AQA A LEVEL BUSINESS NOTES FOR THE ENTIRE
SPECIFICATION (YEARS 1 AND 2)
UNIT 1
1. Why businesses exist- they exist to provide a good or service, the
customers can be individuals or the government, if they meet the needs
of the customer, they are likely to be successful. They usually start
small/ in a small group. An entrepreneur will have a business idea, set it
up, encourage it to grow and risk making a profit or a loss. Reasons to
set up a business: gap in market or talent they want to pursue.
2. All businesses have a purpose, mission, goal and objectives.
3. Mission- organisations aims or long-term intentions, ultimate purpose.
4. Mission statement- a qualitative statement which convinces
stakeholders of its sincerity and commitment.
Disney’s mission- world’s leading producer of entertainment/information-
do this by- using portfolio of brands to differentiate
5. Objectives enable business to reach its aims or mission.
6. Corporate objectives- goals of the whole organisation. They give the
organisation a sense of direction, guide its actions and help co-ordinate
it.
7. Functional- objectives that each area of the business has (finance,
marketing, hr, operations) to achieve the corporate objectives and
therefore the aim or mission. They guide the actions of the organisation,
give it a sense of direction and help co-ordinate it.
8. Objectives act as a yardstick to measure how well the business is
performing.
9. Objectives need to be specific, measurable, achievable, realistic and time
based.
10. Once objectives are set, they can work out strategies which are medium
to long term plans to achieve objectives.
11. Profit maximisation is the most important objective, and most firms will
aim for a level of profit which satisfies owners. They need functional
objectives to achieve this overall objective: improve marketing to
increase sales, minimise costs to improve profit margins, reduce staff
turnover and absenteeism. Level of competition and state of economy
may affect profit.
, 12. Growth involves increasing market share, increasing number of sites or
business areas, increasing sales turnover. Functional objectives to
achieve this include increasing market share, recruiting more employees,
retaining profit. The state of economy and size of market may affect this.
13. Survival is key for new businesses in a competitive market and when
incomes fall, and demand is weak. Functional objectives to achieve this
are: maintaining the required level of staff to meet production needs,
achieving minimum level of sales revenue to meet costs, maintaining
appropriate levels of stock to meet demand.
14. Must ensure there is sufficient cash flow flowing into the business in a
period of time to cover the amount they need to pay, it is vital. Even
profitable firms can be vulnerable if cash flow is poor.
15. Not for profit organisations have social and ethical objectives (paying
fair wage or helping environment.)
Hm- one of most ethical businesses in world- social/ethical objectives-
becoming 100 percent climate positive, using 100 percent recycled
materials
16.Diversification is when the business produces completely new products
in a new market. They may do this to spread risk, increase profit and
growth, if one market fails they have the other.
17. Achieve market standing to improve reputation and corporate image
which will assist in other objectives like growth and profit.
18. Meet the needs of other stakeholders.
MEASUREMENT AND IMPORTANCE OF PROFIT
19. Price is what the consumer pays, cost is what the business pays.
20. Total revenue is also known as income or turnover. TR= average selling
price x quantity sold.
Fixed costs are costs that do not vary directly with the level of output (rent, salaries,
marketing) variable do vary directly with level of output (raw materials, wages).
Total variable costs= variable costs per unit x number of units sold.
21. Profit is the difference between income and total costs, to improve
profit: reduce costs and increase sales revenue.
22. Profit is a reward- compensates for this risk that shareholders take
when purchasing shares in a business. It is paid out of dividends, without
this opportunity it’s unlikely they would invest.
23. Motivator- sole traders keep profits, profit sharing schemes.
24. Measure success- compare profits with competitors and previous years
to assess performance.
25. Guide for future investment- investors use changes in profit levels as a
guide to the markets where it’s easier to make profit.
,26. Source of finance- most profit is retained to fund expansion or capital
investment. It’s convenient, doesn’t need to be repaid, no interest.
27.Attractive to stakeholders- more workers want to apply for jobs,
customers want to buy, suppliers want to enter into contracts.
28.WHAT IS THE EFFECT ON R IF THERE IS A CHANGE IN SV?- assume selling
price remains same. If SV DOUBLES, R DOUBLES. IF SV FALLS BY 10% SO
DOES R.
29.WHAT IS THE EFFECT ON COSTS IF THERE IS A CHANGE IN OUTPUT?-
assume that total VC change by same % as output. If output doubles, VC
DOUBLE, IF OUTPUT FALLS BY 10% SO DOES VC BUT FC STAY THE SAME.
UNIT 2 BUSINESS FORMS
1. Private sector organisations are owned, financed and run by private
individuals, can be sole trader or multinational company. Some are
profit, some non-profit.
2. Public sector organisations are owned and operated by the government,
they provide essential services, street lights, healthcare.
3. Unincorporated- no distinction in law between the business and the
owner, identity of business and owner is the same. (sole trader,
partnership)
4. Incorporated- the business has its own legal identity separate from the
owner. Can enter into contracts, own and owe assets (plc, ltd)
5. Unlimited liability- feature of unincorporated business, the business and
owner are one legal identity, owner is responsible for debts business
incurs and possessions aren’t protected from paying debts.
6. Limited liability- incorporated business, business is separate legal
identity to owner. Owners are limited to the fully paid up value of share
capital, funds are protected.
7. Sole trader- owned by one person, operate on their own or employ
other people. Unlimited liability, little capital for expansion so rely on
owners’ commitment.
8. Ltd- small to medium sized business run by small group of individuals,
only family and friends can buy and sell shares. Share capital less than
£50000, affairs are private so they can focus on their own objectives
instead of short-term profit.
9. Plc- business with limited liability, share capital over £50000, two
shareholders, company secretary, two directors. Constantly under
financial scrutiny, involves loss of control, short termism- focus on short
, term profits for shareholders and maintain share price to avoid takeover
pressure.
10. Sole trader advantages- easy and cheap to set up, few legal formalities,
independence, owner keeps all profit, more privacy, respond quickly to
circumstances. Disadvantages- limited collateral when applying for
loans, difficulty when owner is ill, limited capital for expansion and
investment, limited skills, unlimited liability.
11. Ltd advantage- more privacy than plc, more flexibility, limited liability
and separate identity, more capital than unincorporated business.
Disadvantage- shares less attractive as can’t be traded on stock
exchange SO DIFFICULT TO SELL, harder to raise finance for expansion,
legal formalities.
12. Plc advantage- limited liability and separate legal identity, positive
publicity due to trading shares on stock exchange, raise capital easily
due to stock exchange, suppliers more willing to offer credit.
Disadvantage- publish lots of financial info, under pressure if not
performing well and scrutiny from the press, less privacy, administrative
expenses, founders can lose control if shareholding falls below 51%,
stock exchange LISTING and pressure from investors= short term
financial results instead of long term performance.
13. Ordinary share capital is the money given to a company by shareholders
in return for a share certificate, giving them part ownership of the
business, its permanent so doesn’t need to be repaid. Shareholders have
voting rights in proportion to the number of shares they own. They
receive dividends.
14. Dividends is the payment made to shareholders out of profit earned,
fixed amounts per share, they receive a dividend in proportion to their
shareholding. A company can reinvest their profit or pay dividends.
15. Market capitalisation- the value of the issued ordinary shares of a plc.
Current share price of individual share x number of issued ordinary
shares. Indication of net worth.
16. MARKET CAP- no of issued ordinary shares X price of 1 share AT
CURRENT MARKETN PRICE.
17.ORDINARY SHARE CAPITAL- no of issued ordinary shares X price of 1
share AT 1ST ISSUE.
18.The difference is that- OSC uses price of shares at time they were first
issued and MC uses at the current market price.
19. If the value of initial ordinary share capital is identical to market cap,
this is because current market price is the same as initial share price.
SPECIFICATION (YEARS 1 AND 2)
UNIT 1
1. Why businesses exist- they exist to provide a good or service, the
customers can be individuals or the government, if they meet the needs
of the customer, they are likely to be successful. They usually start
small/ in a small group. An entrepreneur will have a business idea, set it
up, encourage it to grow and risk making a profit or a loss. Reasons to
set up a business: gap in market or talent they want to pursue.
2. All businesses have a purpose, mission, goal and objectives.
3. Mission- organisations aims or long-term intentions, ultimate purpose.
4. Mission statement- a qualitative statement which convinces
stakeholders of its sincerity and commitment.
Disney’s mission- world’s leading producer of entertainment/information-
do this by- using portfolio of brands to differentiate
5. Objectives enable business to reach its aims or mission.
6. Corporate objectives- goals of the whole organisation. They give the
organisation a sense of direction, guide its actions and help co-ordinate
it.
7. Functional- objectives that each area of the business has (finance,
marketing, hr, operations) to achieve the corporate objectives and
therefore the aim or mission. They guide the actions of the organisation,
give it a sense of direction and help co-ordinate it.
8. Objectives act as a yardstick to measure how well the business is
performing.
9. Objectives need to be specific, measurable, achievable, realistic and time
based.
10. Once objectives are set, they can work out strategies which are medium
to long term plans to achieve objectives.
11. Profit maximisation is the most important objective, and most firms will
aim for a level of profit which satisfies owners. They need functional
objectives to achieve this overall objective: improve marketing to
increase sales, minimise costs to improve profit margins, reduce staff
turnover and absenteeism. Level of competition and state of economy
may affect profit.
, 12. Growth involves increasing market share, increasing number of sites or
business areas, increasing sales turnover. Functional objectives to
achieve this include increasing market share, recruiting more employees,
retaining profit. The state of economy and size of market may affect this.
13. Survival is key for new businesses in a competitive market and when
incomes fall, and demand is weak. Functional objectives to achieve this
are: maintaining the required level of staff to meet production needs,
achieving minimum level of sales revenue to meet costs, maintaining
appropriate levels of stock to meet demand.
14. Must ensure there is sufficient cash flow flowing into the business in a
period of time to cover the amount they need to pay, it is vital. Even
profitable firms can be vulnerable if cash flow is poor.
15. Not for profit organisations have social and ethical objectives (paying
fair wage or helping environment.)
Hm- one of most ethical businesses in world- social/ethical objectives-
becoming 100 percent climate positive, using 100 percent recycled
materials
16.Diversification is when the business produces completely new products
in a new market. They may do this to spread risk, increase profit and
growth, if one market fails they have the other.
17. Achieve market standing to improve reputation and corporate image
which will assist in other objectives like growth and profit.
18. Meet the needs of other stakeholders.
MEASUREMENT AND IMPORTANCE OF PROFIT
19. Price is what the consumer pays, cost is what the business pays.
20. Total revenue is also known as income or turnover. TR= average selling
price x quantity sold.
Fixed costs are costs that do not vary directly with the level of output (rent, salaries,
marketing) variable do vary directly with level of output (raw materials, wages).
Total variable costs= variable costs per unit x number of units sold.
21. Profit is the difference between income and total costs, to improve
profit: reduce costs and increase sales revenue.
22. Profit is a reward- compensates for this risk that shareholders take
when purchasing shares in a business. It is paid out of dividends, without
this opportunity it’s unlikely they would invest.
23. Motivator- sole traders keep profits, profit sharing schemes.
24. Measure success- compare profits with competitors and previous years
to assess performance.
25. Guide for future investment- investors use changes in profit levels as a
guide to the markets where it’s easier to make profit.
,26. Source of finance- most profit is retained to fund expansion or capital
investment. It’s convenient, doesn’t need to be repaid, no interest.
27.Attractive to stakeholders- more workers want to apply for jobs,
customers want to buy, suppliers want to enter into contracts.
28.WHAT IS THE EFFECT ON R IF THERE IS A CHANGE IN SV?- assume selling
price remains same. If SV DOUBLES, R DOUBLES. IF SV FALLS BY 10% SO
DOES R.
29.WHAT IS THE EFFECT ON COSTS IF THERE IS A CHANGE IN OUTPUT?-
assume that total VC change by same % as output. If output doubles, VC
DOUBLE, IF OUTPUT FALLS BY 10% SO DOES VC BUT FC STAY THE SAME.
UNIT 2 BUSINESS FORMS
1. Private sector organisations are owned, financed and run by private
individuals, can be sole trader or multinational company. Some are
profit, some non-profit.
2. Public sector organisations are owned and operated by the government,
they provide essential services, street lights, healthcare.
3. Unincorporated- no distinction in law between the business and the
owner, identity of business and owner is the same. (sole trader,
partnership)
4. Incorporated- the business has its own legal identity separate from the
owner. Can enter into contracts, own and owe assets (plc, ltd)
5. Unlimited liability- feature of unincorporated business, the business and
owner are one legal identity, owner is responsible for debts business
incurs and possessions aren’t protected from paying debts.
6. Limited liability- incorporated business, business is separate legal
identity to owner. Owners are limited to the fully paid up value of share
capital, funds are protected.
7. Sole trader- owned by one person, operate on their own or employ
other people. Unlimited liability, little capital for expansion so rely on
owners’ commitment.
8. Ltd- small to medium sized business run by small group of individuals,
only family and friends can buy and sell shares. Share capital less than
£50000, affairs are private so they can focus on their own objectives
instead of short-term profit.
9. Plc- business with limited liability, share capital over £50000, two
shareholders, company secretary, two directors. Constantly under
financial scrutiny, involves loss of control, short termism- focus on short
, term profits for shareholders and maintain share price to avoid takeover
pressure.
10. Sole trader advantages- easy and cheap to set up, few legal formalities,
independence, owner keeps all profit, more privacy, respond quickly to
circumstances. Disadvantages- limited collateral when applying for
loans, difficulty when owner is ill, limited capital for expansion and
investment, limited skills, unlimited liability.
11. Ltd advantage- more privacy than plc, more flexibility, limited liability
and separate identity, more capital than unincorporated business.
Disadvantage- shares less attractive as can’t be traded on stock
exchange SO DIFFICULT TO SELL, harder to raise finance for expansion,
legal formalities.
12. Plc advantage- limited liability and separate legal identity, positive
publicity due to trading shares on stock exchange, raise capital easily
due to stock exchange, suppliers more willing to offer credit.
Disadvantage- publish lots of financial info, under pressure if not
performing well and scrutiny from the press, less privacy, administrative
expenses, founders can lose control if shareholding falls below 51%,
stock exchange LISTING and pressure from investors= short term
financial results instead of long term performance.
13. Ordinary share capital is the money given to a company by shareholders
in return for a share certificate, giving them part ownership of the
business, its permanent so doesn’t need to be repaid. Shareholders have
voting rights in proportion to the number of shares they own. They
receive dividends.
14. Dividends is the payment made to shareholders out of profit earned,
fixed amounts per share, they receive a dividend in proportion to their
shareholding. A company can reinvest their profit or pay dividends.
15. Market capitalisation- the value of the issued ordinary shares of a plc.
Current share price of individual share x number of issued ordinary
shares. Indication of net worth.
16. MARKET CAP- no of issued ordinary shares X price of 1 share AT
CURRENT MARKETN PRICE.
17.ORDINARY SHARE CAPITAL- no of issued ordinary shares X price of 1
share AT 1ST ISSUE.
18.The difference is that- OSC uses price of shares at time they were first
issued and MC uses at the current market price.
19. If the value of initial ordinary share capital is identical to market cap,
this is because current market price is the same as initial share price.
