Overall Business Performance and Economic Change

These flashcards cover key concepts related to business performance, economic change, regulatory environments, and strategic decision-making, enabling students to review and prepare effectively for their upcoming exam.

What are the limitations of financial ratios?

Financial ratios tend to look backward at historical performance, may focus on measures important to shareholders over management, and do not always capture competitive performance.

List some internal performance measures related to Operations.

Efficiency (unit cost), Labour productivity, Capacity utilisation, Break-even output, Quality (reject rate), Quality (lead time).

What are some HRM non-financial measures of performance?

Labour turnover, Labour productivity, Unit labour costs, Absenteeism rate, Revenue per employee, Staff retention rate, Job satisfaction.

What does a higher market share generally indicate in financial terms?

It can signify economies of scale, improved product quality, and increasing customer retention and loyalty.

Name one criticism of the core competencies approach.

Over-zealous outsourcing can damage business competitiveness.

What is the concept of short-termism in business performance?

Short-termism prioritizes immediate performance metrics like share price and revenue growth over long-term objectives like market share and innovation.

What does Elkington's triple bottom line aim to measure?

It aims to measure a business's financial, social, and environmental performance over time.

What are some of the benefits of the triple bottom line approach?

It encourages businesses to consider performance beyond profit, fosters corporate social responsibility, and supports environmental impact measurement.

What is a government's role in regulating businesses?

Regulators supervise laws to ensure compliance and address social, environmental, and economic goals.

What is the purpose of the National Minimum Wage Act?

It sets hourly pay rates below which pay must not fall, affecting a business's cost and profitability.

How does depreciation affect the exchange rates?

Depreciation of a currency means it falls against others, making imports more expensive and exports cheaper.

What factors can influence investment decisions?

Management perspectives on growth, competitor investments, non-financial reputation improvements, risk management, and external uncertainties.

What does the term 'protectionism' refer to?

It refers to government actions to shield domestic industries from foreign competition through tariffs and quotas.

What are the five competitive forces that shape strategy according to Michael Porter?

Bargaining power of suppliers, bargaining power of customers, threat of new entrants, threat of substitutes, and rivalry among existing businesses.

What is the investment appraisal process?

It calculates the value of capital expenditure projects to help businesses compare options for expansion and efficiency.

List the three financial methods used for investment appraisal.

1. Payback 2. Average Rate of Return 3. Net Present Value.

What are some drawbacks of using the payback method?

It ignores cash flow after payback, does not consider the time value of money, encourages short-term thinking, and overlooks qualitative factors.

Define the acronym SPICED as it relates to currency value.

S - Strong, P - Pound, I - Imports (cheaper), C - Exports (dearer), E - Exports (dearer), D - Dearer.

What is the impact of inflation on small businesses?

As costs rise due to inflation, businesses may need to increase prices, affecting profit margins.

What is monetary policy?

Actions taken by a central bank to influence money supply and borrowing costs in the economy.