Business Studies Preliminary Course Overview

What is the nature of a business?

An organized effort of individuals to produce and sell products for profit that satisfy individual needs and wants.

What is the primary goal of businesses?

To make a profit for their owners by producing goods or services that people, other businesses, and governments need and want.

How do businesses ensure efficient operations?

By establishing systems and allocating tasks to produce outputs using the least amount of inputs possible.

What are the key components involved in business operations?

Inputs (raw materials, workers, machinery, power, management skills, other equipment), Operations, Marketing, Finance, Human Resources.

What is profit in a business context?

The return businesses receive for producing products, calculated as revenue minus operating expenses.

What constitutes revenue for a business?

Money received as payment for products.

What percentage of private sector jobs do businesses provide?

Approximately 80%.

How do businesses provide income to individuals?

Through wages or salaries for employees, profits, and dividends to shareholders.

What is meant by 'choice' in a business context?

The act of selecting among alternatives, which increases with greater competition leading to competitive prices.

What is innovation in business?

Creating a new product, service, or process, or improving an existing one, often driven by research and development.

What is entrepreneurship?

The ability and willingness to start, operate, and assume the risk of starting a business in the hope of making a profit.

What risks do entrepreneurs face?

The risk of not being paid and the risk of losing all or part of the money invested in the business.

How does business contribute to wealth generation?

By producing more, which generates wealth within the economy through employee wages, taxes, dividends, loan repayments, and retained profits.

What are the non-material benefits contributing to quality of life?

Fresh air, clean water, and an unpolluted earth.

What responses can businesses implement to address quality-of-life issues?

Implementing environmentally friendly procedures.

What is the relationship between business production and wealth?

The more that is produced, the more wealth is generated within the economy.

What are dividends in the context of business income?

Payments made to shareholders from the profits of the business.

What is the difference between a wage and a salary?

A wage is weekly earnings for services provided, while a salary is a fixed amount for permanent employees.

What role does competition play in business choice?

Greater competition leads to greater availability of choices and competitive prices.

What is the significance of research and development in business?

It leads to innovation by generating ideas for new products or improvements.

Who are entrepreneurs?

Individuals who transform their ideas into new businesses and take on the associated risks.

What is the impact of business on the economy?

Businesses pay employees, who then spend money to satisfy their needs and wants, contributing to economic activity.

What are the classifications of businesses based on size?

Businesses can be classified as small to medium enterprises (SMEs) or large.

How is the size of a business determined?

The size can be determined by the number of employees, number of owners, size of market share, and legal structure.

What is the employee range for a micro business?

A micro business has less than 5 employees.

What defines a small business in terms of employee count?

A small business has between 5 to 19 employees.

What is the employee range for a medium business?

A medium business has between 20 to 199 employees.

How many employees does a large business have?

A large business has more than 200 employees.

What percentage of businesses in Australia are SMEs as of 2021?

97% of businesses in Australia are SMEs.

What are some advantages of small to medium enterprises (SMEs)?

Advantages include independence, low startup costs, and flexibility in responding to customer demand.

What are some disadvantages of small to medium enterprises (SMEs)?

Disadvantages include cash flow issues, long working hours for owners, and difficulty in management continuity.

What is the market scope of a local business?

A local business serves customers in a small geographic area.

What characterizes a national business?

A national business has branches or franchises operating in more than one state or territory.

Define a global business.

A global business operates in the world market, often as importers or exporters without investments outside their home country.

What is a multinational corporation (MNC)?

An MNC has its headquarters in its home country and establishes subsidiaries in host countries.

What distinguishes a transnational corporation (TNC) from an MNC?

A TNC operates across borders without a nationally-based parent company, taking advantage of differences in laws and financial systems.

What are the five industry types mentioned?

The five industry types are primary, secondary, tertiary, quaternary, and quinary.

What does the primary industry involve?

The primary industry involves producing or extracting natural resources, such as farming, mining, and fishing.

What is the focus of the secondary industry?

The secondary industry focuses on manufacturing and processing raw materials.

What characterizes the tertiary industry?

The tertiary industry is concerned with service industries, including retail, wholesale, transportation, and entertainment.

What activities are included in the quaternary industry?

The quaternary industry involves intellectual activities such as education, information processing, and software engineering.

What is the quinary industry?

The quinary industry includes the voluntary sector, non-profit sector, and provision of domestic services.

What are the types of legal structures for businesses?

Legal structures include sole trader, partnership, private company, public company, and government enterprise.

What is a sole trader?

A sole trader is owned and operated by one person who is responsible for all financial and management decisions.

What is a key disadvantage of being a sole trader?

A key disadvantage is unlimited liability, meaning the owner may need to sell personal assets to cover business debts.

What defines a partnership in business?

A partnership consists of two or more people who share income or losses.

What is a significant disadvantage of partnerships?

A significant disadvantage is the possibility of disputes and shared liability for all debts.

How is a company defined in terms of legal structure?

A company is a separate legal entity, distinct from its owners.

What rights does a company have as a legal entity?

A company has the same rights as a natural person, can incur debt, sue, and be sued.

What is the liability of members in a company?

Members are not liable for the company's debts.

List three advantages of forming a company.

1. Easier to attract public investment 2. Can transfer ownership easily 3. Growth potential.

What are two disadvantages of forming a company?

1. Cost of formation 2. Double taxation (company and personal).

What does 'Proprietary limited' (Pty Ltd) indicate about a company?

It indicates that the company is privately owned and shareholders have limited liability up to the value of their shares.

What must a public company include in its name?

The word 'limited' or 'Ltd'.

What is a government enterprise?

A government-owned and operated business.

What are two characteristics of government business enterprises (GBE)?

1. Typically large and among the largest employers in Australia 2. Established by an act of parliament to carry out specified functions.

What is privatisation?

The process of transferring ownership of a property or business from the government to private ownership.

List two advantages of government enterprises.

1. Can use taxpayer funds for expansion 2. Profits contribute to government revenue.

What is a disadvantage of government enterprises?

If a government enterprise has a monopoly, there may be no incentive for efficiency.

What is a franchise?

An agreement where a person buys the rights to use a business name and distribute goods and services of an existing business.

Who are the franchisor and franchisee?

The franchisor grants the rights, while the franchisee buys the rights.

List two advantages of a franchise.

1. Franchisor often provides training and management backup 2. A franchise can succeed with limited experience.

What is a disadvantage of operating a franchise?

Profits must be shared with the franchisor through ongoing franchise fees.

What factors influence the choice of legal structure for a business?

Size, ownership, and finance.

How does size influence the choice of legal structure?

Increased sales and business operations may require selecting a new appropriate legal structure.

What should an owner consider if they want complete control of a business?

They should consider becoming a sole trader.

What is meant by the business environment?

The factors that surround a business and impact its operations.

What are external influences in the business environment?

Wider factors that the business has little control over, affecting its success and adaptability.

Why might a business need new investors as it grows?

To meet the increasing demand for financial resources.

What is a key consideration for business owners regarding capital?

Most businesses are established with limited capital due to the risks involved.

What happens to consumer spending during economic expansion?

Consumer spending increases as employment rises.

How does consumer spending behave at the peak of the economic cycle?

Consumer spending continues to increase; imports rise as local production cannot meet demand.

What is the trend of consumer spending during economic contraction?

Consumer spending starts to slow as some consumers lose jobs, leading to caution and limiting spending to necessities.

What occurs to consumer spending at the trough of the economic cycle?

Consumer spending is at its lowest, with purchases limited to necessities and spending on luxuries at a minimum.

What is the trend of business profits during economic expansion?

Business profits begin to rise, with further expectations of profits.

What is the state of business profits at the peak of the economic cycle?

Profit reports are at a maximum with high confidence.

What happens to business profits during economic contraction?

Many businesses experience reduced profits or losses, with expectations for further loss.

What is the condition of businesses at the trough of the economic cycle?

Businesses face large increases in failures and withstand significant losses.

What happens to prices during economic expansion?

Prices begin to rise.

What occurs to prices at the peak of the economic cycle?

Prices steeply rise due to shortages, leading to inflation.

What is the behavior of prices during economic contraction?

Prices stop rising, especially for non-necessity goods and services.

What is the price trend at the trough of the economic cycle?

Prices remain still.

What may happen to interest rates during economic expansion?

Interest rates may increase in anticipation of further consumer spending and inflation.

What is the Reserve Bank of Australia's action regarding interest rates at the peak of the economic cycle?

The Reserve Bank will increase interest rates if inflation exceeds 3%.

What happens to interest rates during economic contraction?

Interest rates are on hold once prices stop rising; they fall as unemployment rises.

What does the Reserve Bank do at the trough of the economic cycle?

The Reserve Bank cuts interest rates to encourage borrowing.

What is the role of the Reserve Bank of Australia in monetary policy?

It implements monetary policy by adjusting interest rates to encourage borrowing and spending.

How does fiscal policy impact the economy during downturns?

Fiscal policy increases government spending and reduces taxation to stimulate the economy.

What are the three main sources of finance for businesses?

Retained profits, debt finance, and equity finance.

What is retained profit?

The portion of net profit not paid out in dividends but reinvested back into the business.

What is debt finance?

Borrowing from sources outside the business.

What is equity finance?

Using the owners' funds or selling shares to new owners.

What significant change occurred in Australia's financial system in 1983?

Deregulation of the financial sector, improving the financial state of many businesses.

What are two major geographical influences on Australian business activity?

Australia's geographic location within the Asia-Pacific region and economic growth in Asian nations like China, India, and Indonesia.

What is demography in the context of business?

The study of population features, including size, age, sex, income, cultural background, and family size.

What is a significant geographical influence on demand levels?

Globalisation, which links individual members of the Earth through international trade.

What are social influences in business?

Social influences include the culture, values, and ideals applicable to a society, which can differ between countries.

How can taste and fashion trends affect businesses?

They can make certain products popular or unpopular, leading to profit opportunities or cuts.

Name three social issues that have impacted business practice.

1. Growing awareness of the environment (e.g., use of plastic bags). 2. Desire for family-friendly workplaces (e.g., extended parental leave). 3. Need for workplace diversity (e.g., hiring from non-English speaking backgrounds).

What do legal influences in business relate to?

Changes in laws and regulations that businesses must comply with.