Podcast
Questions and Answers
What is one objective that a business might set to maximize profit?
What is one objective that a business might set to maximize profit?
- Pay a return to shareholders (correct)
- Increase employee salaries
- Expand the workforce
- Reduce operational hours
A business sets the objective of survival primarily during periods of stable competition.
A business sets the objective of survival primarily during periods of stable competition.
False (B)
What do businesses aim to do when they set the objective of increasing market share?
What do businesses aim to do when they set the objective of increasing market share?
Outperform competitors
A business sets the objective of survival during __________.
A business sets the objective of survival during __________.
What is one way a business might increase returns to shareholders?
What is one way a business might increase returns to shareholders?
What happens to the return to shareholders when the share price increases?
What happens to the return to shareholders when the share price increases?
What is the economic problem?
What is the economic problem?
Which of the following is a need?
Which of the following is a need?
What is opportunity cost?
What is opportunity cost?
Wants are essential for survival.
Wants are essential for survival.
What are the factors of production?
What are the factors of production?
The reward for land is ______.
The reward for land is ______.
What is the reward for labor?
What is the reward for labor?
If you choose to buy a video game instead of going to the movies, what is your opportunity cost?
If you choose to buy a video game instead of going to the movies, what is your opportunity cost?
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Study Notes
Business Objectives
- Businesses set objectives to provide clear direction for management and employees.
- Objectives give a sense of purpose to work, they also help managers assess the performance of workers.
Profit Maximisation
- The primary objective of many businesses is profit maximisation to:
- Pay a return to shareholders.
- Pay all costs associated with running the business.
- Reinvest in the business.
Survival
- A business may prioritize survival when facing:
- Competition in the market
- Economic changes like recession
- Uncertain conditions like war or pandemics
Return to Shareholders
- Businesses may set an objective to increase return to shareholders to motivate investors and increase investment; this is achieved through:
- Dividends: a payment made to shareholders, for instance, 10persharemultipliedby500sharesequals10 per share multiplied by 500 shares equals 10persharemultipliedby500sharesequals5000 in dividends.
- Share price increases, suppose the share price increases from 15to15 to 15to25, a gain of 10pershare,with500shares,thetotalgainis10 per share, with 500 shares, the total gain is 10pershare,with500shares,thetotalgainis5000.
Growth
- A growth objective for a business aims to:
- Increase profits.
- Decrease the cost of production.
- Increase influence in the market by increasing its size.
- Increase market share to reduce competition.
Increasing Market Share
- Businesses aim to increase market share to remain competitive and increase influence in the market.
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