Business Studies - Common Test 1

Front 1

value added

Back 1

combining resources so that the selling price of the finished good is more than the cost of the individual resources

Front 2

opportunity cost

Back 2

the next best alternative foregone when making a business decision

Front 3

example of opportunity cost

Back 3

deciding to invest money in training workers may mean that business can not afford to increase their wage rate

Front 4

entrepreneur

Back 4

the person who takes the financial risk of starting and managing a new venture

Front 5

qualities of entrepreneurs

Back 5

innovation, commitment, self-motivation, multi-skilled, self-confidence, leadership, risk taking

Front 6

social enterprises

Back 6

a business which has the main goal of achieving a choses social objective as opposed to maximising returns to owners. The business must be profitable in order to fund these objectives

Front 7

triple bottom line reporting

Back 7

communicating with stakeholders not just on economic objectives (profit), but also on social and environmental objectives. This is typical of social enterprises but is becoming more common with other businesses as well

Front 8

primary sector

Back 8

a business that extracts or harvests natural resources to be used by other firms, e.g, farming/fishing/forestry/mining

Front 9

secondary sector

Back 9

firms that process and manufacture resources, into finished or semi-finished goods, e.g, bakery, construction, factory production

Front 10

tertiary sector

Back 10

firms that provide services to consumers and other businesses e.g, retailing, banking, tourism, hotels

Front 11

public sector

Back 11

organizations that are owned and controlled by the government. Might have commercial or non-commercial objectives. In NZ, the postal system is in the public sector

Front 12

private sector

Back 12

organizations that are owned and controlled by individuals (rather than the government). Often have profit maximisation as their main objective. McDonalds is a private sector business

Front 13

public company

Back 13

a business that is listed on the share market. Shares can be bought and shared freely by the members of the public. In NZ, Telecom is an example of a public company

Front 14

private company

Back 14

a business that is owned by individuals but is not listed on the share market. The owners are called shareholders and have limited liability. Shares are not able to be freely bought and sold. In NZ, Event Cinemas is a private company

Front 15

sole trader

Back 15

an unincorporated business that is owned by one person. The owner has unlimited liability and is not a separate legal identity to the business. Most suited to small businesses

Front 16

partnership

Back 16

an unincorporated business that is owned by two or more people. They have unlimited liability but can share in decision-making and contributing finance. Law firms and dentists are often set up as partnerships

Front 17

franchise

Back 17

a business that uses the name, logo, and trading system of an existing business. In NZ, McDonalds stores operate under a franchise system

Front 18

co-operative

Back 18

a business model where all members have one vote at important meetings and profits are shared equally. Agriculutral co-operatives are common as farmers can benefit from bulk-buying of raw materials such as fertilizers

Front 19

limited liability

Back 19

where owners of shares can only lose their value of shares (and not personal possessions) if the business fails. Applies to companies but not sole traders and partnerships

Front 20

unlimited liability

Back 20

where owners of shares are fully responsible for the business debts and can lose not only their value of shares but also their personal possessions if the business fails. Applies to sole traders and partnerships but not companies

Front 21

measurements of business size

Back 21

number of employees, total revenue, capital employed (assets), profits, market share

Front 22

internal growth

Back 22

expanding the business by opening new branches, shops, or factories

Front 23

business objectives

Back 23

profit maximisation, profit satisficing, increasing market share, growth

Front 24

ethics

Back 24

the moral guidelines that affect decision-making. Testing a product on animals may not be illegal but businesses may decide it is not the right thing to do

Front 25

conflict between stakeholders

Back 25

for example, workers may be made redundant, illustrating the conflict between the desire for greater returns for share holders and the community's desire for jobs in the local area

Front 26

prioritising stakeholders

Back 26

usually the needs of stakeholders are the most important as they are the ones who fund the business

Front 27

corporate social responsibility

Back 27

a business to consider not only their shareholders but impact of their decisions on other stakeholders such as customers, workers, communities, and the environment

Front 28

mission statement

Back 28

a statement of the core aims of the business, designed to motivate employees and attract the interest of outside groups

Front 29

importance of small businesses

Back 29

provide employment, provide more goods and services (more choice, provide competition for larger firms