What is a business? Flashcards
What is a business?
- any organisation that makes/ sells goods or provides services
What are business start-ups?
- new firm operating in a market for the first time
What is market capitalisation?
- total value of all ordinary shares issued by a company
How do you calculate market capitalisation?
number of issues shared x current share price
What is a market?
- any place where buyers and sellers meet to trade products
What is adding value?
- process of making a product more valuable to the purchaser
- at each stage of production process more value s added to the product
What are ways of adding value?
- convenience
- USP
- branding
- quality/ design
- speed/ excellent service
- product features and benefits
What is a businesses typical structure of aims/ objectives?
- mission statement and corporate aims
- corporate objectives
- functional objectives
What is a mission statement?
- overall purpose
- clues on firms beliefs/ attitudes
What are corporate objectives?
- AKA strategic objectives
- goals of the business as a whole
What are functional objectives?
- AKA departmental objectives
- objectives for each department
What does the acronym SMART stand for?
Specific
Measurable
Achievable
Realistic
Time specific
What are the main types of objectives?
- profit
- growth
- survival
- cash flow
- social and ethical
What is profit?
- financial gain a business makes from providing goods or services
- when the revenue of a business is greater that the costs it incurs
How do you calculate profit?
total revenue - total costs
How do product costs help make business decisions?
- identify suppliers to change from
- set discounts
- potentially needing to make staff cuts
- profit margins
- set objectives
- set aims
- set salaries
- supports budgets
- helps to charge products correctly
Why is profit important?
- motivation
- growth
- survival
- increase promotion/ advertising
- helps achieve objectives
- donate to charities
- measures success
- returns from taking risks
How can profit be used?
- retained in business
- taken by owners for own benefit
What is a public sector?
- owned and run by government
- aims to provide for public, rather than make a profit
What is a private sector?
- owned by private individuals
- also includes non-profit organisations such as charities
What is limited liability?
- only lose money put into business
- limited risk
- separate legal identity
What is unlimited liability?
- no set amount they can lose
- can lose personal assets
- legally responsible for all debts of business
What are the structures of businesses?
- sole traders
- partnerships
- PLC (public)
- LTD (private)
- social enterprise
What is a sole trader?
- individual owns business
- unlimited liability
- more common
What are the pros of being a sole trader?
- quick and easy to set up
- simple to run
- easy to close
- entitled to all profits
What are the cons of being a sole trader?
- unlimited liability
- harder to raise finance
- business suffers if owner is ill
- long hours
- limited expertise
What are the pros of being a partnership?
- easier to raise finance
- more expertise
- less pressure
What are the cons of being a partnership?
- share profits
- unlimited liability
- conflict over decisions
- long hours
- complicated to sell
What is a partnership?
- owned by 2 or more people
- legal partnership agreement
- unlimited liability
What are the pros of being an Ltd?
- limited liability
- hire staff
- higher prestige
- raise large amounts of finance
What are the cons of being an Ltd?
- can’t sell shares to public
- shared profit
- not on stock exchange
- publish financial documents
- harder to make decisions
What is an Ltd (private limited company)?
- can’t sell shares to public
- often family businesses
- limited liability
What are the pros of being a PLC?
- limited liability
- easier to raise finance
- less tax
What are the cons of being a PLC?
- admin costs higher
- disclose company information publically
- must give away a % of the business
What is a PLC (private limited company)?
- sells shares to the public
- need over £50000 of share capital
- 25% shares must be available if listed on stock market
What is a non-profit organisation?
- benefit community
- social aims
- charities, community development trusts, housing associations, etc.
What are shareholders?
- owner of the company (have at least one share)
What are stocks?
- type of security that represents ownership in a corporation
- sold on stock exchange
Why would shareholders invest?
- make money
- capital gain
- side hustle
- support other businesses
- dividend payments
- interest
- portfolio of business
- support ethical views
- ability to vote for decisions
- leave a legacy
- retire early
- tax purposes
- stay ahead of inflation
Whatis the main role of shareholders?
- provide funds
- more shares = more power
What are dividends?
- payment from accumulated profits earned by a company to shareholders who qualify for such payments
What could influence share prices?
- scandal
- ethics
- demand
- trends
- value of a business
- competitors
- economy
- lack of supplies
What does PESTLE stand for?
Political
Economical
Social
Technological
Legislation
Environmental
What is privatisation?
- government sells off some of what it owns to private investors
- i.e. Royal Mail
What is the voluntary sector?
- includes charities and societies to help people
- less than 1% of the economy
What is business environment?
- incorporates all of the internal and external factors that affect how company functions
- including: employees, customers, management, supply and demand, business regulations
What are some external influences on a businesses environment?
- competition
- market conditions
- incomes
- interest rates
- demographics
- fair trade
What are ethics?
- moral principles/ standards that guide the behaviour of a person/ business
- act in a way that is morally correct
What makes a business ethical?
- fair trade labels
- reducing packaging
- living wage
- no child labour
- minimising impact on environment
