Foundations of Business
Management IB
◍ Added Value. Answer: The difference between a product's price and
the total cost of the inputs that went into making it; the extra worth
created in the production process.
◍ Businesses. Answer: Organizations that are involved in the
production of goods and/or the provision of services.
◍ Capital. Answer: All non-natural resources used in the production
process; examples: money, resources (machinery, tools, equipment,
factories).
◍ Division of Labor. Answer: The specialization of workers in the
provision of goods and/or services by breaking a job down into
particular roles or components that are repeated by the same workers.
◍ Entrepreneurs. Answer: People who manage, organize, and plan the
other three factors of production; risk takers who exploit business
opportunities in return for profits.
◍ Factors of Production. Answer: The inputs (or resources) necessary
for the production process: land, labor, capital, and enterprise (aka
entrepreneurship).
,◍ Functional Areas. Answer: Refer to the different sections of a
business, i.e. marketing, production, finance, and human resource
departments.
◍ Labor. Answer: The physical and mental human effort used in the
production process.
◍ Land. Answer: Natural resources that can be found on the planet,
including renewable and non-renewable natural resources such as water,
fish, wood, and physical land itself.
◍ Opportunity Cost. Answer: The cost measured in terms of the next
best alternative that is foregone when a choice is being made, e.g. money
today can be either spent for immediate benefit or saved for the future.
◍ Primary Sector. Answer: The businesses involved in the cultivation or
extraction of natural resources, such as farming, mining, quarrying,
fishing, oil exploration, and forestry.
◍ Secondary Sector. Answer: The section of the economy where
business activity is concerned with the construction and manufacturing
of physical products; automation and mechanization in modern societies
has seen this sector decline in terms of employment.
◍ Tertiary Sector. Answer: The section of the economy where business
activity is concerned with the provision of services to customers; in
,modern societies, it is the largest sector in terms of employment and
output.
◍ Articles of Association. Answer: the document that sets out the
internal organization and rules of a limited company, including the
powers of each director and voting rules; a compulsory document
needed to set up a company
◍ Certificate of Incorporation. Answer: the document issued to a limited
company to show that it has been legally formed and is therefore a
separate legal entity from its owners; this certificate allows the company
to begin trading shares
◍ charities. Answer: not-for-profit organizations that are established to
support good causes, from society's point of view; examples include the
prevention of animal cruelty, the preservation of the natural
environment, or providing assistance to the elderly
◍ company. Answer: a business that is owned by shareholders; it
possesses a certificate of incorporation that gives it a separate legal
identity from its owners
◍ Deed of Partnership. Answer: the legal contract signed by the owners
of a partnership; the formal document includes the fundamental issues of
the business, such as the name and responsibilities of each partner and
their share of any profits or losses
, ◍ incorporation. Answer: there is a legal difference between the owners
of a company and the business itself that ensures that the owners are
safeguarded against any losses made by the company as the owners are
protected by limited liability
◍ limited Liability. Answer: a restriction on the amount of money that
can be lost from the owners of a business if it goes into bankruptcy; the
owners will lose no more than the amount of capital that they put into
the business
◍ Memorandum of Association. Answer: the name of one of the legal
documents required to create an incorporated company; it includes the
basic information of the organization such as the name and address of
the company, its objectives, and details of its share capital
◍ Non-governmental organization (NGO). Answer: any private sector
organization that does not primarily aim to make a profit; rather, they
operate for the benefit of others in society; examples include World
Wildlife Fund and Friends of the Earth
◍ Partnership. Answer: a form of private sector business owned by 2-20
people (partners) who share the responsibilities and burdens of running
and owning the business
◍ Private Limited Company. Answer: a business organization owned by
shareholders with limited liability but whose shares cannot be bought by
or sold to the general public
Management IB
◍ Added Value. Answer: The difference between a product's price and
the total cost of the inputs that went into making it; the extra worth
created in the production process.
◍ Businesses. Answer: Organizations that are involved in the
production of goods and/or the provision of services.
◍ Capital. Answer: All non-natural resources used in the production
process; examples: money, resources (machinery, tools, equipment,
factories).
◍ Division of Labor. Answer: The specialization of workers in the
provision of goods and/or services by breaking a job down into
particular roles or components that are repeated by the same workers.
◍ Entrepreneurs. Answer: People who manage, organize, and plan the
other three factors of production; risk takers who exploit business
opportunities in return for profits.
◍ Factors of Production. Answer: The inputs (or resources) necessary
for the production process: land, labor, capital, and enterprise (aka
entrepreneurship).
,◍ Functional Areas. Answer: Refer to the different sections of a
business, i.e. marketing, production, finance, and human resource
departments.
◍ Labor. Answer: The physical and mental human effort used in the
production process.
◍ Land. Answer: Natural resources that can be found on the planet,
including renewable and non-renewable natural resources such as water,
fish, wood, and physical land itself.
◍ Opportunity Cost. Answer: The cost measured in terms of the next
best alternative that is foregone when a choice is being made, e.g. money
today can be either spent for immediate benefit or saved for the future.
◍ Primary Sector. Answer: The businesses involved in the cultivation or
extraction of natural resources, such as farming, mining, quarrying,
fishing, oil exploration, and forestry.
◍ Secondary Sector. Answer: The section of the economy where
business activity is concerned with the construction and manufacturing
of physical products; automation and mechanization in modern societies
has seen this sector decline in terms of employment.
◍ Tertiary Sector. Answer: The section of the economy where business
activity is concerned with the provision of services to customers; in
,modern societies, it is the largest sector in terms of employment and
output.
◍ Articles of Association. Answer: the document that sets out the
internal organization and rules of a limited company, including the
powers of each director and voting rules; a compulsory document
needed to set up a company
◍ Certificate of Incorporation. Answer: the document issued to a limited
company to show that it has been legally formed and is therefore a
separate legal entity from its owners; this certificate allows the company
to begin trading shares
◍ charities. Answer: not-for-profit organizations that are established to
support good causes, from society's point of view; examples include the
prevention of animal cruelty, the preservation of the natural
environment, or providing assistance to the elderly
◍ company. Answer: a business that is owned by shareholders; it
possesses a certificate of incorporation that gives it a separate legal
identity from its owners
◍ Deed of Partnership. Answer: the legal contract signed by the owners
of a partnership; the formal document includes the fundamental issues of
the business, such as the name and responsibilities of each partner and
their share of any profits or losses
, ◍ incorporation. Answer: there is a legal difference between the owners
of a company and the business itself that ensures that the owners are
safeguarded against any losses made by the company as the owners are
protected by limited liability
◍ limited Liability. Answer: a restriction on the amount of money that
can be lost from the owners of a business if it goes into bankruptcy; the
owners will lose no more than the amount of capital that they put into
the business
◍ Memorandum of Association. Answer: the name of one of the legal
documents required to create an incorporated company; it includes the
basic information of the organization such as the name and address of
the company, its objectives, and details of its share capital
◍ Non-governmental organization (NGO). Answer: any private sector
organization that does not primarily aim to make a profit; rather, they
operate for the benefit of others in society; examples include World
Wildlife Fund and Friends of the Earth
◍ Partnership. Answer: a form of private sector business owned by 2-20
people (partners) who share the responsibilities and burdens of running
and owning the business
◍ Private Limited Company. Answer: a business organization owned by
shareholders with limited liability but whose shares cannot be bought by
or sold to the general public
