AP Business Topics 1.5-1.8 study guide

Mission statement

Explains a business’s purpose and what it does.

Vision statement

Describes what a business hopes to achieve in the future.

Business goals

Specific outcomes a business wants to accomplish.

Strategic alignment

Ensuring business decisions support its mission, vision, and goals.

Stakeholders

Individuals or groups affected by or interested in the business.

Topic 1.5 — Big Idea

Businesses use missions, visions, and goals to establish purpose, communicate priorities, and guide decisions.

Business ethics

Principles used to evaluate right and wrong in business decisions.

Ethical dilemma

A situation involving competing values or responsibilities.

Corporate social responsibility (CSR)

A business’s consideration of its social and environmental impact.

Stakeholder interests

The needs and concerns of customers, employees, owners, suppliers, and communities.

Profitability

The ability of a business to earn more revenue than it incurs in expenses.

Topic 1.6 — Big Idea

Businesses must consider the ethical implications of decisions and how those decisions affect stakeholders.

Sole proprietorship

A business owned by one person.

Partnership

A business owned by two or more individuals.

Corporation

A business legally separate from its owners.

Limited liability

Protection that generally limits an owner’s financial exposure to their investment.

Unlimited liability

Personal responsibility for business debts and obligations.

Organizational structure

The way business responsibilities, authority, and reporting relationships are arranged.

Specialization

Assigning work according to particular skills or expertise.

Topic 1.7 — Big Idea

Ownership and organizational structures influence control, liability, responsibilities, and decision-making.

Sole proprietorship — advantage

The owner maintains direct control.

Sole proprietorship — disadvantage

The owner generally has unlimited personal liability.

General partnership — advantage

Partners can share resources and expertise.

General partnership — disadvantage

General partners generally have unlimited liability.

Corporation — advantage

Shareholders generally have limited liability.

Corporation — disadvantage

Formation and governance requirements are more complex.

Operations

Activities involved in producing and delivering goods or services.

Supply chain

The network of businesses and processes involved in sourcing, producing, and delivering products.

Suppliers

Businesses that provide resources or materials.

Inputs

Resources used to create a product.

Production process

Activities that transform inputs into outputs.

Outputs

Finished goods or services.

Efficiency

Using resources effectively while minimizing waste.

Supply chain disruption

An interruption that affects the flow of materials or products.

Topic 1.8 — Big Idea

Businesses coordinate resources, suppliers, production, and distribution to create products and deliver value to customers.