to make a profit, get satisfaction and to make a difference
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State three characteristics of an entrepreneur
hardworking, determined and self motivated
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What is a mission statement?
overall vision of where a business should aim to be in the future, it is general and qualitative.
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What do business objectives need to be?
SMART (Specific, Measurable, Achievable, Relevant, Time based)
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What is a company objective?
objectives that are set to help the company reach its aims, they have to be specific to the company to try and maximise success
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Revenue
the income received from selling a good or service. calculated by price X quantity sold
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Fixed costs
costs of the business that do not vary directly with the number of items produced
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Variable costs
costs of the business which vary directly with the number of items produced
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How do you calculate profit?
Revenue - total costs
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What is retained profits?
it represents the growth of a firm, depends on the asset value of the business
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How do you calculate gross profit?
revenue - variable costs
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How do you calculate net profit?
gross profit - fixed costs
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What are objectives?
statements of specific outcomes that are to be achieved within a time frame
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State 3 reasons why businesses set objectives
to have something to aim for, to measure success, to motivate employees
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Why would a business change its objectives?
internal factors eg business growth, external factors eg an economic recession, may have reached the stage of just 'surviving' if they were a new business.
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What are the benefits of being a sole trader?
own decision making, no need to register, can keep all the profits.
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What are the disadvantages of a sole trader?
stressful, holidays means no income, unlimited liability (can lose possessions), hard to raise capital. **** off
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What does the legal agreement in a partnership state?
how profits will be shared, what each partner has invested, how decisions are made, what happens if a partner leaves or dies, who the lead partner is and their role.
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What liability do partnerships have?
they have unlimited liability unless they form a limited liability partnership using solicitors etc
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Why is limited liability important?
protection for the shareholders, shareholders can also lose the value of the investment
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Legal structure of limited companies
do not sell shares on the stock exchange, they are separate legal entities to the founders, can sue and can be sued.
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Companies (not limited ones)
they are owned by their shareholders and run by directors. shareholders own a share of the company but dont own the assets of the company, they are not liable for the debts of the company
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What is a social enterprise?
A business that has social objectives who's surpluses are reinvested for the purpose of that business or the community eg the Big Issue
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Cooperatives
these are not for profit organisations, they are jointly owned and democratically controlled. and
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Mutuals
these are based on customer relationships, the size of the customer depends on how much return they get back.
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What is a share?
It is an individual part of the total share capital that is issued by a company
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What are ordinary shares?
a share which gives the holder of it a dividend which vary in amount depending on the fortunes of the company
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Shareholding %
the number of shares held compared with the total number of shares issued
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PLC and shares
must be registered, shares must be open for anyone to purchase, must have at least £50,000 authorised share capital, must meet the stock exchange requirements
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How do shareholders aim to gain?
By dividends and capital growth, this is when the selling price is more than the original buying price.
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Share prices
they can be traded privately or on the stock exchange. Demand and supply determines the share price.
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Share prices of private companies
Prices set when shareholders subscribe to their shares, only determined when shares are bought or sold, no active market so hard to determine current value.
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Share prices of public companies
everyone sees the information, all trades are disclosed and share prices are widely published and tracked.
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