what is business

• Businesses


  Provide goods and services to their customers, involve entrepreneurs with talent or skills
• Aims of businesses


  • Profit
  • Growth
  • Survival
  • Cash flow
  • Social
  • Ethical
• Mission


  Long term aims or intentions, overall purpose
• Mission statement


  Communicating a mission with relevant stakeholders
• Objectives


  Goals that help an organisation achieve its aims, can be corporate or functional, must be SMART
• Strategy


  Medium to long term plans to achieve objectives
• Profit objectives


  • Profit maximisation
  • Increasing profit margins
• Growth objectives


  • Increasing market share
  • Increasing sales turnover
• Survival objectives


  • Uncertain economic conditions
  • High competition
• Cash flow objectives


  • Ensuring cash flow is controlled and sufficient
• Social, ethical, environmental objectives


  • Being environmentally friendly
  • Sustainability
  • Meeting stakeholder needs
  • Diversification
• Revenue


  Selling price x quantity sold
• Profit


  Total revenue - total costs
• Fixed costs


  Rent, machinery, salaries
• Variable costs


  Raw materials, direct labour
• Public sector


  Government owned, NHS, education, police
• Private sector


  Owned and financed by individuals
• Sole trader


  • Owned by one person, unlimited liability
• Limited company (Ltd)


  • Shares between friends/family, run by a small group
• Public limited company (PLC)


  • Share capital of £50,000 and at least two shareholders
• Not-for-profit organisations


  Charities, mutuals, with social, environmental or community aims, run by volunteers
• Charity


  Exists for public benefit, makes no profit for owners
• Mutual


  Provide benefits for their members (services)
• Unlimited liability


  The owners of the business are fully liable for any debts that are incurred
• Limited liability


  Owners / shareholders are only liable up to the value of their share capital
• Ordinary share capital


  Money given to a company in return for part ownership of the company
• Dividends


  A payment made to shareholders from profits
• Market capitalisation


  The current share price is multiplied by the total number of shares issued
• Sole trader


  • Easy / cheap, few legal formalities, unlimited liability, united skills/knowledge, limited capital
• Limited company (Ltd)


  • Limited liability, more privacy than a PLC, access to more capital than a sole trader, can't sell shares on the Stock Exchange, difficult to raise finance
• Public limited company (PLC)


  • Limited liability, can sell shares on the Stock Exchange, must publish all financial information, administrative expenses, loss of control (51% of shares)
• Shareholders


  Someone who owns at least one share of a company (a PLC or an Ltd)
• Reasons for shareholders


  • To provide financial support
  • To gain control
  • To receive a capital gain (to sell shares for more than what they were purchased for)
  • To receive dividends
• Rights of shareholders


  • Provide finance
  • The majority shareholder (51%)
  • Vote in major decisions
  • Receive any dividends
  • Inspect records
• Share price


  The price of a single share, often determined by supply and demand for the shares
• Influences on share price


  • The state of the economy
  • Performance of the company
  • Competition in the market
  • Proposed takeover
• When ownership changes (sole trader, Ltd, PLC)


  Objectives/values, short-termism will change
• Not-for-profit organisations won't focus on profit maximisation
• External environment


  The competitive environment and the general business environment (PESTLE)
• Demand


  The amount of a product that consumers are willing / able to buy at a given price over a given time