Business Studies Unit 1 AS (AQA)

Fixed Costs: Costs which don't vary with out-put

Variable Costs: Costs which do vary with out-put

Total Costs: Fixed Costs + Variable Costs

Fixed Costs, Variable Costs, Total Costs

Local: Customers are a short distance from the business.

National: Geographically Dispersed market

• Customers spread over a large area

International: Market is spread over more than one country

Local/National/International Markets

Limited/Unlimited

Liability

• Informal Investment

• Smaller Investments

• Experience / Specialised

• In Return they take a share of the business and its profits

Business Angel

Legal ownership of material - Books, Music, Films

• Prevents Copying

Copyright

Primary: Extraction of resources e.g Farming

Secondary:Transformation of resource into product e.g Manufacture

Tertiary: Transformation to provide service e.g Retail

Quaternary: Transformation of information e.g Science Park

Business

Sectors

Cost of an activity expressed in terms of the next best alternative

• e.g Giving up a well paid job to start own business

Opportunity Cost

• Labour
• Capital
• Enterprise
• Land

Input needed to produce product/service

e.g factory production is labour intensive

Factors

of

Production

Adding value to resources to enable the product/service to be sold at a higher price

Selling Price - Cost of Resources = Added Value

Added Value

Capital: Spending on items for reuse - purchase of fixed costs

Revenue: Spending on resources which have already been consumed / soon to be consumed

Capital/Revenue

Expenditure

Profit made from selling shares for more than what they were bought for.

Capital Gain

Partnership: 2-20 partners all owning the business and participating in decision making

Sole-trader: Single individual owns the entire business and all the responsibility & risk

Partnership & Soletrader

Business sells the rights to other entrepreneurs, allowing them to sell the branded products

Franchise

Contribution

Revenue: Money coming in from sales

Units Sold x Selling Price

Profit: Total Revenue - Total Costs or Total Contribution - Fixed Costs

Loss: Where Total Costs exceed Total Revenue

Revenue/Profit/Loss

Process of gathering data about the market to help make decisions

Primary: By the business or on behalf of the business which did not exist before

Secondary: From another source which already existed

Market Research: Primary/Secondary

Point at which units sold overs costs: Total Revenue = Total Costs

Fixed Costs

Contribution (selling price - VC per unit)

Break Even

Profit left after trading and overhead costs, taxation and dividends

• Long-term internal finance

Retained Profit

Patent: Right of ownership of invention/process granted by the government for a fixed period of time up to 20 years.

Trademark:Signs, symbols, logos, words, sounds, that distinguish the products of a business from competitors

Patent/Trademark

• Flexible, unsecured finance
• Helps regulate cash flow problems
• Repayable on Demand
• No interest unless agreed amount is outstanding at the end of the day
• Short Term

Overdraft

• Pay deposit for asset
• Equal installments over period of time
• No need for collateral

Trade Credit

• Price
• Competition
• Incomes
• Marketing
• External factors: Seasonality

Factors Affecting Demand

Selling debtors to debt collectors for approximately 80% of the debt.

• Releases cash tied up in debtors BUT doesn't receive 100% of debt.

Debt Factoring

Market Share: Proportion of market accounted for by one product/company

Total Market Sales

Business' personal sales

Market Growth: Change in market size

Value Changed

Original Value x100

Market size: Size of market based on total sales/units sold

Market Share, Size & Growth

Amount by which the existing level of output is greater than the break even point

Output - Break even (FC/Contribution per Unit)

Margin of Safety

Differentiate brands within market on a graph to identify gaps/niches in market and to monitor existing brands.

Market Mapping

Group of Consumers with similar needs:

Geographic: Local/National

Psycho-graphic: Lifestyle/Social Class

Demographic: Age/Gender/Income/Ethnicity

Behavioural: Frequency of Use: Heavy/Medium/Light

Market Segmentation

Value of Shares sold in Stock Market/to investors

Authorised: Maximum amount wanted from selling shares

Issued: Sum of share capital from selling shares

Share Capital, Authorised and Issued

Process of company turning into public limited

Flotation

Public: On the Stock Market - Anyone can by Shares and sell shares

Private: Privately sell shares

Private/Public Limited