Business Revison Notes 1AS.3

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Business Revision Notes: 1AS.3
Size of business
Measurements of business size
Different methods of measuring the size of a business
1. Number of employees
It can be misleading if the capital intensive rather than labor intensive
2. Sales turnover
Sales turnover is the total value of sales made by a business in a given time
period. Sales turnover is often used as a measure of size especially when comparing
firms in the same industry. Though, it can be misleading when compare firms in
different industries such as high value and low value business ( Airways, Jewelries vs
cleaning services...)
3. Capital Employed
Capital employed is the total value of all longterm finance invested in the
business. It can be misleading when comparing firms in different industries because
generally, the larger the business enterprise, the great value of capital needed for
longterm investment.
4. Market Capitalization
Market capitalization is the total value of a company's issued shares. Market
capitalization can be used only for businesses that have shares `quoted' on stock
exchange (public limited companies). It is calculated by this formula:
M arket capitalisation = current share price ×total number of shares issued
5. Market share
Market share is the sales of the business as proportion of total market sales. If a
firm has a high market share, it must be among the leaders in the industry and
comparatively large. However, when the size of the total market is small, a high
market share will not indicate a very large firm. This is calculated using the following
total sales of business
total sales of industry

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Advantages and disadvantages of being small business
Advantages Disadvantages
Easier to manage and control Lack of specialist management skills
Can adapt to external Limited access to sources of
environmental quick finance
Stronger ties, personal
relationships with customers.…read more

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The importance of small businesses and their role in
the economy
Even though there is no universally agreed definition of small firms. However, it is
easy to identify them within your own economy. Commonly, small,
microbusinesses employ few people and will have lower sales turnover compared
to other firms.
Small firms (including microenterprises) are very important to all economies.…read more

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Strength and weakness of family business
Advantages Disadvantages
Unclear, confusing, boundary problems ,
Casual, flexible, entrepreneurial; indecisive, resistant to change, lack of
innovative management development; no
organization charts
Role confusion, lack of discipline,
Often play multiple roles, flexible,
nepotism [favoritism shown to family
Roles dual relationship and quick decision
members] , dual roles interfere with
learning and objectivity
Creative, ambitious, informal Autocratic [one with absolute power],
authority, entrepreneurial resistant to assemble
Employees committed loyal, shared
Personal relationship interferes with
value and belief…read more

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Business Growth
Why and how a business might grow internally
The owners of many businesses do not want the firm to remain small ­ although
some do for the reasons of remaining in control, avoid risk, heavy workloads.…read more

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