unit 1

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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
    • 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
      • 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


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