Business studies

what is meant by the term services?

an intangible activity that is done for others

what is an example of a service?

hairdressing

what is meant by a consumer good?

consumer goods sold to and bought by the final customer

what is a producer (capital) good?

goods which are sold by one business to another

what are the factors of production?

Land-naturally occurring resources, such as land and water

Labour- effort, skills and knowledge provided by employees

Capital- equipment and money used to provide goods and services such as money to pay staff and machinery to produce goods

Enterprise- the willingness to take risks, make decisions and organise recourses of the people involved in the business

a nurse is an example of which factor of production?

labour

an owner of a corner shop is an example of which factor of production?

enterprise

a pine forest is an example of which type of production?

land

a price of machinery is an example of which type of production?

capital

what is business enterprise?

an action taken by individuals to start a business.

what is the role of an entrepreneur?

• setting up a business:they show innovation by coming up with an idea and then take the initiative by taking steps to start the businesss

• identify opportunities to make a profit such as looking for: new goods and services, new ways to sell their good or service, new markets to explore

• being the business owner: invest money in business involves taking risk and facing uncertainties of what could happen

• organise the resource: managing employees,money, buildings, products

key characteristics of an entrepreneur include:

• being a risk taker- risk money and time

• taking initiative- entrepreneurs are often proactive and willing to change or make important decisions when required

• making decisions- many decisions to be made, successful can make important decisions quickly

• being creative and innovative- competing with other businesses often means that the business has to offer something new or introduce a new product that is not already being produced

• being hardworking- many hours needed especially in the early stages

why does an individual decide to set up a business?

• personal ambition- always wanted to do

• take over family business

• be their own boss- provides individuals with greater flexibility than employment

• identify a gap in the market to increase wealth

rewards of being a entrepreneur

• be own boss

• flexible working hours

• pursuing an interest

• providing employment to themselves and others

risks of becoming an entrepreneur

• loss of income and money invested

• unexpected costs e.g. rise in rent

• potentially long hours and stress

• damage reputation if the business fails

how do start- ups help to do?

• create jobs

• provide goods and services

• create competition against existing providers

• provide innovation and new products for society

how does the government help business start-ups?

• providing funds

• providing advice to entrepreneurs

• reducing number of regulations/laws

• reducing taxes to make it cheaper for business to operate

• encourage banks to lend startups and small business money

what are the characteristics of a sole trader?

• ownership- owned and operated by one person

• unlimited liability- fully liable for all bnes debts

• decision making- sole decision maker

• profits- recieve all profits

• legal structure- not separate from the owner

advantages of being a sole trader

• full profit retention- all profits received by owner

• ease of setup

• decision making control

• tax benefits- lower tax rates compared to big corporations

disadvantages of being a sole trader

unlimited liability- personably liable for all bnes debts

limited funding- difficult to raise capital

heavy workload- bnes owner handles all aspects of the bnes

lack of continuity- bnes ends of owner dies

characteristics of a partnership

• number of partners- two or more

• unlimited liability- each partner is fully liable for debts of the bnes

• decision making- decisions made jointly

• profit sharing- profits are shared as per the partnership agreement

• legal structure- not a separate legal entity from the partners

what’s the advantages of being in a partnership?

• shared investments- partners can share funds to start the bnes

• diverse expertise- partners bring different skills and experiences

• easier to obtain loans- more creditworthiness due to multiple owners

• simple structure- less legal papaerworm compared to other corporations

what are the disadvantages of being in a partnership?

• unlimited liability- each partner is fully liable for all bnes debts

• decision conflicts- disagreements can slow down descion making

• shared profits- each partner receives a portion of the profits

• partner disputes- conflicts can damage bnes

what are the characteristics of a ltd private limited company.

• legal entity- separate from its owners

• limited liability- limited liability for shareholders

• ownership- shares held by shareholders

• management- governed by directors

• share transfer- shares are restricted and not publicly traded

adv of ltd

• limited liability- shareholder only liable up to their investment

• easier to raise capital- can attract investors through shares sales

• invited shareholders- more control

• continuity- company continues despite changes in ownership

disadv of ltd

• slower decision making

• legal procedure in setting up takes time and costs money

• loss of control- directors may have more control than sole traders

• profits have to be shared with other shareholders

what are the characteristics of a public limited company?

liability- shareholders have limited liability

ownership- shares traded publicly on the stock market

management- governed by a board of directors

reporting- required to publish annual financial reports

calculation for turnover

selling price x quantity sold

calculation for net cash flow

total inflow - total outflow

calculation for closing balance

opening balance + net cash flow

gross profit

total revenue - cost of goods

gross profit margin

gross profit / sales x 100

net profit

gross profit - expenses

net profit margin

net profit / sales x 100

total costs

fixed costs + variable costs

contribution

selling price - variable costs

break even

fixed costs / contribution per unit

percentage change

final - initial / initial x 100