Business studies UNIT 2 CHAPT 8+9

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Sources of finance for large firms
Retained profits, selling unwanted assets, share issue, loan
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Retained profit - long term expansion
no interest/repayment needed, no loss go control //profits may be too low to use and if profits are low growth is low so loan would be better
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Selling unwanted assets - pay off expansion/debts
no interest/repayment and no loss of control // asset is not longer owned and if it is needed then leasing costs
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Share issue - long term expansion/merger
no interest has to be paid, share capital doesn't have to be repaid // loss of control, dividends expected by shareholders
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Loan (short/long term)
v flexible, low interest rate and no loss of control for shareholders // low interest costs and must be repaid, property used as security
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What is the purpose of financial statements
how much cash is flowing in an out, making a profit/loss, when suppliers and tax must be paid
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what do financial records show
Products sold,customer not paid yet, goods bought by the business and which suppliers aren't paid yet, equip and assets purchased,wage and labour costs
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what do these statements let stakeholders know (gov/bank/shareholders)
How much the business is worth, making profit or loss? will shareholders invest more, will banks lend money> gov will decide how much tax they should pay
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purpose of balance sheet
lists the companies value of assets and liabilities,
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how to work out current ratio
current assets/current liabilities
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what do the ratios indicate
the liquidity of a business
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centralisation
senior managers have full control no workers make decisions, strong leadership and quick decisions, decisions are taken for benefit of whole business. Workers feel unmotivated and unvalued
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Decentralisation
gives power to junior managers and workers (motivation) but need training, juniors managers given experience of of decision making and responsibility, prepare for senior roles but poor decision = harm firm
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process of recruitment selection
1. Job analysis 2.job description 3.person specification 4.selection
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job analysis
tasks and duties if job, skills needed, training required such as customer service training
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job description
explanation of job vacancy (adverts)
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person specification
what qualities and skills are expected as well as qualifications and interests
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selection
application, interview, testing altitude test/personality test which is more accurate
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induction training benefits
introduces employee to workplace and co workers, company rules and health and safety, how to do the job, help them feel more comfortable and welcome them to the workplace, reduce risk low accidents
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purpose of organisational structure
makes clear responsibilities, who workers should communicate with, clear how many departments and layers of management there are
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effects of expansion: long chain of communication
more layers of management so messages take long time to travel up and down the hierarchy, leaves people at top and bottom of hierarchy feeling isolated and demoralise. danger messages may not reach or get distorted. but each person controls fewer sta
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wide span of control
manager has lots of employees. long time to pass messages on, difficult to manage so many employees effectively, firms must balance short commune chain and narrow span of control, quicker communication bc fewer layers, more respon to workers=training
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on the job training
internal/learning by doing work = cost effective taught by colleague so bad work cold be passed on, directly learning from SKILLED employees but training may not be to high standard
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off the job training
away from workplace, more expensive, not directly related to actual job, higher quality - qualified trainers but worker cat work
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appraisal
superior/self/peer - help managers keep track of employees progress and needs// meet target = rewarded, targets must be realistic
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methods of appraisal
feedback, suggestions, set objectives, provide basis for promotion and pay increase = increase motivation
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benefits of training
workers able to cope with changes like advances in technology, reduces chances of poor quality, increased productivity and efficiency and staff will feel invested and motivated
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costs of training
financial cost of training can be greater than benefits obtained from them, workers aren't productive whilst in training, difficult to retain trained employee as they could get higher trained job elsewhere
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remuneration
paying staff money for the work that do, increasing salary or wage, bonus, pension larger business have more money to spend on remuneration for staff
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training
making staff work more efficiently, good at job=motivation, promoted to higher roles, can help reach appraisal targets
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styles of management
autocratic, democratic, paternalistic, laissez faire
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autocratic
managers how believe in taking all decision sand just passing instructions on to workers
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democratic
managers who involve workers and less senior managers in decision making
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paternalistic
managers take all decisions after CONSULTING STAFF
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Laissez faire
all workers choice on what to do with help from managers if needed - this could be bad for inexperienced staff but good for motivation
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staff retention
recruitment is expensive and time consuming so employers want t retain staff for a long time, well motivated staff are lesss likely to leave their jobs especially with opportunities for promotion
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4 pay methods
Piece rate, hourly wage rate , salary , profit sharing
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piece rate DEFINITION
Fixed amount for producing each unit of work
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piece rate advantage +disadvantage
Leads to higher output // may lead to poor quality if workers rush just to increase output
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Hourly wage rate advantage
workers can calculate how much they receive per day / week
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hourly wage rate drawback
no incentive to increase output or pt in extra effort - provides more pay security so encourages workers to work overtime
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salary
fixed annual sum paid monthly
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salary advantage
provides pay security workers will know how much they receiver per month
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salary disadvantage
no link between effort and pay, works best with appraisal system to determine salary level for next year - workers will work hard to achieve these annual targets
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Profit sharing definition
a shame of annual profits given as a bonus with basic pay
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advantage of profit sharing
many workers more responsible towards the company and keen to help the raise their profits - keep staff in business if they think profits will increase
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drawback
lack of pay security is theres low profits
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Other cards in this set

Card 2

Front

Retained profit - long term expansion

Back

no interest/repayment needed, no loss go control //profits may be too low to use and if profits are low growth is low so loan would be better

Card 3

Front

Selling unwanted assets - pay off expansion/debts

Back

Preview of the front of card 3

Card 4

Front

Share issue - long term expansion/merger

Back

Preview of the front of card 4

Card 5

Front

Loan (short/long term)

Back

Preview of the front of card 5
View more cards

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