unit 1
- Created by: Layla.thomas16
- Created on: 05-11-19 16:47
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- Unit 1
- Understanding the nature and purpose of a business
- Why do businesses exist?
- Businesses create employment
- Businesses create wealth
- Businesses create new products and services
- Businesses can enhance a country's reputation
- Adding value
- Added value= selling price-the cost of bought in materials, components and services
- The process of increasing the worth of resources by modifying them
- The factors of production
- Capital
- Land
- Enterprise
- Labour
- Mission statement
- A qualitative statement of an aim which describes the general purpose of the organisation
- Objective
- More precise and detailed goals or targets that must be achieved in order to achieve the corporate aims and missions
- Examples include survival, growth, market share
- Provide clear set of guidelines, co-ordiante business activity, motivate workers
- Corporate aims
- Long-term statement of what the business intends to achieve
- Importanceof profit
- Total revenue= selling price x number of items sold
- Fixed costs do not change with output
- Variable costs change with output
- Profit= total revenue-total costs
- Can be re-invested, pay shareholders, help obtain loans
- Why do businesses exist?
- Understanding different business forms
- Sole trader
- A business owned and run by one person, has unlimited liability and is unincorporated
- Unlimited liability is when the owners of a business are liable for all debts that the business may incur, personal assets are at risk
- Easier to set up, but riskier
- Limited company
- Incorporated business, has a separate legal identity from the owners and has limited liability
- Limited liability is when the owners of the business is limited to the fully paid-up value of the share capital
- Owners are shareholders
- Private limited company
- A small to medium-sized business, often run by a family or small group
- Shares cannot be sold without agreement of others and are not sold on stock exchange
- LTD
- Public and private sector organisations
- Non -profit organisations
- Public limited company
- Limited liability, must have a share capital of over £50,000 and at least 2 shareholders
- Shares are traded publicly on stock exchange, its value is known as market capitalisation
- Current share price x number of shares issued
- Shareholders have a say in decisions, get paid dividends are classed as a stakeholder
- Sole trader
- Understanding that businesses operate within an external environment
- Market conditions
- Levels of sales, sales growth, price levels, demand
- Incomes
- Demand varies depending on type of good and customer base
- Interest rates
- Cost of borrowing and returning
- Demographic factors
- Increasing population, ageing population, ethnic diversity, smaller households, higher amount of women working
- Environmental issues and fair trade
- factory emissions, smaller households, responsibility
- Better prices, decent working conditions and fair terms of trade for workers
- Market conditions
- Understanding that businesses operate within an external environment
- Understanding the nature and purpose of a business
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