Buisness notes term 1 exam prep

Business

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

Entrepreneurship

The opportunity for individuals with ideas to develop them and gain rewards through business.

Innovation

The incentive and resources necessary for continuous research and development in business.

Employment

Businesses provide approximately 80% of job opportunities in Australia.

Provider of Goods and Services

Businesses combine labor and other resources to produce goods and services.

Choice

Competition and trade give consumers access to a wide range of goods and services.

Quality of Life

The production of goods and services that improve the standard of living.

Wealth Creation

An avenue for investment and profit generation provided by business.

Source of Government Revenue

Businesses contribute revenue to the government through taxation.

Product

A good or service that can be bought.

Good

A tangible item that can be seen and touched.

Service

An intangible product that cannot be physically touched.

Production

Activities that combine resources to create products that satisfy customer needs.

Finished Product

A product that is ready for customers to buy and use.

Sales Revenue

The income generated from selling goods and services.

Profit

Sales revenue minus operating expenses.

Income

Compensation provided to business owners and employees through wages, salaries, and dividends.

Micro Business

A business with up to 5 employees.

Small Business

A business with up to 19 employees.

Medium Business

A business with 20-199 employees.

Large Business

A business with more than 200 employees.

Local Business

A business that serves the surrounding area with a restricted geographic spread.

National Business

A business that operates within one country.

Global Business

A large business that operates in more than one country.

Primary Industry

Businesses directly associated with natural resources.

Tertiary Industry

Businesses providing a range of services to individuals.

Quaternary Industry

Services involving the transfer and processing of information and knowledge.

Quinary Industry

Services traditionally performed in the home.

Incorporated

A company that acts as its own separate legal entity with limited liability.

Unincorporated

A business structure where the owners have unlimited liability.

Sole Trader

A business owned and operated by a single person.

Public Company

A company listed on the Australian Securities Exchange, allowing the public to buy shares.

Private Company

A company with private ownership where shareholders have limited liability.

Government Enterprise

A business owned and operated by the government.

Deregulation

The removal of governmental regulations from industry to increase efficiency.

Consumer Market

Markets composed of consumers who purchase goods and services.

Stakeholders

Groups with an interest in or affected by the activities of a business.

Business Lifecycle

The stages a business goes through from establishment to cessation.

Establishment Stage

The first stage of a business lifecycle where the business begins trading.

Growth Stage

The second stage where sales increase rapidly and the customer base expands.

Maturity Stage

The third stage where growth levels off due to increased competition.

Post-Maturity Stage

The final stage where the business faces either renewal, decline, or cessation.

Merger

The combination of two businesses into a new organization.

Acquisition

One business takes control of another by purchasing a majority interest.

Vertical Integration

When a business merges with suppliers or distributors in its supply chain.

Horizontal Integration

When a business merges with or acquires a firm that makes similar products.

Diversification

When a business expands into unrelated industries.

Cash Flow

The total amount of money coming into and going out of a business.

Management

The process of planning, organizing, leading, and controlling a business.

Internal Environment

Factors within a business that are controllable, such as resources and management.

External Environment

Factors outside a business that are uncontrollable, such as government policy and economy.

Economic Cycle

Periods of growth and recession resulting from fluctuations in economic activity.

Interest Rate

The cost of borrowing money, influencing business debt decisions.

Legal Structure

The framework that determines ownership and operational aspects of a business.

Fair Work Act 2009

Legislation governing employment practices in Australia.

Competition and Consumer Act 2010

Legislation aimed at protecting consumers and promoting competition.

Globalisation

The increased interconnectedness of economies and cultures.

Demographic Changes

Shifts in population characteristics affecting market demand.

Corporate Culture

The shared values, ideas, and beliefs in a business organization.

Resource Management

Managing human, informational, physical, and financial resources within a business.

Business Environment

The surrounding conditions that influence how a business operates.

Market Change

Shifts in consumer demand and expectations affecting businesses.

Financial Deregulation

The changes in the financial sector to enhance competition and efficiencies.

Social Influence

Changes in consumer behavior influenced by cultural and societal factors.

Technology Influence

The impact of technological advancements on business operations.

Institutional Influence

Regulatory and institutional factors affecting business compliance and operations.

Political Influence

The impact of government policies and political changes on business.

Risk Management

Processes to manage and mitigate potential business risks.

Fill in the blank: A __________ is a tangible item that can be seen and touched.

Good

Fill in the blank: A __________ is a good or service that can be bought.

Product

Fill in the blank: __________ provide approximately 80% of job opportunities in Australia.

Businesses.

Fill in the blank: __________ is the process of planning, organizing, leading, and controlling a business.

Management.

Fill in the blank: __________ is an avenue for investment and profit generation provided by business.

Wealth Creation.

Business

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

Fill in the blank: __________ is an organized effort of individuals to produce and sell products for profit that satisfy individual needs and wants.

Business

Fill in the blank: __________ is the incentive and resources necessary for continuous research and development in business.

Innovation

Fill in the blank: __________ is the income generated from selling goods and services.

Sales Revenue

Fill in the blank: __________ is the production of goods and services that improve the standard of living.

Quality of Life

Fill in the blank: __________ is the combination of two businesses into a new organization.

Merger

Fill in the blank: __________ is a business structure where the owners have unlimited liability.

Unincorporated

Business

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

Establishment Stage

The first stage of a business lifecycle where the business begins trading and establishes its presence in the market.

Legal Structure of Business

- Refers to how the business is viewed in the eyes of. The law, in regards to operation and ownership

- It determines who owns the business and how it is operated

- Privately owned business can be split into two broad categories; incorporated and unincorporated

- Incorporated companies acts as. Its own seperate entity; owners only have limited lability

- Unincorporated companies are not registrated as a company and the owners have unlimited liability

Advantages of sole traders

- Low cost of entry

- Simplest form of business

- Complete control

- Less costly to operate

- No partner disputes

- Owner’s right to keep all profits

- Less government regulations

- No tax on profits,  only on personal income

Disadvantages of being a sole trader

Personal (unlimited liability for business debts

-End of business when owner dies

- Difficult to operate if sick

- Need to carry all losses

- Burrden of management

- Need to perform a large variety of tasks

- Difficulty in raising finance for expansion

Advantages of a private company

Easier to attract public finance

- Limited liability- seperate legal entity

- Can ransfer ownership easily

- Enjoys a long life- perpetual succession

- Experienced management - board of directors

- Greater spread of risk

- Company tax rate lower than personal income tax rate

- Growth potential

- Recent legislation allows a company to have only one shareholder and one director

Disadvantages of a private company

Cost of formation

- Double taxation - company and personal

- Personal liability for business debts if directors knew at the time that the business was unable to pay loans

- Most publish a yearly annual report of audited accounts

- Public disclosure - reporting of certain information

- Becomes too large resulting in inefficiencies

Ownership

A bigger business means less control for the owner(s)

- Unincorporated business ( sole trader/partnerships) allow the owner to assume complete control of the business,  however they could raise more money for expansion with other structures, such as going public,  but with a cut of their level of control

Size

- Most businesses start off small or micro with a simple, unincorporated business structure

- Over time however, if the business grows, then it could move up into different size classifications and the ownership structure may need to change. This is due to new needs arise for financing, skills or limiting liability

- This would require an injection of money into the business which can come from partnership or private company

- If expansion continues to grow rapidly a business may chose to become a large national or transnational corporation (TNC)

-  To finance this level of expansion, the business will now decide to raise money from a sharemarkets float

- A float is the raising of capital in company through the sale of shares to the public

- A prospectus. (Document providing information about the company to existing investors) will be issued, the business listed on the Australian Seecurities Exxchange (ASX) and shares are offered for sale.

Distinguish Between a Good and a Service

• Good: A tangible product that can be physically touched, stored, and owned (e.g., clothing, electronics, furniture).

• Service: An intangible product involving an activity or performance provided to customers (e.g., consulting, haircuts, transportation).

Why Are SMEs Growing in Popularity?

• Technological Advancements: Digital platforms lower entry barriers, enabling SMEs to compete globally.

• Government Support: Many governments offer incentives, grants, and tax breaks to promote SME development.

Two Benefits Provided by Businesses to Society

• Employment Opportunities: Businesses create jobs, reducing unemployment and improving living standards.

• Economic Growth: Businesses drive innovation, contribute to GDP, and generate tax revenue for public services.

Two Features of Small-Medium Sized Enterprises (SMEs)

• Limited Scale: Operate with fewer employees (fewer than 200 in Australia) and lower revenue compared to large corporations.

• Flexibility & Innovation: SMEs can adapt quickly to market changes and often focus on niche markets.

Define Transnational Corporations (TNCs)

Large global businesses operating in multiple countries, with headquarters in one nation but production, sales, and services spread internationally (e.g., Apple, McDonald’s, Toyota).

6. Primary Industry Classification & Its Importance to the Australian Economy

• Definition: The primary industry involves the extraction and harvesting of natural resources (e.g., agriculture, fishing, mining).

• Importance:

• Major contributor to exports, especially in minerals and agriculture.

• Provides employment, particularly in rural and regional areas.

• Supports other industries, such as manufacturing and transport.

Features of a Public Company

Listed on the Stock Exchange: Shares are publicly traded, allowing investors to buy and sell ownership stakes.

• Limited Liability: Shareholders’ personal assets are protected from company debts.

• Regulated by Government Authorities: Must comply with corporate governance laws, such as financial reporting and transparency requirements.

• Perpetual Succession: Continues to exist even if ownership or management changes.

What is Privatisation?

Definition: The process of transferring ownership of a government-owned entity to the private sector.

• Why Popular?

• Increases Efficiency: Private businesses are often more efficient than government-run enterprises.

• Reduces Government Spending: Less financial burden on public funds.

• Encourages Competition: Leads to better services and pricing for consumers.

One Current External Influence on a Business

• Technological Advancements:

• Businesses must adopt new digital tools, automation, and artificial intelligence to stay competitive.

• E-commerce and online platforms have reshaped consumer behavior and market trends.

Main Features of the Business Life Cycle

1. Establishment: The startup phase, involving product development, market entry, and high initial costs.

2. Growth: Increased sales, market expansion, and potential profitability.

3. Maturity: Stable revenue, strong brand presence, and operational efficiency.

4. Post-Maturity: Business may renew (innovation and expansion), decline, or exit the market.