I created this revision guide myself during Year 12 to use for Year 12/13 mocks and my A-Level Business examinations which I was due to take in May/June 2020. This includes is everything you need to know from formulas and key terms to models and theories. Please note, that this is only Year 1 Conte...
3. Decision making to improve marketing performance
4. Decision making to improve operational
performance
5. Decision making to improve financial performance
6.Decision making to improve human resource
performance
By Hadiqa Akram
,Chapter 1 - What is Business?
Business Objectives
Why do businesses exist
1. Survival - a priority for a business (⅓ of businesses fail after 3
years)
2. Profit optimisation
Profit maximisation
3. Growth - raising their customer base
4. Cash Flow - keep in the black not the red
5. Social and ethical objectives - only if a business sacrifices profit or share
Business objectives - targets that a business wants to achieve within a given time period
The measurement and importance of profit
Fixed costs - costs that don’t vary with output e.g rent or salaries
Variable costs - costs that vary with levels of output e.g raw materials
Profit = total revenue - total costs
Sales revenue = quantity sold x selling price
Total costs = fixed costs + total variable costs
Importance of profit
- One of the main incentives of running a business
- Source of finance
- Measure of success
- Can be reinvested to help business grow
- Attracts stakeholders
Profit - what is left after all costs have been deducted from the revenue
Revenue - the value of sales made during a trading period.
Cash flow
Cash flow - the movement of money in and out of a business in terms of expenditure and
income.
,Missions and objectives
Mission statement - sets out the business’s overall purpose to direct and stimulate the entire
organisation
Different forms of business
Sole trader - when a business has only 1 owner
PROS CONS
● Autonomy in decisions ● Unlimited liability
● Can keep all of profits + chose what ● Harder to make decisions
they do with them ● Potential lack of capital
● Flexibility + control ● Limited chance of growth in
● Easier to set up/ run comparison to other forms
Public limited company - when a business offers shares to the public
PROS CONS
● Limited liability ● More regulations
● Better access to capital ● Not easy to set up
● Can take over other businesses ● Potential loss of control of the business
● Shareholders only lose what they invest ● Pressure to pay dividends to s.h
, Private limited company ‘ltd’ - a business owned by shareholders and run by directors
PROS CONS
● Limited liability ● Slows the decision making process
● Can raise finances through the sale of ● Disclosure of financial information
shares to friends/family ● More regulations
● Separate legal entity from owners
Mutual businesses - no shareholders or owners, exist solely to benefit their members
Charities - non for profit organisations which are exempt from tax
The role of shareholders
Shareholder - owns a share in the company to make a profit (return) on their investment, can
influence decision making in companies/invited to AGM’s and able to vote on policies.
There are 2 main financial rewards :
1. Annual dividend payments
2. A rise in the value of shares
Influences on share prices and significance
Share prices are affected by performance and the business environment that it trades within.
Influences include:
- Job losses
- Increased profits
- Economic downturn (boom/ recession)
Rise in share prices Fall in share prices
- Managers get bonuses - Company vulnerable to takeover
- Easier to gain capital - Indication of weak performance
- Boosts shareholders confidence - Difficult to generate capital
- Businesses may receive publicity - Shareholders less confident to spend
Factors influencing costs and demand
- Competition + Market conditions
- Income + Interest rates
- Demographic + Environmental factors
- Fair trade - trade between companies in developing countries, were fair prices are paid to the
producers
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