Business Objectives & PLCs

Flashcards covering mission statements, corporate objectives, functional objectives, the importance of profit, factors of production, and the process of a business becoming a PLC.

What is a mission statement?

A qualitative description of what the business intends to do so stakeholders understand its intent.

List 3 Corporate Objectives.

Profit maximization, revenue maximization, to survive, retrenchment, growth

What are the characteristics of SMART objectives?

Specific, Measureable, Agreed, Realistic, Time frame

How are functional objectives driven?

By the corporate objectives.

List 3 reasons why profit is important.

Source of finance, reward for taking risk, employee motivation, sign of financial stability, indicator of success

What does THINK CELL stand for?

Capital, Entrepreneurship, Land, Labour. These are the Factors of Production

What does PLUMS stand for, when considering becoming a PLC?

Profit distribution, retain limited liability, retain limited liability, Management, Sources of finance

List 3 Pros of Flotation.

Access to enormous amounts of finance, offers a stable business ownership structure, higher prestige, shareholders retain limited liability, economies of scale, greater market share, increase in prices, increase in profits

List 3 Cons of Flotation.

Flotation is expensive, anyone can buy shares, increased legal requirements, more financial information made public, short-sighted shareholders

How is the share price of an LTD defined?

Solely defined by the agreement between an owner and the investor.

List 3 factors that influence PLC share prices.

Supply, Demand, Business performance, interest rates

How do increasing interest rates affect share prices?

If interest rates go up, shares are more likely to be sold, meaning supply goes up, meaning price goes down.