# Business studies

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• Created by: laurynbo
• Created on: 10-06-18 17:56

## Data analysis

Pie charts are a circular chart that is split into sections to show % or the relative value of the different categories of data. They are easy to compare but do not show a relationship.

Line graphs are used to compare two variables and can represent data for more than one category.

Bar charts show data which is grouped into categories using rectangular bars with the heigh of the baar representing the frequency.

Histograms show quantitative data and there are no gaps between the bars which then show that data is contiunous.

Index numbers are used in order to make numerical data easier to understand.

Index number = value in period/value in base period X 100

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## Price elasticity of demand

% quantity demanded / % change in price

If the number is equal to one, the good has unitray elasticity demad.

If the number is greater than 1, the good has elastic demand.

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## Income elasticity of demand

% change in quantity demanded / % change in price

When YED is positive, a product is a normal good.

Following an increase in income, more of the good is demended, then the good is an normal good.

Following an increase in income, less of a good is consumed, then the good is an inferior good.

Less then 0, it is an inferior good.

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## Sales forecasting

Is a way of predicting future demand by anticipating what customers aree likley to do.

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## Ratio analysis

Gross profit = revenue - cost of sales

Net profit = gross profit - expenses

Gross proft margin = gross profit / revenue X 100

Net profit margin = net profit / revenue X 100

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## Return on capital employment analysis

The figure measures how effectively the capital invested in the business is being used to create profits.

Net profit before tax / shareholders funds + long term liabilities X 100

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## Liquidity

Refers to how quickly am asset can be converted into cash, money in the bank or held in cash, is the most liquid asset.

Other liquid assets are stock and debtors' of these it is likely that stock is the least liquid.

Current ratio = current assets  current liabilities.

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## SWOT analysis

This identifies and analyses the internal strenght and weaknessess of an organisation, as well as the external opportunities and treats created by the businedd and economic enviornment.

We use SWOT to maximise the potential of the strenghts and opportunities whilst minimising the impact of the weaknesses and threats.

Strenghts refers to the positive features of a business.

Weaknesses refers to the negative featuresof a business.

Opportunities are external conditions that could positivly impact the business.

Threats are external conditions that could have a negative impact on the businsesses perfomance and reduces competitive advantage.

An effective SWOT analysis will buildthe businesses strenghts, resolve weaknesses, exploit apportunities and avoid threats.

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## The Ansoff matrix

Consideres a business product portfolio from a different point of view to the moodles such as the product life cycle or the boston matrix.

Market penetration- concentrating on sales of existing products to existing markets.

Market development- finding and developing new markets for existing products.

Product development- developing new products for existing markets.

Diversifitcation- developing new markets and new products.

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## Integration

Horizontal intergration- hotel merging together - holiday inn and travelodge.

Backwards vertical intergration- starbucks buying a coffee farm. This reduces costs and sucures suplliers.

Foward vertial intergration- ford buying a car dealership. This is the next stage in production.

Conglomerate- a business merges with or takes over anoter business with no connection. Virgin.

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## Organic and external growth

External growth:

A takeover is the aquisition of one business by another.

A merger is when two businesses become one and have one equal share of the business.

Organic growth is when a business uses existing resources to grow and will not involve any other business.

They can do this by: developing new products or targeting a different market.

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## Franchising

A franchise means ro own and operate their own business under the brand.

Positives for the franchisee is they they get education and training, an established business and customer loyaly.

Positives for the franchisor is that they get a royalty fee and part of the revenue and increased market share.

Negatives for the franchisee  is that they have limits on what they can do, high royalty fees and start up costs.

Negatives for the franchisor is that they may get a bad repuation and damage to the brand and they do not get 100% of the profit.

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## Factors affecting location

Target market

Consumers

Competitors

Infrastructure

Labour

Materials

Accsess to markets

Accesibility

Consumers

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## Rationalisation

Reorganisation of a business in order to increase efficiency.

Closing of branches, transferring of production, trimming or production range and incorporation it IT systems to replace paper systems.

Advantages of this is there there makes more space, it may save more money, save time and may increase profits.

Disadvantages are that there is less motivationm if switching to ICT then there may need to be more training, getting rid of a production rage may result in the business loosing customers and increased costs when it comes to technology.

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## Outsourcing

When suppliers are involved in activities that could be undertaken internally by a business.

Offshoring is when businesses move overseas.

Advantages are that it reduces staffing costs, workload and stress levels are reduced.

Disadvantages are demotivation becuase staff may velieve they they're going to loose their jobs, quality of products can not be guarenteed and it will breakdown communication in the production chain.

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## Decision trees

Are planning tools for helping you choose between several options. It looks at financial risks and rewards.

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## Critical path analysis

The critical path is a route through the CPA, which has no spare time and is most efficient. It allows them to identify what they need and how long they need to do it.

Free float is the amount of time that a schedueld activity can be delayed without elaying the early start of any immediately following activities.

The total float is the amount of time an activity may be delayed without delaying the end date or activity end date.

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## Payback period

Measures how long investment takes to pay for itself.

Advantages are that it is a siple way of identifying when a project pays for itself and therefore at which point you can make profit on the investment.

Disadvantages are that it ignores the time value of money.

The shorter the payback period the better the investment.

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## Accounting rate of return

Measuring how much of the investment you clawback on average each year. The highest % wil be chosen.

Advantages are that it clearly shows profibility of a project over time.

Disadvantages are that it ignores the chaning value of money which will make the expected returns inaccurate.

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## Discounted cash flow

Looks at the value of money. It restates the future value of returns in todays money.

Advantages are that it gives an absolute value, therefore this will give you a figure for profit which will thn make it easier to compare to other figures as payback period gaves a %.

Disadvantages are that it is difficult to correct discount rate and figures throughout are estimated, therefore an estimate doe not reflect what could actually happen which may give false hope for investors.

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