- Created by: 11SGIBBS
- Created on: 12-01-17 19:55
Revenue,Costs and Payables
REVENUE= QUANTITY SOLD x SELLING PRICE
TOTAL COSTS= VARIABLE COSTS+ FIXED COSTS
PROFIT= REVENUE - TOTAL COSTS
Revenue must be made in order to cover the costs and until a sufficient amount of revenue is made, there can be no profit; often start up businesses will incur a loss for the first few months or years due to the high start up costs and lack of income.
PAYABLES- are money that is owed to a creditor. A creditor is someone who lends the business money so the business is in credit. This can include bank loans etc.
MARKET CAPITILISATION - refers to the total value of the issued ordinary shares of a public limited company.
This can be calculated by multiplying the outstanding shares by the current market price of an individual shares i.e.
25 MILLION SHARES AND £10 SELLING PRICE
250,000 x 10 = 2,500,000 - MARKET CAP
7P's of Marketing
People - the context of the market, the target audience.
Place- the location in which the product is purchased and the means of distribution.
Price-the sum of money paid by a customer for a unit of any given product.
Promotion- communication to customers and potential customers. Can also apply to shareholders and suppliers.
Physical environment-nature and appeal of the area in which the customer will make their transaction.
Process-the system involved in providing an efficient transaction or service for both actual and potential customer.
Product-the goods and services provided for a business for it's customers.
LABOUR PRODUCTIVITY - is a measure of the output per worker in the given time period.
Labour productivity= output per period/ numbers of employees per period
High labour productivity is beneficial for any business since the output with increase and in turn increase sales whilst the costs remain the same.
Maslow's Heirarchy of Needs
Maslow states that you must meet peoples needs level by level and once the needs of one level have been met that you can move up a level. This is important for a business and its workers since this will keep them motivated. This can be altered by each individual based on what they value more.
Public Limited Companies
PUBLIC LIMITED COMPANIES - are traded of the stock exchange and can be sold to the general public unlike private limited companies shares.
- Easy to raise finance.
- Still a seperate legal entity - own isnt liable for any bankrupcy.
- can mean a loss of control since people can buy all the shares and gain ownership.
- under scrutiny by the financial press
Pizza Express was once a public business but has now reverted to being a private business. McDonalds,Tesco and Starbucks are amongst many other businesses that are currently public.
Inventory Control Chart
Inventory control chart allows managers to control and analyse stock over a period of time.
Buffer stock is the minimum amount of stock the business requires.
Re-order level is the amount of stock that has to be ordered from the supplier.
Maximum stock level is the largest amount of stock the business can contain in their storage facilities.
HR - Hard Approaches
Hard approaches are one way of viewing a businesses resources:
1) Employees are merely another resource and should be hired on a short term basis.
2) Its believed that employees only motivation is money and they will carry out as little work as is possible
3) Appraisals are judgemental
4) Training is only done to meet production needs.
Hard approaches mean a business has control over it's workforce meaning less mistakes will be made and if they are then employee can be easily replaced.
However, Hard apporaches can also lead to a dissatisfied work force since they won't feel valued and therefore not work to the best of their ability.
ROI - Return on Investment
One objective a business might have is an increased return on investment. ROI can be calculated as:
ROI(%)= RETURN ON INVESTMENT/ COST OF INVESTMENT x 100
By doing this calculations a business can identify how efficient their investment is - the greater the percentage the more efficient it is.
Decision tree's aid businesses in making important decisions by combining probability and expected pay off - a business is more likely to make the decision with the greatest amount of reward (expected pay off).
- can be used in familiar situations and as a result be more accurate.
- uses real figures in order to estimate an accurate expected pay off
- good visual representation for those who struggle with decision making
- ignores qualitative data - any data that isnt numerical (i.e. market research).
- if any information used is inaccurate the result will be too.
- in real life there are a wider range of potential outcomes
Blake Mouton Grid - Styles of Leadership
The Blake Mouton Grid allows managers to assess their style of leadership.
If you are an impoverished leader than you care little for production or people.
If you are an country club leader you have lots of concern for your customers but little for production.
A team leader is concerned for their people and level of production.
Produce or perish leader are largely concerned for the production and not the people.
Debt factoring is when banks and other financial institutions take unpaid invoices of the hands of the businesses and give them an instant cash payment ; less than the value of the invoice.
- instantly return of the money owned
- Some of the money owed will be kept as a fee for their service - therefore not getting the total some of the debt back.
MARKET SEGMENTATION- us when a market is divided into groups of buyers based of demographics (age,gender,socio-economic class and family size) ,geographic location, income and behaviour.
Using segmentation can allow businesses to identify a niche in the market however, some peoples needs may not be identified through market segmentation therefore you'd lose their custom. Segements of a market can also overlap.
Concentrated marketing is when a business focusses of a few segements of the market; useful for small businesses with limited resources.
Differentiated marketing is were several segments are addressed and is only really feasible for larger businesses with larger budgets. By targeting several markets the business has a wider audience which then can adapt their products to (i.e. colouring books).
Undifferentiated marketing is where segmentation is ignored and the entire market is their audience; typically used for necessity produtcs which are widley used.
Breakeven and Operating Profit Margin- calculation
CONTRIBUTION PER UNIT= SELLING PRICE - VARIABLE COSTS PER UNIT
TOTAL CONTRIBUTION= CONTRIBUTION PER UNIT x NUMBER OF UNITS SOLD
BREAKEVEN OUTPUT= FIXED COSTS / CONTRIBUTION PER UNIT
OPERATING PROFIT MARGIN
GROSS PROFIT= SALES REVENUE - COST OF SALES
OPERATING PROFIT= GROSS PROFIT - OPERATING EXPENSES
PROFIT FOR THE YEAR= OPERATING PROFIT - NET FINANCE COSTS - TAX
OPERATING PROFIT MARGIN(%)= OPERATING PROFIT / SALES REVENUE x 100
Stakeholders and Stakeholder Mapping
Stakeholders can be both internal and external.
Internal stakeholders are people within the business including owners, employees and in public limited businesses the shareholders too since they are part owners.
External stakeholders are people outside the business such as customers,suppliers, local community, creditors and the Government.
Various stakeholders will have different objectives for the business however, sometimes interests will overlap:
- cut costs in order to increase profit
- keep shareholders happy
- cut labour costs
- survive financially
Stakeholder mapping shows how important each stakeholder is and what to do with them.
Outsourcing and Venture Capital
OUTSOURCING- is when a business contract out some of their activites to other businesses rather than carrying them out in-house. (Debt Factoring?)
Outsourcing can be used for manufacturing ,finance,recruitment, advertising and IT. Outsourcing is often not permenant so it cuts the cost of employing people permenantly to do the same job and also means the people you've outsourced to are more relaible and specialised in that field. However, outsourcing does mean a lack of control over the quality of the work.
VENTURE CAPITAL- is funding in the form of share or loan capital that is invested in the business that is thought to be risky.
Venture capitalists are professional investors who invst in businesses they believe have the potential to suceed. They can also offer business advice but applying for funding can be a lengthy process.
Public and Private limited companies
Public limited companies:
- can sell shares to the public
- share prices will be quoted on the stock exchange
- can start as public to raise capital and then transfer to private.
- their names will end in PLC
Private limited companies:
- cannot sell shares to the public
- shareholders cannot sell their shares without the agreement of other shareholders
- typically smaller family business
- will end in LTD
Both business forms have limited liability meaning their owners are a seperate entity from the business itself. To register as either one of these businesses you must send the required documents to companies house - after they've become trading the businesses are legally obliged to publish their finances for the year.