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Business AQA > What is Business ? > Flashcards

What is Business ? Flashcards

1
Q

Why Business exist

A

Making profit
provide goods and services including public services such as the NHS
develop good idea
provide help and support for others , most notably charities that raise funds

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2
Q

What is a mission statement

A

Defines an organization and why it exists

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3
Q

Purpose of a mission statement

A

bring focus and meaning to a business and act as a guide when making critical decisions that affect the direction of a business

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4
Q

Why Business set Objectives

A

Motivating to have a clear goal to aim towards for managers and for staff
Objectives are basis for devising strategy : medium to long plan for meeting the objectives

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5
Q

what depends on setting objectives

A

costed both in manpower and money to know what resources are going to be needed to achieve the objectives

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6
Q

6 key Business objectives

A

Profit Optimisation
profit maximisation
growth
cashflow
survival
social and ethical

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7
Q

Profit Optimisation

A

Profit provides capital to fund business growth
Optimisation - getting the right balance between profit and risk. too much profit exploit the consumer and too less would threaten firms image

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8
Q

Profit Max

A

Getting as much profit as possible. Big companies follow this suspecting a rival would buy them off

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9
Q

Growth

A

focus on rising customers instead of profit. getting growth today and profit will come tomorrow

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10
Q

Survival , social and ethical

A

survival relies on keeping cash flow high enough . priority for new , start up business .
social and ethical only mean something if business willing to take sacrifice

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11
Q

SMART Objectives

A

Specific:
Mesurable
Acheivable
Realistic
TIme based

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12
Q

Specific

A

Clear and Precise

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13
Q

Measurable

A

Must be possible know when an objectives has been completed

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14
Q

Achievable

A

objectives must be within capabilities and have sufficient
resources.

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15
Q

Realistic

A

Challenging but possible to achieve given capabilities and resources

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16
Q

TIme-Based

A

Deadline to work on

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17
Q

Which objective is better in difficult economic times

A

survival is likely
to be more important than profit or environmental targets, whereas in a
booming economy, profit, growth and social issues

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18
Q

Objectives and Corporate Objectives

A

Objectives are targets precise enough
Corporate objectives : target for whole business (profit to raise by 20% a yr for next 2 yrs)

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19
Q

Why do firms struggle with cashflow

A

retail consumers expect generous credit terms while supplied demand cash on delivery

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20
Q

Evaluation

A

Company bosses yearn for stability and predictability. Set clear objectives and hold managers to account.

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21
Q

Business with Unliablityl limited

A

Soletraders and Patnerships

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22
Q

Unlimited liability

A

Owners property isnt seperable from business finances and at risk in event of failure

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23
Q

Sole traders

A

A business owned by one single person although it may have some employees and be a public service business

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24
Q

Advantages of Sole trader

A

Simple and cheap to establish with few legal work
Owner receives all profits
respond quickly to changes in market
Confidentiality is maintained as financial details don’t have to be published

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25
Q

Disadvantages of Sole trader

A

Owner is likely to be short of capital for investment and expansion
Few assets for collateral to support application for loans
Unlimited liability
difficult for sole trader to take holidays

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25
Q

Partnerships

A

Comprise between more than 2 ppl who contribute to capital in a business. based on how much capital each partner has contributed

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26
Q

Advantages

A

partners may have a wide range of sills between them
raise greater amounts of capital
pressure on owner is reduced as cover is available for holidays and there is support in making decision

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27
Q

Disadvantages

A

Control shared between partners
arguments are common
unlimited liability

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28
Q

Limited liability

A

restricts financial responsibility of shareholders for a companies debts to amount they invested in

29
Q

Process of Incorporation

A

Creates seperate legal entity for the organisation and you get through registrar of companies

30
Q

Private Limited Company

A

smaller than Plc.
Share capital must not exceed £50000
LTD be included after the company name. Shares cant be bought or sold without the agreement of other directors
often family businesses

31
Q

Public Limited company

A

Their shares can be traded onto stock exchange and bought by any business / individual
must have the term Plc after their name
min of 50 ,000 share capital
publish more details of their financial affairs than Ltd companies

32
Q

Forming a company must send 2 documents to the Registrar of companies

A

Memorandum of Association
Article of Association

33
Q

Not for profit Businesses

A

Organisation that has business objectives other than making a profit

34
Q

whats their objectives

A

Provide service to local communities
give people job related skills
fair trading activities

35
Q

Mutuals and charities

A

Mutuals - private businesses who run for the benefit of their members and their base is made up of their clients and policy holders. Not pressured by shareholders for profit
Charities - ensures those who fund the charity isn’t liable for any benefits.provides tax benefits

36
Q

Public sector

A

Owned by the state , national and local govt

37
Q

Privatization

A

converting govt owned businesses to private sector

38
Q

Diff between private and public sector

A

Private sector much more likely to be profit maximisers whereas public org are set up for benefit of society as whole

39
Q

Reasons for changing different forms of Business

A

Expenses - relatively easy to set up as a sole trader
Size and risk - if to remain little and have low risk then sole trader is the right option
Objectives of the owners - if involve growth , then incorporated business will likely to give greater access to capital

40
Q

Reasons for Changing business forms

A

Circumstances - such as growth of business , owners wish to be incorporated in order to benefit from ltd liability
Capital - raise capital by being incorporated is easier
takeover - change in structure when taken over

41
Q

Pros of LTd company

A

benefit from Ltd liability
great amounts of capital
required to send a ltd amount of financial info

42
Q

Cons of Ltd company

A

cannot sell shares on stock exchange
requires permission to sell shares
some admin costs

43
Q

pros of PLC

A

gain positive publicly from trading on stock exchange
access to large capitals

44
Q

cons of plc

A

stock exchange lisitng means emphasis is placed on short term financial results
required to publish great deal of financial info
trading can result in admin costs

45
Q

Evaluation on diff business forms

A

Ltd liability helps firms take reasonalble risks but gives scope to some shady practices as the business can be ran into ground and then can start again leaving customers out of pocket
No proof that a stock exchange listing leads to short termism , directors could do this due to their bonuses .

46
Q

Ordinary share capital

A

Money invested in a company by shareholders entitling them to part ownership . if the owner wishes to get money back , sell shares on stock market

47
Q

role of shareholders

A

attend AGM and discuss whatever is on agenda
major decisions will impact shareholders and required to be approved by shareholder

48
Q
A
49
Q

2 main financial rewards for company shareholders

A

Annual dividend payments
rise in value of shares

49
Q

Effects of ownership and mission objectives on performance

A

PLc often dirven by profit by shareholders which lead to short term approach . decision are made based on this whereas sole trader and ltd companies can focus on mission statement and objectives

49
Q

how are shareholders issued dividends

A

Dividends recieved in proportion to shareholdings ( numbers of shares each individual own)

49
Q

To make a successful takeover bid

A

higher than the market cap , falling share prices provide opportunity for investment / takeover

49
Q

Market Cap

A

value that stock market places on whole business by ( share price * number of issues issued)

49
Q

When does share price increase

A

when investor confidence increases and demand is more than supply

49
Q

Reasons why shares and dividends fluctuate

A

Performance : profits are higher then share value will increase
Expectation: result of a new product due to be launched on market
Changes within market or consumer taste

49
Q

RIghts Issue

A

gives existing shareholders the right to buy more shares at discount to market value

49
Q

Market conditions

A

Characteristics of a particular market

50
Q

Factors of market conditions

A

Economy changes
consumer taste and fashion
disruptive change - resulting from radical innovation /new tech
Competitive structure - market with high barriers to entry protect operators in the market

51
Q

Competition

A

In Competitive environment, strategies adopted by rivals will have an impact on a business.
Business must try to differentiate its own products and services in order to encourage consumers to purchase them

52
Q

relation of competition with demand and cost

A

in competitive environment , firms likely to compete with price , leads to pressure on cost - looking to reduce cost

53
Q

Demand in relation to income

A

demand for necessities will be less affected by changes in income than demand for luxuries

54
Q

why do rising interest rates result in lower demand

A

consumers are likely to have less disposable income due to higher borrowing costs for loans and mortgages. encouraged to save more

55
Q

why do rising interest benfit discounters

A

consumers switching for a cheap price grocery and gain consumers due to cut in spending

56
Q

interest rates in relation to cost

A

high levels of borrowing be faced with higher costs when interest rates rise.

57
Q

how does interest rates affect business in terms of decision making

A

high-interest rates lead to businesses postponing on new capital investments due to costs involved

58
Q

Demographic factors

A

Growing or declining population - project oppurtuinites look exciting in India >japan
Age : proportion of older people forecast to grow , opprtuinites for relevant products
Gender - male focused items like consoles and cosmetics for females
Ethnicity

59
Q

what does it lead to when Govt introduces legislation to help protect the environment from pollution?

A

Businesses have to spend large amounts on measures that nature is free from pollution
located overseas where legislation is less restricted

60
Q

Factors of environmental issues and fair trade

A

Global warming - business make considerable effot to minimise co2 emissions
Sustainability - certain resources are running out and need to be conserved
Fair trade- achieving better prices , decent working conditions and fair terms for farmers and workers in less developed countries . Mean higher cost to business but could lead to greater demand and better reputation due to USP

61
Q

Evaluation to external factors

A

subject to change in customer tase

Business AQA (6 decks)

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