How is the size of a business determined?

The size of a business is determined by the number of employees and revenue, with categories like small, medium, and large.

What are the main reasons businesses exist?

Businesses exist to earn a financial return, with objectives like profit, growth, survival, cash flow, social, and ethical goals.

What is a mission statement?

A mission statement is the overriding goal of a business, explaining its existence and strategic perspective.

What makes a good mission statement?

A good mission statement contains objectives, differentiates from competitors, defines markets, and is relevant to stakeholders.

What are common criticisms of mission statements?

Common criticisms include being unsupported by actions, vague, obvious, seen as PR, and not reflecting reality.

What is the relationship between mission and objectives?

The mission statement is at the top of a hierarchy, with corporate objectives derived from it, leading to departmental objectives.

How is profit measured and why is it important?

Profit is the difference between total revenue and costs, serving as a reward for risk and an incentive for business.

What is revenue and how is it calculated?

Revenue, also known as turnover or sales, is calculated by multiplying the quantity of product sold by the price paid by customers.

What are variable costs?

Variable costs change with output, including raw materials, packaging, wages, and marketing costs.

What are fixed costs?

Fixed costs do not change with output, including rent, salaries, advertising, and legal fees.

What is an unincorporated business?

An unincorporated business has no legal difference between the owner and the business, with unlimited liability.

What is an incorporated business?

An incorporated business has a legal difference between the company and owners, with limited liability for shareholders.

What is unlimited liability?

Unlimited liability means the business owner is personally responsible for debts and liabilities.

What is a sole trader?

A sole trader is an individual owning a business alone, with unlimited liability for business debts.

What are the advantages of partnerships?

Advantages include easy setup, specialization, shared decision-making, more capital, and no published financials.

What are the disadvantages of partnerships?

Disadvantages include unlimited liability, profit sharing, potential conflicts, and binding decisions.

What are the benefits of being a sole trader?

Benefits include easy setup, complete control, minimal paperwork, and easy closure.

What are the drawbacks of being a sole trader?

Drawbacks include full personal liability, difficulty raising finance, and higher tax rates.

What is the importance of limited liability?

Limited liability protects shareholders, limiting their loss to their investment.

What is a limited company?

A limited company is a separate legal entity, with shareholders appointing directors and limited liability for owners.

What are the benefits of a limited company?

Benefits include shareholder protection, easier finance, and business stability.

What are the drawbacks of a limited company?

Drawbacks include greater admin costs and public disclosure of information.

What is a public limited company?

A public limited company has shares traded on a stock market, with more shareholders and greater regulation.

What are public sector companies?

Public sector companies are owned or controlled by the government, like Network Rail.

What are not-for-profit organizations?

Not-for-profit organizations trade to benefit the community, with social and ethical aims.

What is a social enterprise?

A social enterprise is a business with social goals, like community development trusts and co-operatives.

What are key issues in different business forms?

Key issues include liability, share capital, market capitalization, and dividends.

What is ordinary share capital?

Ordinary share capital is money raised by selling new shares to shareholders.

What is market capitalization?

Market capitalization is the total market value of a company's issued share capital.

Dividends are payments made to shareholders from a company's profits.

How did Twitter float stocks?

-In 2013 they floated themselves on the NY stock exchange.

PESTLE (external factors)

Political, Economic, Social, Technological, Legal, Environment

Factors that affect cost and demand

Competition Market conditions Incomes Interest rates Demographic factors Environmental issues and fair trade

competition Effect on demand

Competition can encourage firms to compete on price therefore lowering prices overall and increasing demand in the market A number of firms competing may see a spread in demand between firms, reducing the market share of each firm if the market size remains unchanged.

the defining characteristics of the market e.g. Level of sales, trends and degree of competition

Market conditions effect on demand and cost

-Market decline can reduce demand for supplies, leading firms to lower costs to maintain sales. High demand may lead to supply shortages, allowing suppliers to raise prices. -Demand levels show market conditions. Strong demand may attract new businesses.

Demographic factors (the statistical characteristics of the population) effects on demand and costs

-More workers due to migration have lowered wages and production costs. Changes in population and age have raised public sector costs (e.g., healthcare, education). -Migration has increased demand for housing, transport, and healthcare. Population changes affect what products are in demand

interest rates effects on cost and demand

-Higher interest rates increase borrowing costs for businesses, raising fixed costs like loan repayments. Higher interest rates encourage saving and reduce spending. Lower rates have the opposite effect. High interest rates can reduce demand, especially for items bought on credit, like luxury goods.

incomes effect on cost and demand

-Higher incomes, like those from wage increases, can raise business costs if wages go up. -Rising incomes boost consumers' spending power, leading to higher demand as people can afford more.

environmental factors affect on cost and demand

-Fair trade increases costs because businesses pay more for raw materials. - raise costs for waste disposal or updating equipment. But, they can lower costs by reducing energy use or avoiding fines. -Businesses can attract more customers by promoting environmental or fair trade practices. If prices go up due to higher costs, demand may drop.

Sole traders are often smaller organisations and the owner is usually involved with the day to say running. Focus on survival Do not have shareholders to consider - involved with business

Gross domestic product is a measure of the output of an economy in terms of the goods and services it produces over a year

what does SMART stand for?

-Specific, Measurable, agreed, Realistic, Time-related -method to determine common business objectives

What are interest rates?

-The cost of borrowing money or the reward for saving -High interest rates: cost of existing loans may increase, consumers have less disposable income, demand may fall, and consumers may save -Low interest, cost of existing loans may fall, demand for luxury goods may rise, consumers are more likely to spend, disposable income rises, savers lose out on earnings from investments.

3.1 What is business? Flashcards

Student preview

51 questions

Show all answers

1.

FLASHCARD QUESTION

Front

What is the dynamic nature of business influenced by?

Back

The dynamic nature of business is influenced by technology, taste, and internal and external factors.

2.

FLASHCARD QUESTION

Front

Why do people start businesses?

Back

People start businesses to make a profit, gain independence, and achieve personal goals.

3.

FLASHCARD QUESTION

Front

What are some qualities of successful entrepreneurs?

Back

Successful entrepreneurs are often leaders, adaptable, quick, resilient, and risk-takers.

4.

FLASHCARD QUESTION

Front

How can added value be achieved?

Back

-Can be achieved through branding, quality, convinience and service.

-The more value a business can add to its products, the more competitive it is

5.

FLASHCARD QUESTION

Front

How does Mc Donald' have added value?

Back

-through a strong global brand, when people see the big golden arches, they understand.

-Convinience and speed of service

6.

FLASHCARD QUESTION

Front

Why do new business ideas come about?

Back

New business ideas come about due to demand and obsolescence.

7.

FLASHCARD QUESTION

Front

What are the classifications of business sectors?

Back

Business sectors are classified into primary (raw materials), secondary (manufacturing), tertiary (services), and quaternary (IT).

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