Business Studies Unit 1 AS (AQA)

basic definitions for unit 1

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  • Created by: Paloma
  • Created on: 16-05-10 14:40

Fixed Costs, Variable Costs, Total Costs

Fixed Costs: Costs which don't vary with out-put

Variable Costs: Costs which do vary with out-put

Total Costs: Fixed Costs + Variable Costs

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Fixed Costs, Variable Costs, Total Costs

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Local/National/International Market

Local: Customers are a short distance from the business.

National: Geographically Dispersed market

  • Customers spread over a large area

International: Market is spread over more than one country

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Local/National/International Markets

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Limited/Unlimited Liability

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Business Angel

  • Informal Investment
  • Smaller Investments
  • Experience / Specialised
  • In Return they take a share of the business and its profits
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Business Angel

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Legal ownership of material - Books, Music, Films

  • Prevents Copying
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Business Sectors

Primary: Extraction of resources e.g Farming

Secondary:Transformation of resource into product e.g Manufacture

Tertiary: Transformation to provide service e.g Retail

Quaternary: Transformation of information e.g Science Park

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Opportunity Costs

Cost of an activity expressed in terms of the next best alternative

  • e.g Giving up a well paid job to start own business
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Opportunity Cost

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Factors of Production

  • Labour
  • Capital
  • Enterprise
  • Land

Input needed to produce product/service

e.g factory production is labour intensive

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Added Value

Adding value to resources to enable the product/service to be sold at a higher price

Selling Price - Cost of Resources = Added Value

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Added Value

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Capital/Revenue Expenditure

Capital: Spending on items for reuse - purchase of fixed costs

Revenue: Spending on resources which have already been consumed / soon to be consumed

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Capital Gain

Profit made from selling shares for more than what they were bought for.

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Capital Gain

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Partnership & Soletrader

Partnership: 2-20 partners all owning the business and participating in decision making

Sole-trader: Single individual owns the entire business and all the responsibility & risk

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Partnership & Soletrader

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Business sells the rights to other entrepreneurs, allowing them to sell the branded products

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Revenue: Money coming in from sales

Units Sold x Selling Price

Profit: Total Revenue - Total Costs or Total Contribution - Fixed Costs

Loss: Where Total Costs exceed Total Revenue

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Market Research: Primary/Secondary

Process of gathering data about the market to help make decisions

Primary: By the business or on behalf of the business which did not exist before

Secondary: From another source which already existed

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Market Research: Primary/Secondary

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Break Even

Point at which units sold overs costs: Total Revenue = Total Costs

Fixed Costs

Contribution (selling price - VC per unit)

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Break Even

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Retained Profit

Profit left after trading and overhead costs, taxation and dividends

  • Long-term internal finance
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Retained Profit

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Patent: Right of ownership of invention/process granted by the government for a fixed period of time up to 20 years.

Trademark:Signs, symbols, logos, words, sounds, that distinguish the products of a business from competitors

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  • Flexible, unsecured finance
  • Helps regulate cash flow problems
  • Repayable on Demand
  • No interest unless agreed amount is outstanding at the end of the day
  • Short Term
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Trade Credit

  • Pay deposit for asset
  • Equal installments over period of time
  • No need for collateral
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Trade Credit

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Factors Affecting Demand

  • Price
  • Competition
  • Incomes
  • Marketing
  • External factors: Seasonality
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Factors Affecting Demand

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Debt Factoring

Selling debtors to debt collectors for approximately 80% of the debt.

  • Releases cash tied up in debtors BUT doesn't receive 100% of debt.
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Debt Factoring

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Market Share, Size & Growth

Market Share: Proportion of market accounted for by one product/company

Total Market Sales

Business' personal sales

Market Growth: Change in market size

Value Changed

Original Value x100

Market size: Size of market based on total sales/units sold

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Market Share, Size & Growth

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Margin of Safety

Amount by which the existing level of output is greater than the break even point

Output - Break even (FC/Contribution per Unit)

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Margin of Safety

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Market Mapping

Differentiate brands within market on a graph to identify gaps/niches in market and to monitor existing brands.

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Market Mapping

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Market Segmentation

Group of Consumers with similar needs:

Geographic: Local/National

Psycho-graphic: Lifestyle/Social Class

Demographic: Age/Gender/Income/Ethnicity

Behavioural: Frequency of Use: Heavy/Medium/Light

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Market Segmentation

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Share Capital, Authorised and Issued

Value of Shares sold in Stock Market/to investors

Authorised: Maximum amount wanted from selling shares

Issued: Sum of share capital from selling shares

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Share Capital, Authorised and Issued

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Process of company turning into public limited

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Private/Public Limited

Public: On the Stock Market - Anyone can by Shares and sell shares

Private: Privately sell shares

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scarlett lawless


poor, not enough info



good brief information only works better if you go backwards haha

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