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What is business? - Coggle Diagram
What is business?
Understaning different business forms
Private = part of the economy that is not state controlled and is run by individuals
Public = This refers to all the businesses and organisations which are owned and run by the government
Factors affecting choosing business forms:- Finances (including sources of)- Size - Taxes - Profit (who shared with)- Risks - Ownership and control- Registrations and payment - Liability (limited and unlimited)
Unlimited Liability = owners are personally responsible for the debts of the business. This means their personal possessions such as their cars etc would pay for debts should the business go bankrupt
Limited Liability = the business has its own legal identity
Market Capitalisation = this represents the total market value of the issued share capital of the company. When demand for shares increases, the share prices increase too
Understanding the nature and
purpose of business
Key business objectives:
To make money
To provide a service
Provide employment opportunities
Fill a gap in the market
growth / survival
Mission Statement = goal of a business and the reason for its existence
Benefits of a good mission statement:- Clarifies purpose and focus - Motivates staff and those interested in the business
Criticisms of mission statements:- Not always supported by actions of the business- Often too vague and general
Corporate aims and objectives:
Corporate aims – the long term targets and plans to fulfil the mission statement
Corporate objectives – the medium to long term quantifiable targets to fulfil the mission statement
Corporate strategy – the actions to be taken by the business to achieve its objectives
Types of business objectives:- Ethical - Profit - Growth – volume- Survival - Cash flow- Social
IMPORTANCE OF PROFIT:
Motivator - Sole traders can keep all the profit and Ltds owned by people running the business.
Further investment - Guide to see where it is easier to make profits and Where profits are high and low
Stakeholders - Reliable customers and Purchase goods
Finance - Avoiding paying interest
Success - Compare profits to competitors
calculations
Profit = revenue - total costs
Revenue = selling price x number of units sold
Total costs = fixed costs + variable costs
Market Capitalisation = the current share value x number of shares issued
Understanding
that businesses
operate within an
external environment
Components of the external environment:
Market conditions and competition
Incomes
Interest rates
Demographic factors
Environmental issues
Factors that affect demand:
Price
Income
Substitutions
Supply
Market trends
Complimentary goods
Marketing and advertising
Seasons
Government actions and law
The different areas of the external environment that affect a business:- Natural disasters - Interest rates - Availability of materials - Recession- Price of materials