1.3. 1 and 1.3.2 putting a business idea into practice

What do businesses have and what do they do

Aims and objectives

They give business direction and provides a purpose for what business does

What is business aims

Target of the business

What ate business objectives

Steps business take to meet aims

What do business objectives have to be

SMART

Specific,measurable,agreed,realistic,time bound

What does financial aims and objectives mean

Linked to money

There goal is to keep business running and make a profit

What are the financial aims and objectives

Business survival

profit

sales-gives business a target to aim forvand a purpose for its employees

market share-refers to percentage of market business occupys

financial security

What does non financial aims and objectives mean

Non financial reasons for making oney usually linked to personal reason

What are non financial aims and objectives

social objectives-having business whose purpose is to meet social needs

personal satisfaction,

challenge-makes businessto succeed and challenge them

independence

control.

Why do aims and objectives differ between business:different sectors

Relates to whether business provides goods or services and how different it is to other business

Why do aims and objectives differ between business:business size and scale

Relates to size of business. Mew business will aim for survival and good businesses will aim for profit

What is revenue

what is revenue

Revenue is the total income generated by a business from its normal business activities, usually from sales of goods and services.

What is increase in revenue(positive)

This can increase profit and allow business to past it's break-even point and increase it's margin of safety by selling more products if costs stay the same or decrease

If costs increase

The increase in revenue has an impact

What is decrease in revenue (negative)±

This can decrease profit and business is at risk of not breaking even or having low margin of safety

how can revenue increase

To increase revenue, a business can:

• Increase sales volume

• Raise prices

• Reduce costs of raw materials

• Reduce costs by employing cheaper staff

What is increase in costs (negative)

How do you make a profit when costs are increasing

This can reduce profit and increase break-even point (BEP)

Business has to sell more

What is decrease in costs (positive)

This can lower Break even and gives business more profit because it has to sel more to break even

How is decrease in costs still positive

As long as products quality stays the same

What is break even

Point at which business is neither making a profit or a loss(revenue and total costs are the same)

How to calculate break even

Fixed costs/selling price - variable price

what is margin of safety

Amount sales can drop before break even point is reached and business makes no profit

How to calculate margin of safety

= Actual sales - break-even sales

How to calculate revenue

Quantity × price

What are costs

All expenses business pays e.g.raw materials

How to calculate total costs

Fixed costs + variable costs

What arevfixed costs and how can they be increased

Costs that don't change and can increase if company grows

What are variable costs (example)

Costs that change as company changes output ee.g.wage,raw materials

How to calculate average unit cost

Total costs ÷ output(total number of units produced)

How to calculate variable cost

Variable cost per unit × number of unit

what is interest

Interest is the cost of borrowing money or the return on invested funds, usually expressed as a percentage over a period of time. It can be simple interest or compound interest.