Paper 1 practice

publicly held company

publicly held company

A company that is publicly owned and and has many shareholders who can buy and sell their shares through a stock exchange.

benefits of a publicly held company

• finances can be raised through the sale of shares

• risks can be spread out among a large number of stakeholders.

• limited liability: if a business fails/incurs losses, personal assets of the shareholders are not at risk.

disadvantages of a publicly held company

• shared profits between shareholders

• high costs; time consuming to set up publicly held company.

• loss of control; to the largest shareholder

break-even point

Break-even point is the level of sales at which total revenue equals total costs, resulting in neither profit nor loss. It is where the company covers all its expenses.

contribution

the difference between the selling price and variable cost of a product

what is outsourcing

Outsourcing is the practice of contracting out certain business functions or processes to third-party providers, often located in other countries, to reduce costs or improve efficiency.

what is offshoring

Offshoring is the practice of moving a company's business processes, such as manufacturing or services, to another country to take advantage of lower costs or other benefits.

what is insourcing

Insourcing is the practice of performing tasks internally within a company that could be outsourced to an external provider. It involves using the company's own resources and employees to complete the work.

what circumstance can cause a company to insource

A company may choose to insource due to factors like cost savings, quality control, confidentiality concerns, or strategic alignment with core competencies.

what circumstance could cause a company to outsource

A company may outsource due to cost savings, access to specialized skills, focus on core activities, increased efficiency, and global expansion opportunities.

benefits of offshoring

• Offshoring can lead to cost savings due to lower labor costs in other countries.

• It can provide access to a larger talent pool and specialized skills.

• Offshoring can help companies operate 24/7 due to time zone differences.

• It may also reduce the time to market for products and services.

what are the downsides of offshoring

• Offshoring can lead to job losses in the home country.

• Quality control issues may arise due to distance and communication barriers.

• Cultural differences can impact productivity and collaboration.

• Offshoring may result in data security risks.

what are the benefits of reshoring

• Reshoring can lead to reduced transportation costs.

• It can improve quality control and communication.

• Reshoring can create jobs and boost the local economy.

average cost

cost per unit of production.

TC of production

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number of units produced

“challenge”

factor that hinders the operations/profitability

company

a business owned by shareholders (have limited liability). legal separate entities.

contract

legally binding agreement between two parties. sets out certain terms and conditions.

costs

expenditure of a business when producing goods/services

directors

senior executives in an organization. they hold autonomous, decision-making, responsibility and power.

employees

internal stakeholder

environmental sustainability

the ability for the business to maintain the use of its resources for future generations. meeting the needs of today without jeopardizing the needs of future generations.

expansion

the growth of a business due to increased size/growth in the market. measured by increase: sales revenue, market share, profits.

finances

funds needed for business activities.

how may location of a business affect its profitability

The location of a business can impact profitability through factors like access to customers, labor availability, competition, costs, and regulations.

advantages of businesses using credit cards

• Convenience: Credit cards offer quick and easy payment options.

• Cash Flow Management: Helps businesses manage cash flow effectively.

• Rewards and Perks: Earn rewards and benefits on purchases.

• Build Credit: Establish and improve business credit history.

• Security: Offers fraud protection and dispute resolution.

what is a cashflow forecast

A cash flow forecast is a financial document that predicts the inflows and outflows of cash in a business over a specific period, helping to manage liquidity and make informed financial decisions.

what are the benefits of a cash flow forecast

• Benefits of a Cash Flow Forecast:

  • Helps in managing liquidity

  • Assists in planning for future financial needs

  • Enables better decision-making

  • Identifies potential cash shortages

  • Aids in setting realistic financial goals

what is a freelancer

A freelancer is a self-employed individual who offers services to clients on a project basis, without being bound to a single employer.

what are the benefits of segmentation

• Segmentation helps target specific customer groups

• Allows for personalized marketing strategies

• Enhances customer satisfaction and loyalty

• Improves product development and innovation

• Increases overall profitability and competitiveness

why are unique selling points important

Unique selling points (USPs) are important because they differentiate a product or service from competitors, attract customers, and create a competitive advantage.