Please enable JavaScript.
Coggle requires JavaScript to display documents.
Unit 1: What is Business? - Coggle Diagram
Unit 1: What is Business?
Shares, Price and Market Cap
Shares represent the units of ownership in an Ltd or PLC.
Shareholders are the people who own these units.
Invest to receive dividends, gain control and capital.
Ordinary share capital- capital(money) that is obtained from selling shares
What influences share prices?
Can range from competition in the market, state of the economy and how well the company is performing.
Market Capitalisation
- the value of all shares in a company, giving a rough idea of the value of the business.
Share price x number of issued shares.
Essay plan- whats good about shares, whats bad about shares.
People may be reluctant to invest in shares due to the state of the economy. For example, share price increases when the economy is in a recession (more likely now because of the recession). Less people buying shares means business loses out on opportunity to receive an extra form of finance.
External influences may deter people buying shares even if the share price doesn't change. Shareholders invest to receive dividends and interest, and a damaged economy may mean that the business can not provide sufficient enough dividends so shareholders move elsewhere. As a result, businesses can struggle to grow as well as others where the previous shareholders move to.
Businesses having shareholders means that there mission is more likely to be achieved. There may be disputes between shareholders and managers but a shareholder agreement may prohibit the shareholders opinion augmenting the outcome of the decision.
Mission Statements
The mission of the business is the overriding goal that needs to be achieved, providing a strategic perspective for the future.
Mission statements can be critisized as they are often too vague or uneasy to realistically predict.
A good mission statement stands out from other competitors and clearly states what markets they want to operate in.
Fixed and Variable Costs
Variable costs change as output varies including raw materials, wagers upon the hour and bought in stocks.
Fixed costs do not change in relation to output, which can include salaries, banking and legal fees.
Total costs= Fixed Costs + Variable Costs
Business Objectives
Set in financial terms, meaning in order of the financial outcome that is to be achieved. For example, desired profit or growth.
Not all objectives can be measured, but are still important. These can be objectives like being in the lead for customer service.
Objectives can often be looked at within a hierarchy which can work towards setting a strategy for the future of the business.
Limited and Unlimited Liability
Who is responsible for the debts if the business fails?
Limited liability protects the shareholders. Shareholders are only viable for the investment in the share capital.
The company is separate from the shareholders.
Unlimited liability are related to unincorporated businesses, meaning that the owner is liable for the any debts of the business.
Different forms of business
Incorporated
There is legal difference between the business and the owners
Limited liability
Most operate as private limited companies, with a small number standing as a public limited company.
Unincorporated
The owner is the business
Unlimited liability
Either operate as sole traders or partnerships
Private and Public Companies
Private sectors are operated and owned by private individuals who run for profit in order to provide for their shareholders.
Public sectors are run on behalf of the public, being that of the government or funded by the government for the benefit of the public.
These businesses do not aim for a profit but to provide goods and services to the public, such as the NHS and charity shops.
Revenue and Demand
Revenue is the total value of what a customer actually buys
Variation of names: takings, turnover, sales.
Volume sold x average selling price
Demand totals around the amount of product customers are willing to buy.
Factors varying the scale of demand:
Prices and Incomes, consumer tastes, competition, demographics, seasonal changes and government actions