What Is Business? Flashcards
What is the role of businesses?
Create goods and services to meet customers needs
Why businesses exist
Create wealth Create jobs Develop new products to benefit society Support other businesses in the country Provide a source of tax revenue for the government
What’s a mission statement and what does it focus on?
It sets out a businesses overall purpose to direct and stimulate the entire organisation. It will focus on:
The organisations values
Non financial goals
The benefits of the business to the community or stakeholder
How customers are to be satisfied
Why do businesses set objectives
Provide quantifiable steps to achieve aims
Clarify direction of the business
Measure success against targets
Provide targets to motive and reward employees
Influence potential lenders/investors
Examples of common business objectives
Financial: Profitability Survival Growth Increase market share Shareholder value Non financial: Personal satisfaction Brand recognition Sustainability Customer satisfaction
Factors that influence business objectives
Size Sector Market Ownership Owner Consumer satisfaction
What’s the importance of profit?
Allows owners to reinvest into new projects and stimulate economic activity
Secures long term success of a business
Can be reinvested to aid growth and keep up with ever changing consumer demands
What is revenue?
The value of all sales made during a trading period.
What are variable costs?
Costs that charge directly with the level of output or sales such as materials
What are fixed costs?
Costs that don’t change with the level of output or sales such as rent
What are sole traders? What are the pros and cons?
Owned by individuals whom are self employed.
Pros/Cons:
Easy to start up, no registration
Own boss, but long hours
Requires a wide range of skills and flexibility
You can keep all profits
Unlimited liability
What are Ltds? What are the pros and cons?
Owned by shareholders with seperate legal identity
Pros/Cons:
Must go through the process of incorporation
Limited liability
Customers may trust a limited company more
Wider access to capital, easier to gain loans ect
What are PLCs? What are the pros and cons?
Large publicly owned companies
Pros/Cons:
Can raise capital through selling shares to the public
Ability to take over other businesses
Can lose control of the business
Pressure to pay dividends to shareholders
What is limited liability?
Where the owners are detached from the company in the eyes of the law.
What are common aims for PLCs?
Likely to relate to increasing shareholder value
More likely to want t operate in international markets and objectives nay refer to how they shall do this
What are common aims of Ltds?
Objectives are likely to be in relation to expansion and growth
What are common aims of sole traders?
If its new, likely to focus on survival, building a loyal customer base and a reputation
Also to provide the trader with a suitable income
What are the common aims of a charity?
Increase number of donors
Increase number of people supported
Increase awareness of the cause
What is a shareholder?
An individual or institution that owns a percentage of a company. They invest in companies to make a profit on their investment. They can also influence the decision making of companies they invest in.
Give some examples that make affect share price.
Company announces profit increase of 10% (rise)
Company announces 500 job losses (falls)
Dividend of 5p per share announced (rise)
A takeover from a foreign country is speculated (fall)
Benefits of share prices rising:
Managers may receive a bonus
The company finds it easier to raise capital
Consumers with shares feel more confident to spend
The business may receive positive publicity
Downfalls when share prices fall:
The company make become vulnerable to a takeover
Price fall indicates poor performance
The company finds it harder to raise capital
Consumers with shares feel less confident to spend
