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Description
Flashcards by gowan.savage, updated more than 1 year ago
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Created by gowan.savage
almost 9 years ago
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| Question | Answer |
| Profit | When Revenue from the sale of products is greater that the operating expenses. * A business is usually judged by the Return On Investment (ROI) |
| The 4 Business Function | 1) Operations 2) Marketing 3) Finance 4) Human Resources |
| Operation | Inputs - Transformation - Outputs *This is how a business creates good/services sold. |
| Marketing | Decisions about: product features, pricing distribution and promotion. |
| Finance | Everything to do with money |
| Human Resources | The acquisition, development, maintenances and separation of employees in the business |
| Inputs | - Raw materials - Components - Human Labour - Facilities - Information |
| Outputs | - Finished Product Components Customer Satisfaction |
| Classifying Businesses | : Size : Geographic Location : Industry : Legal Structure |
| Characteristics of a Small Business | - less than 20 employees - Independently Owned and Sole Trader - Most financed from the owner - Small market share, usually local |
| Characteristics of a Medium Business | - 20 - 199 employees - A few people owned -partnership/private company) - some finance from owners, some loans - medium market share - Usually a geographic region |
| Characteristics of a Large Business | - 200 or more employed - owned by many (public/private company) - Many sources of finance - Large market usually national or international |
| Geographic Locations: | - Local - National - Global + International + Transnational |
| Industry | - Primary, involved in the acquisition of raw materials - Secondary, use raw materials to create finished or semi - finished goods - Tertiary, provide a service - Quaternary, provide information services - Quinary, perform services traditionally performed in the house |
| Legal Structures | 1) Unincorporated + Sole Trader + Partnership 2) Incorporated + Private Company + Public Company |
| Sole Trader | |
| Partnership | |
| Company | |
| Business Life Cycle | + Establishment + Growth + Maturity + Post-Maturity = Renewal = Steady Stage = Cesation |
| Establishment | - Key goals are surviving, setting a foundation - Sales begin slow can be erratic and profits often suffer a loss - Difficult to achieve distribution - 33% chance of failure, extremely high risk - Usually sole trader or partnership Decisions are made 'on the run' |
| Strategies for the Establishment stage | - Prepare for cash shortages - Develop effective marketing - Undertake training to develop management skills - Research and plan for business future |
| Growth, Take - Off | - Key goal to increase sales and grow business - Profits rising due to increase in sales and falling production costs -If growth is to rapid adequate cash flow is difficult -Failure and Risk reduce -Competitors increase in threat - Usually change to a private or public company |
| Strategies for the Growth stage | - Employ more staff - Develop effective credit policy - Employ professional managers Regular monitor competitors - Ensure growth is not too rapid |
| Maturity, Saturation | - Key goal is to maintain profits - Rates of sales, profit, market shares decline - Financial management systems - Need to improve existing products - Heavy use of advertising - Leadership is crucial - Failure rate and risk will increase the longer the business takes to respond |
| Strategies for the Maturity stage | - Focus on cutting costs - Examine every aspect of the value chain to cut costs - Diversify new products - Find ways to grow business value - Improve customer relationship |
| Post-Maturity, Regeneration, Revival | - Key goals are to increase sales, cash flow, profits. - Trying to find new market target - May need to issue new shares (raise finance) - If business can't improve profit may stay in a steady state for a while but will then decline and lead to cessation. |
| Strategies for Post-Maturity | - Improve competitive position - Market research - Introduce new products - Research and development - New managers hired or consultants - If cessation occurs should be dealt with ethically and effectively |
| Supply and Demand | Supply - the volume of goods or swervices the business is willing to sell Demand - the want for a good or service |
| Mergers | When the owner of two separate business agree to combine their resources |
| Acqusition | Occurs when one business takes control of another business |
| Mergers and Acquisitions are effective ways to: | - expand geographically - expand access to resources - increase resources and assets - expand product range *can be used to eliminate copetition |
| Different Types of Mergers and Acquisition | |
| Cessation | When a business closes due to business failures or owners decision to close. Two types: Voluntary and Involuntary |
| Voluntary Cessation | Decision made by owners - Loss of enthusiasm - Retirement - Selling the business - Declining profits - Need to rest |
| Involuntary Cessation | Forced closure - Death of owner - Creditors wanting payment *Two main cause of decline and failure are lack of management skills and or sufficient funds |
| What is Accounting? | Accounting is the process of collecting and analysing the financial information of a business and then communicating the results in financial reports to relevant stakeholders |
| What is Finance | Finance refers to how a business acquires and manages funds needed to conduct its operations |
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