareholders -> work harder and less disputes
one member - one vote - democratic ownership
many keen to involve local community in their work
may be more ethical than others
Cons of co-operative
shares are not sold > limited capital raised
in a producer co-op, the workers might find it difficult to raise enough money to start up their enterprise. also, the workers often lack experience to make the enterprise successful > appoint managers
Franchise
a form of business organization that allows a company to buy the right to use an existing company’s brand name and products/service
Franchisee
the company allowed by another company to conduct business using the other company’s name and brand
Franchisor
the company that allows another company to conduct business using its name and brand
Pros of franchise
able to sell well-known product > significant revenue
advertising carried out by franchisor > less costs for franchisee
less risk of failure as branded product will be familiar to more people
certain services carried out by franchisor (training, some aspects of administration,…) > saving franchisee money
Cons of franchise
payment for franchise rights and still be made even the franchisee make a loss
required to pay a percentage of the sales revenue to the franchisor every year
restrictively controlled by franchisor (designs, suppliers…)
franchisor can withdraw the agreement and sometimes prevent franchisee from using the premises
Pros of social enterprises
May attract customers because people want to help others.
Do not have to pay tax so costs are lower
Cons of social enterprises
Can not make a profit so workers may not have an incentive to do well
Lack of finance because they rely on donations/fundraising
Unlimited liability
shareholders/owners are liable for all the debts of their organization and stand to lose their investment as well as personal assets if the business goes into debt.
Limited liability
shareholders/owners are only liable to pay or lost the amount they have invested
Resourcefulness
The ability to recognize and use resources effectively to solve difficult situations
Delegation
Passing responsibility for a task to other people / give out tasks to workers
Perseverance
continued efforts in spite of difficulties
Influencing skills
the ability to get others to do or believe as you wish
Leadership
the ability to inspire and encourage others
Self-confidence
to be confident in your own abilities and judgements
Creativity
the ability to develop or improve on established ideas or designs
Team building
to motivate each other to succeed in achieving a common goal
Innovation
the ability to come up with a completely original idea
Interpersonal
to develop and maintain good relationships with others
Problem-solving
to be able to find solutions to obstacles which are encountered
Managing risk
to consider the risks and choose which ones are worth taking
Prioritization
Deciding on what tasks are important and being able to decide which tasks should be carried out first and which tasks are less important
Changing needs or wants for a product
changes in taste and fashion
changes in the size and structure of population
changes in real income
Changes in government policy
Availability of grants and subsidies
Changes in taxation
Changes in the law
Risks involved in enterprise
financial risks economic risks health and safety and environmental risks human resources risks production risks
Risk-keen
recognizes that a high level of risk is likely to lead to a high level of profit
Risk optimizer
accept a certain amount of risk in the interest of making significant profits
Risk reducer
reduce the amount of risk faced by an enterprise to reduce the likelihood of failure
Risk avoider
avoid any possibility of risk in order to ensure the continued existence of an enterprise
Risk-averse
being unwilling or disinclined to take any risk
Pressure group
an organization that aims to influence governments and enterprises to adopt the policies and actions it favors
Fairtrade
An organization that ensures that producers receive a fair price and some money goes back into the local community.
Negotiation
the process of discussion in order to reach agreement on a course of action (or solve a dispute) that satisfies the interests of all involved
Collective advantage
positive outcomes for more than one party
Why SMART objectives are important when preparing for a negotiation ?
Having measurable objective makes it easier for the enterprise to know if they have met those objectives
Planning for a negotiation includes:
setting objectives
choosing evidence to use
considering the benefits and weaknesses of a proposal and the arguments and counter-arguments for the proposal
Conducting the negotiation includes:
setting the right tone presenting your proposal understanding each other’s point of view summarizing to check understanding reaching an agreement
Measuring success includes:
what went well (effective problem-solving skills, ability to deal calmly, demonstration of mutual respect,…) and what could be improved
How agreement can be reached
when each side negotiates their position as strongly as they can and the two sides are clear about any agreement so that they are aware of what has been decided as a result, it could be a win-lose or win-win
Bank overdraft
a form of short term lending by the bank when there is no money left in the enterprise’s bank account
Bank loan
a larger, longer term investment paid back at an agreed interest rate
Leasing
you rent a piece of equipment for a monthly fee but the equipment belongs to the leasing company
Mortgage
a larger, longer term loan used to buy property and paid back at an agreed interest
Grants
money offered to enterprises, usually by governments, for specific prices; usually don’t need to be paid back
Subsidies
money or reduced taxes given to an enterprise by a government to support its development or for public benefit
Crowdfunding
using websites and social media to encourage large numbers of people to invest small amounts of money in return for a stake in the company, or other reward
Assets
objects that are owned by the business
Retained profits
Profit kept by firms to finance investment
Microfinance
lenders who aid people who do not have enough income to access traditional bank loans
Venture capitalist
an individual or small group who weighs up the risks and rewards of investing in an enterprise; if they invest they expect a share of the enterprise
Share or equity
contribution to the finance needed by an enterprise organized as a limited company
Trade payable
the amount of money owed by the enterprise to suppliers, such as for raw material received but not paid for
Trade credit
buying items that an enterprise needs and then having an agreed number of days in which to pay the supplier
Trade receivable
the amount of money owed to the enterprise by customers who have had goods or services but not yet paid for them
Credit
a sum of money that an supplier/enterprise allows an entrepreneur/customer before requiring payment
Trade credit
the credit extended by a seller to the purchaser of goods and services
Pros of trade credit
facilitates purchases as no need for immediate payment > owed by customer > help enterprise to establish itself and gain an increase in market share
do not have to pay right away (lending money) > attract customers > obtaining finance > short-term financing and also interest-free to customers
gain competitive advantage as a supplier that provides credit payment
Cons of trade credit
people and organizations requesting payment of funds immediately > the enterprises are not able to pay
suddenly unable to make the payment in the time period > confidence lost > could have offer discount for less cost as they were able to pay at shorter time period
Cash inflow
any cash that comes into the enterprise
Cash outflow
any cash that goes out of an enterprise
Surplus
on a cash flow forecast, when the cash that comes into the enterprise is greater than the cash that goes out
Deficit
on a cash flow forecast, when the cash that comes into the enterprise is less than the cash that goes out
Net cash flow
difference between money coming into, and out of, an enterprise
Solvency
the degree to which the current assets of an enterprise are greater than its current liabilities
Significance of enterprise having a cash flow deficit
does not have sufficient cash immediately available > not able to support its operations and could become insolvent (unable to pay debts) > long-term leads to bankrupt
Significance of enterprise having a cash flow surplus
able to support its operations > able to pay its creditors, employees, suppliers and other > solvent > continue in existence for a long time
Break-even point
the point at which income from sales will cover all the enterprise’s costs
variable costs
costs directly related to the output
How break-even is calculated
Fixed cost/contribution
Fixed costs
costs do not related with the output
Break-even analysis for what?
calculating the minimum sales needed to avoid an enterprise making a loss
Limitations of break-even chart
not always easy to estimate costs
assumes that all units are sold
assume forecasts are reliable
assumes that external environment is stable
Contribution
difference between sales revenue and variable costs
Income statement
A financial statement showing the revenue and expenses for a fiscal period.
Budget
A financial plan for a future period
Budget variance
the difference between a budgeted or anticipated figure and the actual figure
Purpose of a budget
identity where expenditure may need to be controlled and reduced
draw attention to the efficiency of an enterprise
clarify what an enterprise needs to do to improve its financial situation
help establishing specific and clear financial targets
Purpose of income statement
determine past financial performance
predict future financial performance
understanding of its income and expenses > assess capability of an enterprise to generate future cash flow
Purpose of cash flow forecast
determine value/rate of a return of a particular project/all the works of an enterprise
indicate financial strength
determine problems with the liquidity of an enterprise
evaluate risks attached to the production of a particular product
Some problems cash flow forecast can indicate
reached limit of overdraft
owed a lot of money by purchasers
owes money to the tax authorities/rent
Reasons for keeping accurate financial records
provide true and fair view to stakeholders
legal and taxation purposes
forecasting (ex:future income)
decision making for owners/stakeholders
Gross profit
revenue less cost of sales
Net profit
gross profit less all other expenses
Profit maximization
the goal of many enterprises to make the gap between total revenue and total cost as wide as possible
Satisficing
where an enterprise aims for an adequate level of profit, rather than profit maximization
Sales revenue maximization
where an enterprise aims to maximize the revenue received from sales rather than profit
Social responsibility
the idea that an enterprise has a responsibility toward the wider society and environment
Sender
an organization, group or individual attempting to get their message to others
Receiver
an organization, group or individual to whom a message is sent
Difference between business plan and action plan.
A business plan summarizes the objectives of an enterprise and how they are to be achieved. An action plan lists the tasks needed to be completed to achieve an objective and who will complete those actions. This may be part of the business plan.
Contents of action plan
steps need to be taken for a strategy to be successful
it is important to update the action plan as everything will not be as predicted
Importance of action plan
monitor progress
handle projects efficiently
generate bond between enterprise > aware each others’ roles
Importance of business plan
negotiate for a loan > present to a financial institution
give a clear idea to all stakeholders
outline how things will be operated
anticipate potential problems > minimize the risk
needs to be updated
Content of business plans
name and address
aims and objectives
type of business
production, finance, product…
Marketing
anticipating, identifying and satisfying customer need
Mystery shopper programs
when people act as customers to test out the service offered by a given enterprise
Focus groups
talking to the same or a similar group of people over a long period of time to explore the needs, thoughts and opinions of customers
Sponsorship
an enterprise paying or offering something in return for having its name linked with an event, person or group
Brand loyalty
consistent preference for one brand over all others
Branding
differentiating > identifiable
Marketing strategy
long-term plan to reach marketing objectives
Pros of marketing
increase awareness > make more informed decisions
maintain brand loyalty
increase/defend sales, market share or profit
Customer sovereignty
consumer preferences determine the production of goods and services
Market orientation
an approach where an enterprise takes decisions on the basis of customer demand
Market research
collection and analysis of information relates to consumptions of goods and services
Quantitative research
gain hard objective data
Qualitative data
gain soft objective data
Mass media
mixture of various technologies that are used to reach an audience
How government bodies help enterprise
tax concessions provide enterprise courses in school/college financial support policies for assistance run campaigns/workshops/seminars
How business and enterprise agencies help enterprise
providing appropriate information about setting up new enterprises
organize meetings/conferences with successful entrepreneurs
mentoring/face-to-face consultation sessions
How can a financial institution help an enterprise
Providing finance (loans/overdrafts) Advice on how to raise finance Help with drawing up business plans
How business and enterprise networks help enterprise
effective forums for advice and discussion
enable new business relationships to be formed
Other entrepreneurs
give advice
act as a mentor to entrepreneurs
Incubation centre
place where resources, space and an appropriate environment are provided for entrepreneurs to start up an enterprise
SME
small/medium-sized enterprises
Vertical communication
messages between people of different organizational levels of an enterprise
Horizontal communication
messages between people on the same organizational level of an enterprise
Intranet
computer network that shares information resources and services within a particular enterprise
Shareholder
fund for shares in a limited company
AGM (Annual General Meeting)
usually hold by limited companies yearly
Planning of meetings includes:
planning a meeting
objectives of a meeting
Agenda
A list of items/points that will be discussed
Formal report
document written to provide information, analyze an issue and make recommendations
Minutes
summary of what has taken place at the meeting
Notice of meeting
provision of information about date, time and place of forthcoming meeting
Measure success of meetings by
analyzing and evaluating decisions made
deciding if objectives were achieved
How break-even is calculated
Fixed cost/contribution
Difference between revenue and profit
Revenue is income received from sales. Profit is when sales revenue is greater than total costs.
Planning periods
long term, short term, medium term
Legal responsibilities
something you have to do by law.
Ethical principles
doing something according to moral principles
Expenditure on capital goods
Spending on fixed/non-current assets
How to calculate revenue?
revenue= sales x sales price
How to calculate profit?
price - cost
How to calculate variable costs?
costs to make one product x number produced
How to calculate overhead rates?
monthly sales : overhead costs of the business in a month
Charity (pros and cons)
An organization set up to provide help and raise money for those in need
Reasons why governments set laws and regulations for enterprises
ensuring the consumer is protected from inaccurate information
ensuring employees are not exploited or treated unfairly
How to not breaking laws and regulations?
researching the legal requirements
correctly labelling all products with their contents
How can a financial institution help an enterprise?
Providing finance (loans/overdrafts) Advice on how to raise finance Help with drawing up business plans
Reasons for producing budget
To predict future income and expenditure > cash flow forecast
Identifies where expenditure needs to be controlled > take action
Identifies where the enterprise is doing well > use in the future
Simple budget
A financial statement of income and expenditure
Explain the difference between investment and saving
Saving – money not spent ; put into a bank to earn interest (ex:banks)
Investment – the process of purchasing assets or putting money into a project with the aim of making a greater return in the future (ex: buying stocks)
Financial pieces of information usually included in a business plan
Budgets
Cash flow (forecast)
Profit or loss estimation
Why updating the business plan is important to an enterprise?
so that all stakeholders know the correct objectives and can follow them
how they intend to produce items is clearly shown so they can follow the plan
Why it is necessary to monitor the planning of an enterprise?
To see if objectives/aims are being met so they can be adjusted if necessary
To monitor progress of the enterprise
Fixed costs
– do not change with the output / sales
– do not change within a period of time.
Problem that could be avoided by preparing a budget
Helps avoid debt by knowing the amount you will expect to spend you can cut your spending before going into debt
Helps avoid impulse buying
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