Business, Profits & Risk Overview

Business, Profits & Risk

• A business is any activity that seeks to provide goods and services to others while operating at a profit.
• Goods are tangible products such as computers, food, clothing, cars, and appliances.
• Services are intangible products that can't be held in your hand, such as education, healthcare, insurance, recreation, and travel.
• An entrepreneur is a person who risks time and money to start and manage a business, with the goal of filling a market need.
• Revenue is the total amount of money a business takes in during a given period by selling goods and services.
• Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses.
• Loss occurs when a business's expenses are more than its revenues.
• Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable.
• Businesses take risks, but big risks could come with big profits.

Standard of Living & Quality of Life

• Standard of living refers to the amount of goods and services people can buy with the money they have.
• Quality of life is the general well-being of a society, considering factors such as political freedom, natural environment, education, healthcare, safety, and rewards that contribute to satisfaction and enjoyment.

Stakeholders

• Stakeholders are all the people who stand to gain or lose by the policies and activities of a business and whose concerns the business needs to address.
• A primary challenge for businesses is to recognize and respond to the needs of stakeholders, including employees, customers, investors, the community, and the government.

Nonprofit Organizations

• A nonprofit organization is an organization whose goals do not include making a personal profit for its owners or organizers.
• Examples of nonprofit organizations include public schools, civic associations, and charities.
• Nonprofit organizations use financial gains to meet social or educational goals.
• Business skills such as information management, leadership, marketing, and financial management are still needed to manage and work in nonprofit organizations.

Entrepreneurship and the Creation of Wealth

• Entrepreneurs play a vital role in the creation of wealth.
• The freedom to succeed is a positive aspect of entrepreneurship, offering opportunities to make decisions and reap potential wealth.
• The freedom to fail is a negative aspect of entrepreneurship, with possibility of losing time and money.
• The Five Factors of Production needed to create wealth:
  • Land (or natural resources)
  • Labor (workers)
  • Capital (money, machines, buildings)
  • Entrepreneurship
  • Knowledge

Business Environment

• The business environment refers to the surrounding factors that either help or hinder the development of businesses.
• The key factors of the business environment include:
  • Economic and legal environment
  • Technological environment
  • Competitive environment
  • Social environment
  • Global business environment

Economic and Legal Environment

• Governments can foster entrepreneurship by:
  • Allowing private ownership of businesses
  • Minimizing interference with the free exchange of goods and services
  • Passing laws that enable businesspeople to write enforceable contracts
  • Establishing a currency that's tradable in world markets
  • Minimizing corruption

Technological Environment

• Technology refers to technologies that can make business processes more effective, efficient, and productive.
• Effectiveness means producing the desired result.
• Efficiency means producing goods and services using the least number of resources.
• Productivity is the amount of output generated given the amount of input (e.g., hours worked).
• E-commerce is the buying and selling of goods over the Internet.
  • B2C (Business-to-consumer)
  • B2B (Business-to-business)
• Databases are electronic storage files for information.
• Identity theft is the illegal obtaining of individuals' personal information, such as Social Security and credit card numbers.