what is business 3.1 Flashcards
what is a business objective
SMART target which a business sets to help it achieve its aims
what are the main functions of business objectives
- state what needs to be achieve
- a focus for all activity
- targets for individual groups
- measurement of -performance
Common corporate business objectives
- increased sales revenue
- profit increase
- growth
- increased market share
What is the hierarchy of objectives in business
- Aim
- mission statement
- Corporate/strategic objectives
- functional objectives
- team objectives
- individual objectives
corporate objectives (functional)
increased market share (marketing)
reduce unit costs (operations)
increase cash flow (finance)
Improve customer satisfaction (HR)
What is a mission statement
the overriding purpose of the business. The reason for its existence. A good statement must give a clear sense of business purpose, excite employees, differentiate business from competitors.
Who is the mission statement intended for
- employees
customers
investors
society
Criticism of mission statements
- not always supported by actions of the business
- often too vague
- are they just for PR
What are fixed costs
Costs that the business incurs that do NOT change as output changes (rent, electricity)
What are variable costs
Costs that change in relation to output change (raw materials, wages)
How to calculate total costs
TC= FC + VC
What is limited liability
Where the owners of a business isn’t personally responsible for the debts in which a business incurs. (incorporated businesses, private limited company, public limited company)
What is unlimited liability
Where the business owners are personally responsible for the debts and liabilities of the business. The owner and the business are viewed as one legal entity. (unincorporated business, sole traders, partnerships)
what is a sole trader
An individual owning the business on their own. They can employ people unlimited liability \+ quick and easy to set up \+simple to run - unlimited liability - harder to raise finance
What is a partnership
Where a business is started and owned by more than one person.
Unlimited liability
+ partners can combine experience
+greater potential to raise finance
- unlimited liability
- poor decisions by one partner can lead to damages for the other partner
What are private sector organisations
businesses that are operated by private people
goal is usually to earn profit
what is the public sector organisations
business that are owned by the government or ran on behalf of the government (NHS
what is a company
A company (incorporated business) is a separate legal entity from the owners, of whom are known as shareholders
what is a private limited company
common incorporated business
privately owned
share CANNOT be traded publicly
quick and cheap to set up
Public limited companies
Minimum share capital of 50k
Shares are traded on the public stock exchange
Usually many shareholders (who typically aren’t involved in the everyday running of the business)
what is a share
An individual part of the issued share capital of a company (source of finance)
Ordinary shares:
- voting rights
- shareholding- the percentage of shares of which a person owns in proportion to the number of shares in the business
- qualify for dividends
What is a dividend
A monetary payment per share from the reserves or profits of a business
what is capital growth/gain
Where the share price increases overtime - share trading buying shares for cheap and selling them at a higher price.
What is a share price
Determined by the interaction of supply and demand.
If demand for a share is higher than the supply then the share price should rise
if the share price is falling this indicated an excess of shares
