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Commerce
| Term | Definition |
|---|---|
| Investment options | - managed funds - superannuation - investment accounts - crypto - shares - property - debenture |
| Superannuation | a compulsory savings account where each time you are paid over a certain amount, your employee will allocate a percentage of your income to the account |
| How much super does employer pay | 12% |
| Managed funds | made up of a pool of money that comes from many people who have similar investment goals |
| Investment accounts | accounts that you have with a bank that pay the holder interest based on the value of savings help in the account e.g term deposit |
| Debenture | a long term loan issued by a company to raise money |
| Property | purchasing real estate with the intent of generating financial returns |
| factors influencing a portfolio | - risk -return - diversification - short, medium, long term goals |
| Risk | the possibility of losing all or part of the original finances used in an investment |
| return | the money made or lost on an investment over a period of time |
| volatility | how much the price or value of an investment increases or decreases over time |
| defensive investment portfolio | a low risk investment that is designed to be safe in difficult economic time |
| growth portfolio | include higher risk investment, but which has the potential for greater returns in the long run |
| balanced portfolio | a mix of higher and lower risk assets that balances potenital for return with risk of losing money |
| rate of return equation | profit of investment ÷ original investment x 100 ÷ years of investment |
| capital risk | the risk of potential loss of part or all of an investment |
| example of capital risk | all assets decrease in value (stocks) |
| inflation risk | the risk that the value of an investment doesn't keep up with the rate of inflation |
| example of inflation risk | investments with a small return (term deposit) |
| liquidity risk | the risk that an investment cannot be sold quickly enough to meet financial commitments without impacting the price in the market |
| example of liquidity risk | depend on market price (property) |
| default risk | the risk that a lender take on in the chance that a borrower will be inable to make the required payments on their debt obligation |
| example of default risk | applies to assets (bonds) |
| risk mitigation strategies | - avoid the risk - reduce the risk- diversification - manage the risk - transfer the risk |
| risk mitigation definition | the process of developing strategies to reduce threats to a business or individual overall financial position |
| entrepreneur | a person who sets out to build a successful business in a new field |
| risk of entrepreneur | - leaving a stable job to start the business - investing or borrowing money you may lose |
| advantages of entrepreneur | - your own boss= independence - possibility of making a profit - challenge, reward, satisfaction - increase personal wealth |
| disadvantages of entrepreneur | - hard work/long hours - income may fluctuate - risk of failure - high levels of responsabillity |
| competitive advantage | what sets a business apart from its rivals and allows it to outperform them in the marketplace- unique selling point |
| competitive advantage strategies | - cost leadership - differentiation |
| Online business | a business which runs some or all of its business using the internet |
| on demand business | use technology such as mobile apps to maximize consumer experience |
| small business | - micro- less than 5 employees - small- 5-19 employees |
| large business | 200 or more employees |
| global business | - transnational corporation - a large company that has branches in many countries |
| off shore business | functions performed in different countries - cheaper production costs - lower wages |
| government business enterprises | - government owned and operated - provide essential community services such as health, education, roads and welfare |
| cost leadership | producing/selling goods and services at low prices has strong ability to attract market share |
| differentiation | making a product or service unique and better than its competition can increase market share |
| market share | the percentage of businesses total sales over a certain period that a particular company can claim |
| operations | manage production process to improve efficiency and quality |
| purpose of marketing | builds brand awareness and loyalty by promoting product |
| factors to consider when starting a business | - market research - demographics - target market - location - competition - |
| market research | collecting and analysing information about customers and the business opportunities through primary sources (surveys, interviews) or secondary sources (research) |
| importance of market research | reveals facts and attitudes of customers |
| competition | the rivalry among businesses that seek to satisfy a market |
| importance of competition | - maintain market leadership - increase profitability - build long term customer loyalty |
| competitive advantage | - what sets a business apart from its rivals and allows it to outperform them |
| target market | who will buy the good or service |
| importance of target market | identifying a target market allows businesses to direct products, marketing, and resources towards the customers most likely ro buy the product, increasing sales and efficiency |
| importance of staffing | - operational efficiency of a business - customer satisfaction - operational costs - long term growth |
| Advantages of setting up a new business | - freedom to set up business how owner likes - can determine pace of growth - more flexibility to choose location, target market, range of products, - no goodwill |
| Disadvantages of setting up a new business | - high risk - time consuming |
| Advantages of purchasing an existing business | - business is already running and operating - already has customer base, staff and reputation - already has trained employees |
| Disadvantages of purchasing an existing business | - will need to pay a premium beyond the value of the net physical assets-> goodwill - value of goodwill will be hard to determine - need to do a lot of research |
| Advantages of purchasing a franchise | - established name - franchisor provides training and management backup |
| Disadvantages of purchasing a franchise | - the franchisor controls operations - profits must be shared with franchisor - frachisee must share any burden of the franchisor's business mistakes |
| financing a business | the process of securing fund (capital) needed to start, operate and grow a business |
| methods for financing a business | - debt finance - equity finance |
| debt finance | raising money through short and long term borrowing from external sources e.g bank |
| advantages/disadvantages of debt finance | Adv - money available at short notice - usually not secured against assets Dis - higher interest rates the bank can demand rrepayment - banks may require security |
| Equity finance | a business raises money by selling shares of ownership to investor |
| Advantages/disadvantages of equity finance | Adv - no repayments - investors may have knowledge - reduces financial risk Dis - business owners lose some control and ownership - profits are shared with shareholders |
| Sole trader | a business that is owned and operated by one person- unincorporated |
| unincorporated | - not a speate legal entity from business - unlimited liability |
| unlimited liability | when a business owner is personally responsible for all the debts of their business |
| incorporated | - separate legal entity - limited liability |
| partnership | owned and operated by 2- 20 people |
| private company | - 2- 50 private shareholders - small to medium sizes -family owned business |
| public company | - atleast one shareholder - large in size and a large range of products - minimum of 3 directors |
| factors contributing to the success of a business | - profitability- making more money then the business spends - satisfied customers- loyalty - marketing- attracts new customers |
| factors contributing to the failure of a business | - poor management- owners lack the skills to run the business properly - poor communication-not listening to advice - financial issues- not enough money to start a business, poor cash flow - external factors- recessions, high interest |
| role of operations | will determine how efficiently and effectively the business produces g/s to meet the needs of customers |
| operations management | - consists of all the activities businesses engage in to produce a g/s - uses a trasnformational process that takes inputs from sources and produces outputs |
| inputs | - the resources used in the transformation process - divided into transformed and transforming |
| transformed inputs | - the inputs changed or converted in the operations process e.g materials, information |
| transforming inputs | - the inputs that carry out the transformation process e.g human resource, facilities |
| transformation process | the process of turning inputs into outputs |
| quality management | the process that a business undertakes to ensure consistency, reliability, safety and fitness for purpose |
| purpose of quality management | - determine any issues that need to be rectified or improved |
| quality control | - reactively reduces problems by using inspections sampling - can increase wastage |
| quality assurance | - proactive system to ensure that previously set standards are acheivd in production - does the product do what its meant to? |
| Product | goods (tangible) and services (intangible) that can be offered in exchange for the purpose of satisfying a need or want |
| Price | - the amount of money a customer is prepared to offer in exchange for a product - 3 main pricing methods: cost based pricing, market based pricing, competition based pricing |
| Cost based pricing | - adds markup to the total cost of producing a product and additional costs (interest, insurance) - (total cost of production + additional cost) x markup perceentage = price |
| market based pricing | sets price according to the interaction between supply and demand |
| competition based pricing | sets price in relation to competitors |
| Promotion | describes the methods used by businesses to inform, persuade and remind a target market about its products |
| Place | process of distributing the product from where it is made to the consumer |
| purpose of financial records | - inform decision making monitor progress, sales progress - legal requirements- business registration, documents, leases, contracts, records - tax obligations - enable cash flow |
| profit and loss statement | a summary of the income earned, and the expenses incurred, over a period of trading |
| cash flow statement | indicates the movement of cash inflows and outflows over a period of time |
| balance sheet | shows the financial position of a business at a point in time - record value of assets and value of liabilities |
| how many businesses fail in the first year | 33% |
| Human resources management | the effective management of the formal relationship between an employer and the employees |
| 2 HR strategies | - training - development |
| training | building the current skills, knowledge and attitudes of an employee for superior work performance |
| development | preparing employees for future responsibilities within the organization due to a change in the businesses strategies or a growth in its size or market share |
| Monetary HR reward | additional monetary payments that are given to employees and are beyond the employees minimum legal entitlements for good work |
| types of monetary rewards | direct benefits- wage increase, bonuses, commissions Indirect benefits- company car, insurance, medical and health |
| non monetary HR rewards | includes rewards such as interesting and challenging work |
| work | a person providing services to another person, business or government usually in exchange for some form of remuneration |
| personal benefits of work | - ability to satisfy needs and wants through purchasing g/s |
| economic benefits of work | - contributing to the production of g/s - individuals earn income which leads to taxes in the government |
| key indicators of household economic wellbeing | - disposable income - household debt - net worth - unemployment |
| redistribution of income | government action to transfer income and wealth from some individuals (high income earners) to others (low income earners) through tax and government exoenditure |
| why is redistribution of income important | - without government intervention in the economy, high levels of social inequality occur - creates a more equitable distribution of income |
| taxation | a compulsory charge imposed by the government on individuals and businesses that are used to fund public expenditure |
| 3 types of tax | - income tax - company tax - consumption tax |
| income tax | a proportion of individuals income |
| company tax | business profits |
| consumption tax | the value of goods and services consumed |
| progressive tax | claims an increasing proportion of an individual as income as their income rise |
| government expenditure | Australian Governments spending on various programs and projects. Where the government chooses to direct this spending is set out each year in the budget |
| social security and welfare | government providing financial and other support to individuals and families in need e.g unemployment benefits |
| impacts of government expenditure | - before tax and benefits, housholds in the highest quintile have a disposable income equal to more than 12x the lowest quintile - after tax and benefits, this falls to 5x lowest quintile |
| social enterprsies | a community response to assist the unemployed and support their self esteem |
| employer | an individua; or business that provides work to others in the form of employment |
| employee | someone who provides their services to employers |
| contractor | provide services to others, but generally only for specific projects or for a limited period of time |
| industrial organisations/union | groups that represent and advocate for the rights of workers |
| governments in the workforce | provide rules and regulations that include setting minimum standards for the treatment of employees |
| trade union | organsiations that advocates for the rights of employees |
| types of employment | - contracotr - casual - part time - full time |
| full time employment | - continuing, ongoing employment - 38 or more hours a week - receive a range of entitlements |
| advantages of full time employment | - job security and stable income - access to full employment benefits |
| disadvantages of full time employment | - less flexability in working hours - can lead to work- life imbalances - difficult to pursue other commitments |
| part time employment | - ongoing employment - less then 38 hours a week - number of hours may be flexible - entitlements received on a pro rata basis |
| advantages of part time employment | - greater flexibility - ongoing income with some job security - access to entitlements |
| disadvantages of part time employment | - lower income compared to full time - less entitlements |
| causal employment | - employed on an hourly basis - hours vary from week to week - no access to entitlements |
| features of a self employed employment | an indivual who works for him/her self |
| advantages of self employed | - independence and control over work - flexibility in schedule - potential to earn higher income |
| disadvantages of self employed | - no access to employee entitlements - must manage own finances and taxes - unsatble income |
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