Why? Flashcards
Why do people set up businesses?
(1) Profit - risky but possibility of big financial rewards
(2) Expect to make more then to work as an employee of another business
(3) Own decisions - interest
Why is profit important?
(1) motivation - given shares as dividends, bonuses
(2) source of finance - retained to use as investments to help grow and increase profits
(3) attract investors - shares
making a profit or break even is important for survival - bankrupt and have to close down
Why do businesses set objectives?
(1) To enable them to achieve their mission and can help decision making
(2) Everyone can work towards a goal - coordination is improved, motivation increases
(3) can compare performance with objectives to measure successes and review decisions
Why are social and ethical objectives important?
Business operation is becoming more available - ethical
Why do shareholders invest in companies?
(1) Capital gain - buy share prices when they are low and sell them when risen to make a profit
(2) Dividend - return on investment
(3) Involved in the running of a business - decision making - majority stake holder
(4) want aims and objectives of a company to succeed
(5) help survival or growth
(6) Venture capitalist - invest in a business they see succeeding - financial risk but can have high rewards
Why is opportunity cost considered when making decisions?
Puts value on decisions, choose where to use limited resources
Why is market research done?
(1) spot opportunities - customer buying patterns, growing / declining markets
(2) helps decide what to do next - advertisement
(3) helps to see if plans are working - sales figures shows if market strategy is working
Why would a business make a new product?
1 new customers
2 competitive adv
3 balanced product portfolio
4 technological developments
5 market gaps
Why have multichannel distribution?
flexibility for customers and wide market coverage for manufacturers
brand loyalty and feeling goods
Why is under utilization inefficient?
Not getting the full use out of machines and facilities paid for. Increased cost - unit costs increase as fixed costs are less spread out
Why is communication between managers and employees important?
motivation
achieving goals and objectives
easier to accept difficult decisions
helps to get feedback
why are balance sheets important?
1 suppliers to see working capital and liquidity - better at paying bills and whether to offer credit
2 shows sources of finance - borrowing
3 can assess internal strengths and weaknesses such as using excess working capital to invest in new equipment or paying loans
Why is important to focus on things other than finance?
quality, market share, market environment, productivity, customer satisfaction and external factors are not considered
