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Questions and Answers
What is the primary difference between reselling and franchising?
Which of the following best describes gross profit?
Which costs are considered factory overhead?
What does net income before tax represent?
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In a projected income statement, what information is typically forecasted?
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What is the primary purpose of the value chain in a business enterprise?
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Which of the following best describes inbound logistics?
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What is an indirect type of material in a business setting?
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Which step is NOT part of setting up a business according to the process outlined?
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What does the term 'operations' refer to in the value chain?
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How is a business model typically defined?
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What characterizes direct workers in a business?
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What is meant by 'value/supply chain' in the business context?
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Study Notes
Manpower
- Direct Workers: Directly involved in the production/service delivery process
- Indirect Workers: Support direct workers (e.g., administration, maintenance)
Materials
- Direct Materials: Directly used in the production process
- Indirect Materials: Support the production process (e.g., cleaning supplies)
Setting Up a Business
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Product Development:
- Prototype: A testable model of the product
- Validation: Assessing market acceptability through customer feedback
- Supplier Selection: Identifying sources for raw materials and inputs
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Value Chain: A series of interconnected activities creating competitive advantage
- Michael Porter: Pioneered the concept of value chain
- Value Creation: Companies aim to create value exceeding the cost of providing goods/services
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Supply Chain: The flow of activities related to producing and selling a product or service
- Customer Request Fulfillment: The ultimate goal of the supply chain
Business Model
- Brick and Mortar: Businesses with physical locations
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Reselling: Businesses purchasing products from others and reselling with/without modifications
- Dropshipping: A reselling model where the seller doesn't hold inventory
- Franchising: Utilizing a proven business model from another company for a fee
Financial Planning
- Forecasting: Estimating/predicting costs and revenue
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Gross Profit: Revenue minus cost of goods sold/sales/merchandise
- Cost of Goods Sold: For manufacturing/agriculture businesses
- Cost of Sales: For service-based businesses
- Cost of Merchandise: For trading businesses
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Factory Overhead: Manufacturing costs excluding direct labor and materials
- Examples: Production supervisor salaries, factory rent, utilities, equipment maintenance
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Net Income (Before Tax): Profit after deducting cost of sales and operating expenses
- Operating Expenses: Marketing and administrative costs
- Net Income (After Tax): Income remaining after paying taxes based on net income before tax
- Projected Income Statement: Financial forecast for the next five years
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Description
Explore essential concepts in setting up a business, including manpower management, materials, and the supply chain. Understand the importance of direct and indirect workers, as well as the value chain and supplier selection in creating competitive advantage. This quiz will test your knowledge on these fundamental principles.
