Unit 1

• Mission statements 


  Qualitative description about the organisation so shareholders understand the business intent
• Corporate objectives

  Define overall objectives of the business

  Driven by mission statements

  Drives fictional objectives
• (Source of fiance)importance of profit 


  Profit can be retained

  Funds expansion
• (Rewards for taking risks) importance of profit

  Keep profits

  Divends goes to the shareholders
• (Not-for-profit) importance of profit

  Serve the mission:

  Member

  Ethical

  Environmental
• Importance of profits (motivates employees)


  Profit sharing with employees

  Increase productivity
• Importance of profit (sign of fiance stability)

  Suppliers more willing to trust

  Extend trade credit
• (Indicator of success) Importance of profit


  However this may not always be the case

  Profit may not always be the primary objective. They business may want to increase market share
• Revenue = total made from sales - turnover
• Fixed cost = cost that vary without output e.g rent
• Variable costs = costs that don't vary output e.g. raw material
• Profit = revenue - costs
• Revenue = sales × price
• Total costs = Fixed cost + variable cost
• Variable costs = Variable costs per unit × unit produced
• Land (Factors of production)

  Represent the natural resources and physical space where production occurs
• Labour (Factor of production)


  Represent the human effort and stick applied to production process
• Capital (Factor of production)


  Refers to the tools, machinery
• Entrepreneurship (Factors of production)

  Encompasses the innovation organisation and risk taking that drives the production process
• Input (Factor of production)

  Transformation process (The conversion, what a business does)

  Output (good and service)
• Private limited companies

  Public limited companies

  (Limited liability)


  Owners and business are different legal entities share personal assets are at risk in event of business incurring debt
• Soles trades

  (Unlimited liability)


  Owner and business is the same legal entitity

  Owner is responsible for all debts the business
• Private limited companies 


  Ltd is a company that us owned by shareholders and managed by directors,shareholders choose the director
• Pros of private limited companies

  limited companies: encourages investments

  Additional sources of fiance:raises fiance through selling shares

  Control of who shareholders are: less risk of conflict between owners and managers

  higher prestige than sole trader
• Cons of private limited companies

  No access to stock exchange: smaller volume of fiance available

  Shared profit: many shareholders means diluted profits

  Legal requirements to publish financial accounts

  Competitors may be able to see
• Public limited companies 


  Company that commonly offers it shares to the general public via stock exchange
• Features public limited companies

  Abbreviated to PLC in UK

  Type of limited company: limited liability

  Must raise a minimum of 50k share capital

  Minimum of two directors and one company secretary
• Flotation 》》 going 


  The process of a private limited companies offering for sales on the stock market to therefore become a public limited company
• Pros of flotation 


  Raise external fiance:Stock exchange,

  Enormous amount of fiance can be raised means expansion/projects can be fiance by share capital raised from flotation
• Pro of flotation 


  Stable business ownership structure:

  Investor sell shares to other investors
• Pro of flotation 


  Higher prestige:

  More exposure means more sales which means more revenue
• Pro of flotation 


  Shareholders return limited liability
• Cons of flotation 


  Floatation are expensive

  Legal fees
• Cons of floatation 


  Anyone can buy shares:managers have no control of who the shareholders are
• Cons of flotation 


  Short- sighted shareholders: motivated by divenends not investments
• What is a public sector

  Financed by govt

  Local or national e.g NHS or school
• Private sectors 


  Fianced by entrepreneurs

  Unincorporated: sole traders and partners

  Incorporated: private limited company and limited company
• Market capitalisation


  Number of ordinary issue shared × price of 1 share = market cap

  Number of ordinary issue shares × price of 1 shares at first issue = ordinary shares
• Dividends 


  Ddistribution of a % a profit by a company
• Dividends dates

  1. Declaration (1st jan) managers declare the Dividends the date it will be paid
  2. In Dividends date: date shareholders must hold a share by to receive Dividends
  3. Ex Dividends date (14th april): a date when you buy a share that you don't qualify for next Dividends
  4. Dividends pay rate (15th april)