Business Objectives and Profit Maximization
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Business Objectives and Profit Maximization

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Questions and Answers

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.

    False

    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 __________.

    <p>competition</p> Signup and view all the answers

    What is one way a business might increase returns to shareholders?

    <p>Increasing overall profit</p> Signup and view all the answers

    What happens to the return to shareholders when the share price increases?

    <p>It increases</p> Signup and view all the answers

    What is the economic problem?

    <p>Scarcity is the basic economic problem, which exists when there are unlimited wants and limited resources.</p> Signup and view all the answers

    Which of the following is a need?

    <p>Food</p> Signup and view all the answers

    What is opportunity cost?

    <p>The next best alternative forgone by choosing another item</p> Signup and view all the answers

    Wants are essential for survival.

    <p>False</p> Signup and view all the answers

    What are the factors of production?

    <p>Land, Labour, Capital, and Entrepreneurship.</p> Signup and view all the answers

    The reward for land is ______.

    <p>rent</p> Signup and view all the answers

    What is the reward for labor?

    <p>Wage/Salary</p> Signup and view all the answers

    If you choose to buy a video game instead of going to the movies, what is your opportunity cost?

    <p>The experience of enjoying the movie with friends</p> Signup and view all the answers

    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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    Related Documents

    O Levels Business Chapter 5 PDF
    OL Notes (Colour) PDF

    Description

    This quiz explores the essential objectives businesses set to guide management and employees. It covers topics such as profit maximization, survival strategies, and the return on investment for shareholders. Understanding these aspects is crucial for anyone interested in business management and finance.

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