business half yearly study.pdf

Nature of business definitions Term Definition Profit The revenue gain minus the expenses for the sale Needs & Wants Needs are basic requirements or essentials for survival AND Wants are item...

Nature of business definitions Term Definition Profit The revenue gain minus the expenses for the sale Needs & Wants Needs are basic requirements or essentials for survival AND Wants are items and services that enhance the quality of life but are not essential for survival Good Tangible item Service Intangible that takes an effect on consumer Finished Good/Service Ready to consume Semi-Finished Good/Service Not in a state to be used as of yet; needs further transformation to be useful Revenue Income gained from business activity Cash buffer A cash buffer is a reserve of cash that a business or individual sets aside to cover unexpected expenses or financial shortfalls Career security The assurance or confidence that an individual has in the continuity and stability of their employment.(stable job) Return on Investment ROI- A measure used to evaluate the efficiency or profitability of an investment. ROI= ( Net Profit/Cost of Investment )×100 Innovation process of creating significantly improved product/service/process through R & D (Research & Development) Invention Creation of an original idea; completely new Entrepreneur One who stars, operates, assumes the risk of a business venture hoping for profit Lender An individual, institution, or entity that provides funds to another party with the expectation that the funds will be repaid, typically with interest, over a specified period.  Perpetual Succession A feature of corporations and incorporated entities that ensures their continuous existence regardless of changes in ownership or management. Incorporated ​A type of business entity that has been legally registered as a corporation, They are recognised as separate legal entities to their owners Unincorporated A business structure where the business and its owner(s) are not legally separate entities. Examples include sole traders and partnerships Limited liability A legal structure where a business owner's financial liability is limited to a fixed amount, typically the value of their investment in the company. Unlimited liability A business structure where the owner(s) are personally responsible for all of the business's debts and obligations Study Details Types of Business Understand the classification of business by size – small to medium enterprises (SMEs), large Small Medium Large Employees Under 20 20-199 200+ Ownership 1-2 Multiple onwers/sharehoders Public sharehodlers/BOD Legal Sole trader/ Partnership Partnership/Private company Public company Structure Source of Owner savings/loans Onwer savings/loans and Cash reserves, profit, finance private shareholders shares, loans Distinguish factors that classify a business as local, national and global. Local: Serves to only surrounding suburbs/towns (SME) National: Operates in only 1 country Global: Multinational cooperations, operates and flows finance, assets, technology, information, employees and goods and services between multiple countries. Distinguish factors that determine the business legal structure. Sole Trader (unincorporated): One owner who may employ others and is financially and legally responsible for the business in turmoil. The company must still be registered under ASIC udner a name other than his own.. Partnership (unincorporated): Operated by 2-20 people (Some industries may have more such as stockbrokers. The business must follow the requirements under the Partnership Act 1982 (NSW). Private company PTY LTD (incorporated): 2-50 shareholders/part owners. Shareholders have limited liability protection. Not Listed on ASX. Public Company PTY (incorporated): large mount of shareholders, listed on ASX, must provide, annual reports and prospectus. Identify the factors influencing the choice of legal structure. 1. size of the business: The amount of employees and services the business can maintain 2. Ownership: Increased pressure is one one owner may lead to shared workload 3. Finances: Multiple sources of finance to be pooled (Venture capital) Distinguish between the quaternary and quinary industries. Primary: Collection of natural resources Secondary:Manufacture raw materials into finished/semifinished products Tertiary: Service based industry Quaternary: transfer and processing of information and knowledge. Quinary: services that have traditionally been performed in the home. Influence Distinguish between the different external influences in the business External: Factors which businesses cant control - Economy - Political - Consumer choice Explain internal influences within the business environment. Internal: Factors which businesses can control - Product - Research  - Management/business culture Understand various stakeholders of a business. People who have vested interest in its activities of the business (Influence decisions of business - Employees/Managers - Shareholders - Custoemrs Distinguish between the roles of the ASIC and ACCC. ○ Understand what business behaviour is considered legal and illegal by these organisations. ASIC: Australian Securities & Investments Commission Government agency. - Regulates the conduct of Australian companies, financial markets, financial services organisations to promote market integrity. ACCC: Australian Competition & Consumer Commission - Enforce the Competition and Consumer Act 2010 and other legislation, promoting competition, fair trading and regulating national infrastructure Business growth and decline - Understand the characteristics of each stage of the business life cycle. Establishment: First stage of business lifecyle where the business is new and sees little consumers, high costs, and low profits. Growth: Stage in the business lifecyle where the business finds traction and has a spike in customers and sales/profits. Maturity: The stage in the business lifecyle where the business sees and plateau in sales and profits while maintaining customer base and business identity. Post maturity: The business can either see a renewal with an increase in sales, profit and customers, a decline where these factors all begin to decrease, or they mainly remain in a steady plateau state. Explain the challenges associated with each stage of the business life cycle/Understand the reasons for failure in each stage of the business life cycle. Establishment: - Creating customer base - Developing processes - Cash management Growth: - Adapting operations - Maintaining cashflow - Increased competition Maturity: - Continuing to innovate - Asset allocation - Future planning Post maturity: (renewal, steady state, decline) - Cost reduction - Market disruption - Employee morall Distinguish between the different types of mergers and acquisitions, such as horizontal integration and the different types of forward and vertical integration Merger: 2 separate businesses combine resources into a new business Acquisition: One business taking control over another Vertical integration: Business expanding into a different level of the production line Horizontal integration: Business requiring another in a similar sector of an industry Diversification: Business acquires of merges with another from a completely different industry Distinguish between voluntary and involuntary cessation. ○ Forms of cessation for sole trader/ partnership → bankruptcy (voluntary/ involuntary)Provide examples. Voluntary: Business sells assets and stops operation due to owner retirement, lifestyle change, or a sole trader dying. Involuntary: The owner is forced by creditors (people owed money) to sell of assets to pay back. ○ Forms of cessation for companies → voluntary administration, liquidation (voluntary/ involuntary). Provide examples. Bankruptcy: declaration that a business, or person, is unable to pay his or her debts. Administration: when an independent administrator is appointed to operate the business in the hope of trading out of the present financial problems Liquidation: iquidator is appointed to take control of the business with the intention of selling all the company’s assets in an orderly and fair way in order to pay the creditors.  Small to medium enterprises Understand the four main economic contributions of SMEs → GDP, employment, innovation & invention, BOPs. GDP: Estimated to 50% of GDP Employement: 8 Million people Balance of payment: SME exports are growing drastically Innovation/Invention: Spending billions on R&D Understand the characteristics of different markets and competitive situations: ○ Markets → monopoly, duopoly, oligopoly, monopolistic competition. Monopoly: One firm dominates industry Duopoly: Two firms dominate market Oligopoly: Small groups of firms dominate market Monopolstic: Where there is a large numbers of buyers/sellers in a market Perfect Competition: SME’s selling similar things only differentiated by price Identify the personal qualities of an entrepreneur. Identify forms of equity finance and how to access equity finance. Funds contributed by the business owner to start and then expand the business (shareholder’s equity) Understand the difference between internal equity finance (retained profits) and external equity finance (ordinary shares, private equity). Explain the legal regulations that businesses must adhere to (new and existing businesses) Identify BOTH federal and state government taxation that applies to sole trader businesses. Identify the advantages and disadvantages of establishment options → new, existing and franchise. Understand the financial costs associated with downsizing the workforce Sources of Planning Identify strengths, weaknesses, opportunities and strengths of businesses. Understand strategic goals Long term goals of a business Identify business vision, goals and/or objectives Organising Resources Marketing: ○ Identify different types of market segmentation ○ Understand how and why promotion strategies can be implemented. ○ Product strategies → branding, packaging. ○ Pricing methods → cost-based, competition-based, market-based pricing ○ Price strategies → skimming, penetration, loss-leader, price points. ○ Place → Distribution channels and channel choice Human Resources: Distinguish between acquisition, development, maintenance and separation processes. Finance: Understand how to read a break-even analysis. ○ How to determine the break-even point? ○ Fixed and variable costs ○ Formula for break-even required ○ Calculating break-even points when costs (fixed and variable) change Distinguish between monitoring and evaluating. ○ Understand the importance of both. ○ Why is monitoring and evaluation important to assess the performance of a business? Focus on sales, budgets, and profit. ○ Determine the difference between actual vs forecasted (planned) profits. Understand the effects of planned profit being lower than actual profit. ○ Understand the effects of increased within industries g Critical issues in business success and failure Matthew finish Understand the two main economic conditions → expansion and contraction. ○ How does this affect aspects of the business and/ or consumers?  ○ How does this lead to success or failure? How do critical issues in businesses affect success and failure? ○ importance of a business plan ○ management – staffing and teams ○ trend analysis ○ identifying and sustaining competitive advantage ○ avoiding over-extension of finance and other resources ○ using technology ○ economic conditions