3.1- Why Businesses exist?

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State 5 reasons why profit is important?

1. Is a measure of success 2. provides funds to re-invest into the business 3. used to reward investors 4. attracts new investors 5. positive media coverage of success

What is a mission statement?

A statement of the purpose of the company, organisation or people; its reason for existing; a written declaration of an organisations core purpose and focus that normally remains unchanged over time.

What is the importance of cash flow?

Cash flow is an important goal because you need money coming into the business for it to be a successful and to be able to make a profit. So inevitably there will be money going out from the business to cover costs.

What does CSR stand for?

Corporate Social Responsibilities

How do we calculate total costs?

Fixed costs + variable costs

What are the 2 types of costs for a business?

Fixed costs and variable costs

What is the importance of growth?

Growth is important because this allows them to be able to set higher goals for them to achieve and allow them to have the opportunity to increase their profits overtime.

What are the 4 main functions of a business?

Human Resources (HR), Finance, Operations, Marketing

What is the importance of survival?

It is important a company survives because if they aren't making money then the company will be recording losses and then will become bankrupt and then into liquidation.

What 2 things should a mission statement do?

It should clearly state which markets will be served and how. It also should communicate a sense of intended direction to the entire organisation.

What is the order of hierarchy of objectives? (highest to lowest)

Mission Statement - Corporate Aims - Corporate objectives - Functional Objectives

How do we calculate profit?

Revenue - total costs

What are S.M.A.R.T. objectives?

Specific, Measurable, Agreed, Realistic/Relevant, Time

What is the importance of social/ethical objectives?

These objectives are a key goal because if they reach out to various communities and religions then they should see an increase in sales as they are having a wider range of customers.

What is the importance of profit?

This is an important goal because this is what allows companies to be able to expand and grow. It also allows companies not just to survive financially but actually able to expand and progress as a company.

What is profit? (definition)

This is the amount of money a company makes after they calculate their total sales/ revenue minus the costs of labour

What would be a realistic/relevant objective?

This is to motivate, targets must be attainable

What would be a time specific objective?

This is where employees need to know how long it will take to achieve a specific target

What would be an agreed objective?

This is where people are more likely to commit to them if they are discussed

What would be a measurable objective?

This must be quantifiable e.g. 10% increase

What would be a specific objective?

This must define exactly what the firm is measuring such as sales or profit

What is social/ethical objectives? (definition)

This requires companies to set targets to maybe reach out to certain communities and have staff on hand to act accordingly to fit with their social benefits

What 3 other phrases can sales revenue be referred to?

Turnover, sales and sales turnover

What is survival? (definition)

Where a company makes just enough money to be able to survive financially

What is cash flow? (definition)

is the movement of money into or out of a business. The measurement of cash flow can be used for calculating other parameters that can give information on a companies value and situation

How do we calculate revenue?

price per unit x number of products sold

What are the 7 commonly set objectives?

profits and profit maximization, growth, survival, cash flow, customer service, diversification and social and ethical objectives

What is sales revenue? (definition)

the money received by a business from the sales of its products or services

What is piece rate labour (definition)

this is where workers are paid in relation to output

What is growth? (definition)

where the company grows and expands, this could be shown by profit margins increasing


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