Business Lecture Notes Flashcards

Flashcards for vocabulary review of business lecture notes.

Basic purpose of a business

To provide goods/services that meet customer needs or wants, solving problems or delivering value.

Entrepreneurial drive

Often set up by entrepreneurs spotting market gaps or innovating.

Profit motive

Central to private sector businesses; enables growth, reinvestment, and rewards to owners.

Employment creation

Reduces unemployment, boosts incomes.

Wealth creation

Taxes and wages stimulate economic growth.

Triple Bottom Line

Profit, people, planet.

Profit maximisation

Focuses on surplus for owners/shareholders.

Growth (Business objective)

Increases market share, economies of scale.

Survival (Business objective)

Priority in the early stages or during downturns.

Cash flow management

Vital for liquidity; poor cash flow = insolvency risk even if profitable.

Social/ethical objectives

CSR, sustainability.

SMART objectives

Specific, Measurable, Achievable, Realistic, Time-bound - ensures clarity and achievability.

Mission statement

Sets visionary direction; inspires stakeholders but often non-quantifiable.

Objectives

Translate mission into actionable steps (short, medium, long term).

Strategic alignment

Objectives must align with mission to avoid strategic drift.

Share price influences

Company performance (profits, growth), Macroeconomics (inflation, interest rates), Sector trends (e.g., tech boom), Global crises.

Significance of share price changes

Impacts ability to raise finance, Reflects investor confidence, May trigger hostile bids if undervalued.

Sole trader ownership impact

Focus on independence & survival.

Ltd/PLC ownership impact

Shareholder value becomes central.

Non-profit/social enterprise ownership impact

Social mission dominates decisions.

Competition: Cost impact

Marketing, innovation to stay competitive.

Competition: Demand impact

Customers may switch for better offers.

Boom (market conditions)

High demand, rising input costs.

Recession (market conditions)

Falling demand, pressure to cut prices.

Normal goods

Demand rises with incomes (cars, holidays).

Inferior goods

Demand falls as incomes rise (own-brand groceries).

High Interest rates effect

Discourages borrowing, reduces consumer spending.

Low interest rates effect

Stimulates loans and mortgages.

Ageing population: Demographics

Healthcare demand up.

Migration: Demographics

Expands workforce and demand.

Environmental/fair trade: Costs

Investment in eco-friendly processes.

Environmental/fair trade: Demand

Ethical consumers favour sustainable brands.

Dynamic environment

External factors constantly evolve - businesses need agility.

PESTLE analysis

Helps systematically scan external factors.

Risk management

Diversifying products/markets mitigates external shocks.

Coordination (Why businesses set objectives)

Ensures all departments work toward the same goal.

Performance monitoring (Why businesses set objectives)

Allows for benchmarking; underperformance can be identified early.

Accountability (Why businesses set objectives)

Clarifies responsibility across the organisation.

Revenue

Price × Quantity sold.

Fixed costs

Rent, business insurance - remain constant.

Variable costs

Raw materials - increase as output rises.

Total costs

Fixed + Variable costs.

Gross profit

Revenue - Cost of Sales.

Operating profit

Gross profit - Operating Expenses.

Net profit

Operating profit - Interest and Tax.

Internal funding (Why profit matters)

Reinvestment in R&D, marketing.

Shareholder returns (Why profit matters)

Dividends, rising share value.

Indicator of efficiency (Why profit matters)

High profits often show strong management.

Market confidence (Why profit matters)

Attracts investors and creditors.

Growth needs (Reasons for choosing/changing business form)

Ltd to PLC allows access to large capital.

Risk mitigation (Reasons for choosing/changing business form)

Incorporation offers limited liability, reducing personal financial risk.

Ownership control (Reasons for choosing/changing business form)

Sole traders have complete control but may seek partners or Ltd structure to grow.

Flexibility vs regulation (Reasons for choosing/changing business form)

Sole traders have fewer legal requirements; PLCs face strict regulation.

Sole trader

Easy setup, full control, but personal risk.

Ltd

Limited liability, more credibility, but harder to transfer shares.

PLC

Raise large funds, but vulnerable to hostile takeovers.

Non-profit

Operate to meet social goals.

Social enterprise

Balance profit & social mission.

Unlimited liability

Risk of bankruptcy affecting personal assets.

Limited liability

Encourages entrepreneurship, but may lead to reckless risk-taking.

Ordinary share capital

Equity holders expect returns; may push for short-termism.

Market capitalisation

Reflects company size; influences investor confidence.

Dividends

Balancing act: retain earnings vs satisfy shareholders.

Shareholders' role

Provide equity, Appoint directors, Influence strategy (via voting rights).

Income investors

Seek dividends.

Growth investors

Seek capital gains.

Influence-seekers (activist investors)

Push strategic/ethical agendas.