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Business > What Is Business > Flashcards

What Is Business Flashcards

1
Q

What is a business

A

An organisation that exists to provide goods and services on a commercial basis to customers

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2
Q

Definition : mission statement

A
  • overriding goal in a business
  • reason for its existence
  • vision for the future
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3
Q

Definition : objective

A

Something the business wants to achieve in a given time period

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4
Q

Examples of objectives in a business

A
  • profit
  • survival
  • growth
  • cash flow
  • social and ethical
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5
Q

What are SMART goals

A

S - specific
M - measurable
A - achievable
R - relevant
T - time bound

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6
Q

What is the difference between a mission statement and an objective

A

Mission statements are the main vision in the business whereas objectives are long term goals to help achieve the mission statement

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7
Q

Why do businesses set objectives

A
  • provide a direction
  • motivate staff
  • helps with decision making
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8
Q

Definition : revenue

A

Amount of money that is earned through the selling of goods and services

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9
Q

Calculation : revenue

A

Number of goods sold x selling price

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10
Q

Calculation : profit

A

Sales revenue - total costs

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11
Q

How is profit useful

A
  • helps a business to grow
  • serves as motivation to owners
  • used as a measure of success
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12
Q

Definition : fixed costs

A

Don’t change in the short term, do not vary with output

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13
Q

Definition : variable costs

A

Vary with output

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14
Q

Calculation : total costs

A

Fixed costs + variable costs

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15
Q

What is the private sector

A
  • organisations that are owned and operated by individuals or shareholders
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16
Q

Definition : sole trader

A
  • owned by 1 owner
  • can employ staff but remain in control of business
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17
Q

Advantages of being a sole trader

A

+ easy to set up
+ start up costs are low
+ do not have to publish financial reports
+ not accountable to shareholders
+ have full control
+ keep all profits

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18
Q

Disadvantages of being a sole trader

A
  • often fail as debts become so high they struggle to establish in the market
  • market research is often not good enough to promote their products enough
  • owners may lack the relevant skills
  • unlimited liability
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19
Q

What are limited companies

A

when a business becomes incorporated through registering with companies house they gain limited liability

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20
Q

Definition : private limited company

A

The shares are not publicly sold on the stock exchange, shareholders are usually chosen (friends or family)

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21
Q

Advantages of a private limited company

A

+ limited liability
+ new shares must be invited which protects the business from outside influence
+ shares can be sold to raise capital

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22
Q

Disadvantages of a private limited company

A
  • more paperwork
  • public can view financial information
  • can be time consuming to set up
  • business may require help to manage finances which can increase costs
23
Q

Definition : public limited company

A

Can sell shares to the general public

24
Q

Advantages of a public limited company

A

+ large amounts of capital can be raised
+ limited liability
+ increased negotiation opportunities with suppliers in terms of prices because larger businesses can achieve economies of scale

25
Q

Disadvantages of a public limited company

A
  • costs are high
  • all accounts are publicly available
  • shares can be bought by competitors which increases risk of takeover
  • shareholders expect ownership
  • corporation taxes
  • dividends
26
Q

Definition : not for profit organisations

A
  • primary aim is not profit, profits they do make are reinvested or shared to staff, they focus on providing quality goods and services for a good value
27
Q

Advantages for not for profit organisations

A

+ limited liability
+ tax exemption
+ employee benefit

28
Q

Disadvantages for not for profit organisations

A
  • public scrutiny
  • social pressure
29
Q

Definition : social enterprise

A
  • help to solve social problems and improve the community and environment
  • reinvest profits into the achievement of the social aims
30
Q

Advantages of social enterprise

A

+ tax deductions
+ make a social impact
+ chances of receiving grants

31
Q

Disadvantages for social enterprise

A
  • strict rules and regulations
  • constant monitoring
  • limit on revenue generation
32
Q

Definition : public sector

A
  • organisations that are owned or ran by the government e.g. NHS
  • they provide services to the community
33
Q

Advantages of the public sector

A

+ help the community
+ job security as they have the backing of the government
+ variety of working hours for staff
+ not affected by the economy
+ easier to raise capital

34
Q

Disadvantages of the public sector

A
  • slow decision making
  • can be a high degree of corruption
  • a lot of investment is needed
  • less financial freedom to borrow money
35
Q

Definition : dividends

A

Pay out of profits for shareholders

36
Q

Definition : share capital

A

Money raised by the sale of shares

37
Q

Definition : shareholder

A

An owner of shares in a company

38
Q

Definition : stock market

A

Where shares are sold

39
Q

Definition : share price

A

Amount it would cost to buy 1 share

40
Q

Definition : market capitalisation

A

Value of company that is traded on the stock exchange

41
Q

Definition : equity

A

Value of shares issued by a company

42
Q

Definition : investment

A

Putting money into a business

43
Q

Definition : ordinary shares capital

A

Money raised by the sale of shares by public and private companies

44
Q

Calculation : market capitalisation

A

Market price of shares x number of common shares outstanding

45
Q

Definition : capital growth

A

Arises form an increase in the value of a business

46
Q

Influences on share price

A
  • sales
  • demand
  • investment
  • changes in operations
  • size of business
  • reputation
  • economic growth
47
Q

How do market conditions impact a business

A
  • Economic decline means the demand for products will decrease as consumer spending is likely to decrease
  • Economic growth will increase demand and increase costs as they will have to produce more products to keep up with the growing demand
48
Q

How does the environment impact a business

A
  • They need to be aware of the impact that their manufacturing have on the environment, they can attract unwanted attention from pressure groups and damage their reputation
49
Q

Definition : Fair trade

A

Ensures that farmers and producers of products are paid a fair wage by larger companies that buy the products off them

50
Q

How does fair trade impact a business

A
  • If they support their trade, then it will give them a good reputation, and people want to support the business, which will increase demand
  • They can gain a bad reputation if they do not support, it there is a risk to be publicly exposed
51
Q

How does consumer income impact a business

A
  • An increase will result in more demand and more costs
52
Q

How does competition impact a business

A
  • If there are more competitors in the market, it will decrease demand for the businesses
  • If there is less competition, other businesses can gain more market share and increase their customers and sales
53
Q

How do interest rates impact a business

A
  • Impacts disposable income
  • A decrease in interest rates will mean more investment and more consumer spending
54
Q

How do demographic factors impact a business

A
  • A business will need to constantly monitor trends which will increase marketing costs
  • If they don’t keep up-to-date with these trends, demand will fall

Business (6 decks)

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