AQA A level Business - Unit 1

Key issues with different forms of business

Unlimited/ limited liability, Ordinary share capital, Market capitalisation and Dividends.

Budgets

Agreed ceiling on the monthly spending by any department or manger.

Corporate Objectives

Targets for the whole business, such as profit to rise by 20% a year for the next 3 years for the whole business.

Delegated

Decision making power is passed down the the hierarchy.

Entrepreneur

Person with the initiative and drive to make a business idea happen.

Mission

Over riding motivation or purpose of a business

Mission Statement

A short, powerful expressed sentence or two that explains the business aims clearly yet motivationally.

Objectives

Targets precise enough to allow praise or blame for the person in charge.

Profit Optimisation

The surplus of revenue over costs should be just right; neither too high in the short term nor too low to finance long term success.

Strategy

Medium to long term plan for meeting objectives.

Four business functions

Marketing, People (Human Resources), Finance and Operations.

Reasons businesses exist

Human spirit, a sense of adventure, to lead people to what they can do, and to create income, meet consumer demand.

Set businesses objectives

Managers cannot make every decision. Contributes towards achieving goals. These are reasons for doing what?

Benefits of setting objectives

Motivating for managers and for all staff to have a clear goal to aim towards. Also, they are the basis for devising a strategy.

Key Business Objectives

Profit Maximisation, Profit Optimisation, Growth, Cash Flow, Survival and Social and Ethical - these are examples of key what?

Specific Measurable Achievable Realistic Timebound

SMART stands for - write each word

Bankrupt

INDIVIDUAL is unable to meet personal liabilities, some or all of which can be as a consequence of business activities.

Creditors

Those owned money by a business. For example, suppliers and bankers.

Incorporation

Establishing a business as a separate legal entity from its owners, and therefore giving the owners limited liability.

Limited Liability

Owners are not liable for the debts of the business; they can lose no more than the sum they invested.

Monopoly

Where the sales of one business have a dominant share of its marketplace.

Registrar of Companies

Government department where firms register to be incorporated.

Sole Trader

Business owned by one person with unlimited liability.

Unlimited Liability

Owners are liable for any debts incurred by the business, requires them to sell their personal assets and possessions and become personally bankrupt.

Limited Liability ADV

1. Owners may feel more secure in taking business risks e.g. expanding business; 2. Owners can sell shares to raise finance = advantages of which type of ownership?

disadvantages of limited liability

Have to: follow more rules, make financial information available publicly, consider share holder opinion.

Private Limited Company

Low start up capital, can be wholly owned by the entrepreneur, or investors. Shares cannot be bought and sold without agreement, cannot be listed on stock market. For example, Aviva.

Public Limited Company

Share capital of more than £50,000 required to float on stock market, members of the public can buy shares. Increases company's access to share capital, e.g. Tescos.

Co-Operatives

This can be worker owned, such as John Lewis, or customer owned, such as the retail Co-Op. They have the potential to offer more united cause for workforce than profits of shareholders.

Mutual Business

This includes building societies/ mutual life assurance. They have no shareholder or owners. Exists solely for best interests of members; Customers. For example, Nationwide.

Charities

e.g. Oxfam, includes pressure groups, such as Greenpeace. Contributors are are not liable for any debts, but receive significant tax benefits.

Public Corporation

Government owned businesses - trade mainly within the private sector. Most have been sold to the private sector, often forming a private monopoly. Crown Estate is one example - earns rental income for the government from publicly owned lands.

Local Authority Service

Care homes for the elderly etc run by this public sector, even though there was alternative provision from the private sector. Priced below the private sector level or even free.

Private Public Partnerships

Public services run in partnership with the private sector. Idea promoted by the Government as being more efficient

Annual General Meeting (AGM)

Yearly meeting in which company directors invite all shareholders to come to hear results and vote on new resolutions. A legal requirement for PLCs.

Dividend Cover

Measures how well a firm's dividends are covered by its profits for the year. Accountants recommend a figure of at least 2, company should pay out no more than half its profits to shareholders.

Market Capitalisation

Value placed on the business by the stock market, calculated as; share price x number of shares issued.

role of shareholders

They literally own a share of the business, proportionate to their shareholding. It is to provide the capital to get the business going and to keep it growing

shareholder rewards

Annual dividend payments and rise in the value of shares.