Business Studies

BLACKBOARD EDUCATION
BUSINESS
STUDIES
IN 5 DAYS
A revision for Business IGCSE, GCSE,
O Level, As level
BLACKBOARDEDUCATION.ORG Page 1 of 113

Economic problem
• Need: a good or a service essential to
survive/live.
• Want: a good or service which people
would like to have but can live without
it.
• Scarcity: is a lack of resources to fulfil
a need or want
• Economic problem: all resources in the
world are scarce but needs and wants
are unlimited

Factors of are all the resources
needed to produce
production goods and services.

There are 4 factors of
production:
Labor
Human resource, all
Land
Natural resource,
employees and everything provided by
manager in the
the nature
business
Capital Entreprise
Man made resources, the skill and ability to
used to produce organise and use to above
further goods. Money resources to produce goods
and Machinery and services

Opportunity
cost
Is the next best alternative given
up. The cost of letting go
something when choosing the
most suitable one.

Specialisation
When a government or a company
or an employee focus on putting all
their efforts and resources in only
one thing that they are very good
at. So they can make it perfectly;
leads to high output, high quality
and low cost.

Division of
Labour
Is when a specialisation is at an
employee level, when a process is
divided into smaller jobs and each
employee will only focus on the job he/
she is good at.
Because they are only doing the work they are

very good at, this will increase productivity, work
will be faster and quality will be high

Stages of
Economic
activity
• Primary sector of an industry focus in
extracting natural resources from the
earth to be used as raw material for
business (Fish, Oil, vegetables, coal)
• Secondary sector of an industry focus in
using the raw material provided by the
primary sector to produce or
manufacture goods. (Car manufacturing,
construction, baking)
• Tertiary sector of an industry focus in
providing services to consumer and
businesses (Teaching, banking, hotel,
retailing)
• De-industrialization: moving out of
secondary sector and focusing on
tertiary or primary sector.

Sectors in an
economy - by
ownership
• Private sector: Businesses are not owned
by the Government and all are owned by
Private individuals and firms, they make the
decision of how much to produce and what
price to charge
• Public sector: All Businesses are owned by

the Government who makes the decision of
what to produce and what price to charge
• Mixed economy: An economy which is a

mixture of both, private and public sector

Entrepreneur
A person who starts a new business, he
organises factors of production
(resources) to set up the business, he
takes all the risks and runs the new
business venture. He comes up with a
business idea and work hard to make the
Some of the features of an entrepreneur

includes: being a risk taker, an innovator,
hard worker and a decision maker

Business plan
Business Plan: a document prepared
by a business which contains the
business objective, marketing
strategies, financial and operational
planning.
Preparing this document can help them

to:
1. Get loan from the bank by showing it

to the bank manager
2. Convince people to invest in the

business by showing this detailed
document to them

Comparing the size of
the business
• Number of employees
If the business has more employees, this means its a
large business
• Value of output
If the business producing a large number of output,
this means its a large business
• Value of sales
If the business is making more sales, selling lots of
products this means it is a large business
• Value of capital employed
If theres a large amount of capital invested in the
business, this will mean that the business is a large
business

Growth
• Internal Growth: Growing from within the business by Profits. This can
be done by simply using the leftover profit to make a new branch,
increase production and try to use internal resources to increase the
size of the business.
• External Growth: This is when you try to join with other businesses
to make your business big, you can join the other business by:
• Merger: join with other firms, two businesses willingly join

together to become a large business
• Takeover: buys another business, when one business forcefully

buys out another business to make itself bigger

External Growth
• Horizontal Integration: An external growth, when a firm merges or
takeover another firm in the same industry and at the same stage of
production. The firm usually takes over it’s competitor business, which
is making a similar product. For example: Apple merges of takeover
Samsung
• Vertical integration: An external growth, when a firm merges or

takeover another firm in the same industry but a different stage of
production.
The firm usually merges or takeover it’s supplier (vertical

backward) or the firm usually takeover or merge with the firm in
the next level of production (vertical forward)
• Conglomerate: an external growth, when a firm merges or takeover

another firm in a different industry. This is when the firm merges or
takeover with a completely different business. For example an ice
cream company merges or takeover a tyre shop.

UNLIMITED LIABILITY
• In case of business failure, the owner of the business
will have to pay all the debtors by selling the business
and also selling the owners personal belonging
Limited LIABILITY
• In case of business failure, the owner of the business
will only have to pay all the debtors by selling the
business, they do not need to sell their personal
belonging to pay the debtors.

Types of
BUSINESS
ORGANISATION
• Sole Traders
• Partnership
• Private limited company
• Public limited company
• Franchise
• Joint Venture

sOLE trader
When there is only one business owner. He
takes all the risks, does all the work, pays for
all the expenses and makes all the profits.
Advantages of being a sole trader:
1. Takes all the profits
2. Makes all the decisions
3. His own boss
4. Easy to start a sole trader
Disadvantages of being a sole trader:
1. Takes all the risks
2. Does all the work, no one to share the work.
3. Unlimited liability: incase of business failure, he will have to pay all the
debts from his personal funds.
4. If he is sick or dies, the business will stop.

Partnership
When 2 or 20 partners join together to start
and run a business, they share the resources,
share the investments, share the work load
and share the profits.
Advantages of a partnership:
1. Share the work load
2. Bring expertise to the business
3. Share costs
4. Share risk
5. Share investments
Disadvantages of a partnership:
1. Share the profit
2. Need partners approval to do a task
3. Unlimited liability: incase of business failure, he will have to pay all the debts
from his personal funds.
4. Disagreement in partnership

Private limited company
When a business plans to increase investment, it will sell it’s shares to friends and
family members. Those who will buy the share will also become a part owner of
the business. The more shares you buy, the bigger part in business ownership you
have and the business will generate more investment. The share holder gets
dividends (profits) every year. The amount of profit depends on the amount of
shares they have purchased.
Advantages of a Private limited company:
1. Generate investment
2. Ownership is shared with trustworthy people
3. Founder gets to keep the maximum shares
4. Limited liability: owners and shareholders only loose their investment in business not their
personal belongings
Disadvantages of a Private limited company:
1. Ownership and control is shared
2. Profits are shared
3. Business information is shared

Public limited company
When a business plans to increase investment, it will sell its shares
to the open public, anyone can buy. Shares are sold on the stock
exchange market. Those who will buy the share will also become
a part owner of the business. The more shares you buy, the bigger
part in business ownership you have and the business will
generate more investment. The share holder gets dividends
(profits) every year. The amount of profit depends on the amount
of shares they have purchased.
Advantages of a Public limited company:
1. Generate bigger investments
2. Limited liability: owners and shareholders only loose their investment in

business not their personal belongings
Disadvantages of a Private limited company:
1. Ownership and control is shared
2. Profits are shared
3. Business information is shared

Franchise
When a Franchisor (owner of the business) gives right of business (license)
to a Franchisee (person who wishes to use Franchisor’s name and product)
Franchisor gives:
Business Name
Business's products
Training
Advertisement
Rules and procedures
Franchisee gives:
Investment
Management
Follow rules and procedures
Licensing fee
Royalty

Joint venture
When two or more business
join together to create a
third business or a project
• Share resources
• Share profits
• Share expertise
• Continue with their own
business and products

STAKEHOLDERS
Any person or a group which has a direct interest in activity of
the business
• Internal Stake holders: work for the business or inside the

business
example: Owners, workers, managers.
• External Stake holders: work outside the business

example: Customers, Government, community, banks and

HUMAN
RESOURCE
People in Business

MOTIVATION
Motivation: willingness of the employees to do a task,
this is when the employee enjoy the work itself
Benefits of motivation:
• Low absenteeism
• Low labour turnover
• Good relationship with managers, staff and customers
• Increase productivity, leading to lower costs and
increase profits

Motivational
theories
Fredrick Taylor’s theory of
external factors
Abraham Maslow’s Hierarchy

of Need
Fredrick Herzberg’s theory

of Hygiene and motivators

Motivational theory by
Fredrick taylor
Money is the motivator
• Divided job in to smaller tasks
• Found efficient ways to complete the tasks
• Timed the tasks
• Trained the employee
• Give reward (money) to those who finish within the time
A few problems with his ideas:

• Employees are motivated by many thing and not just money
• Cannot measure different jobs

Abraham maslow
• He believed employees have needs and if we satisfy them
they will be motivated.
• He made a hierarchy and believed employees should achieve
each level to get motivated
• He believed Managers should identify the level of need an
employee is on and should know when to provide the next
level of need

Fredrick Herzberg
He believed humans have two set of Needs: Motivators and
Hygiene
Hygiene Factors must be satisfied. If they are not provided
the employees will be demotivated, if they are provided,
the employees will NOT be motivated as they are basic
factors
Motivators are the factors which will motivate the
employee to work hard and enjoy his job

Financial motivational
factors
Salary: paid monthly
Wage: paid daily or weekly. It is also given on hourly
work or piece rate
Commission: paid when you sell something, only given
when an employee makes sale as an incentive
Bonus: given at the end of the year if the employee has
performed well.
Performance related pay: after carefully evaluating
employee performance throughout the year, an
employee is given a pay raise
Profit sharing: employees are given some percent of
profit
Share ownership: employees are given shares of the
company, they can get dividends every year or can
further sell the shares.

Non Financial motivator
factors
• Fringe Benefits: extra benefits given to an employee,
like a company car, a house or a phone.
• Job Re design
• Job Rotation: when employee jobs are changed
often so they are not bored doing the same job
repeatedly
• Job Enrichment: when employees are given extra
tasks, which are complex and might need more
training to do these tasks
• Job Enlargement: when employees are given extra
task to perform at work, these tasks are not
complex.
• Training: training and learning new skills at work

motivates employees
•

Organisational structure
• Chain of command: a structure of the organisation which
allows information to pass down from senior to lower level
• Span of control: number of subordinates working under a

manager
• Line Managers: a manager who is directly controlling a

team
• Delegation: giving authority to a subordinate to perform a

task

Role of managers
• Planning: planning for future objective and identifying
what resources are required to achieve the objectives
and what resources do we have
• Organising: bringing together all the resources to reach

the planned goal
• Coordinating: coordinating with people and other

departments
• Commanding: supervise and lead so the targets are met
• Controlling: measure and evaluate work of all people

and groups to help with performance

Leadership styles
Different approaches of dealing with employees
• Autocratic: managers makes all the decisions and make

sure everyone follows their order
• Democratic: managers bring employees in the decision

making process, listen to suggestions and make a decision
• Laissez Faire: managers leave the decisions making on the

employees and let them finish the task in their own way

Trade union
Trade Union: A group of workers in a business who join
together to make sure their rights are protected, trade
union normally appoints a head, a leader for the trade
union. The leader talks to the management and share
employee’s concerns. Below are the benefits of joining a
trade union:
• Advice and support to employees
• Improve pay
• Protect employee’s rights
• Improve working hours

Recruitment process
1. Vacancy arises: when the business identifies that
there is a need of a new employee to do a specific
task.
2. Job description: listing down the job and tasks to
be done on the daily basis.
3. Job specification: listing down most suitable
qualifications and skills needed in the person
4. Internal recruitment: hiring a person from within
the organisation, when the job is only advertised
internally and not externally to the public.
5. External Recruitment: hiring a person from outside
the organisation and not from inside.
6. Application and CV: first shortlisting process, going
through CV and application to find a suitable
employee
7. Interview and Testing
8. Vacancy filled

Training
Induction Training: First day orientation, given to a new
employee, explaining procedures, introducing to other
employees
On the Job Training: when an employee is asked to shadow
and watch an experienced employee doing the same job
Off the Job Training: when an employee is trained away
from his desk, maybe in some training hall or in a university

Redundancy and
dismissal
Redundancy: Employee is no longer needed as the job is
not needed, it has nothing to do with employee
performance and behaviour
Dismissal: Employee is no longer needed because of his

behaviour or performance, which is not liked by the
organisation.

MARKETING
DEPARTMENT

SUB DEPARTMENTS IN THE
MARKETING DEPARTMENT
Sales Department: Deals with sales of products and services inside
the country and exports. Could be business to business (b2b) or
business to consumer (b2c) sales
Market research Department: Deals with finding out what

customer wants, what the competitor is doing so they can make
their product better
Promotion department: Deals with finding the right way of

promoting and advertising the business and it’s products
Distribution department: Deals with transporting and distributing

the product to final consumer

Role of marketing
Identify customer need: marketing tried to understand what customer wants, so they
can make the product according to their needs. They can find this out by market research and
communicating with the customer.
Satisfy customer need: once the marketing department knows what customer wants, it
will make the product according to their needs so the customer needs are met and marketing
makes more sales.
Maintain customer loyalty: making sure that the customers are coming back and
purchasing from us and not going to the competitors.
Gain information about customer: they gain more information about customers
taste, choice and what they like, through market research
Anticipate changes in customer need: trying to find out when the customer’s
needs will change so they can prepare accordingly.

Mass market vs niche market
Mass Market: very large number of buyers and sellers. Products
are used by the whole market
• High level of competition
• Low production cost due to large production (economies of
scale)
• Standardise product
• Unskilled labour
Niche Market: small number of product sold to a smaller market.

Less competition
High production cost
Skilled labour
Expensive products

Market segmentation
Market segmentation: dividing the market in to small sub group with
similar characteristics, this helps target the right customer for the
product
•
• Socio economic group: income
• Age
• Region/location
• Gender
• Life style

Product oriented vs market
oriented
Product oriented business: A business which only focus on the
product, once they make the product and then they try to
find a market for it. Normally innovative products
Market oriented business: A business which carries out

market research first, try to understand what customer want
and then make a product accordingly

Market research
Market research: a process of gathering,
analysing and interpreting information
about the market, competitor and
customer to help make a better product
to satisfy customer needs
Two types of market research:
Primary research: the research is done the first time, has

never been done before (field research)
Secondary research: the research has already been done

before, we can access the research and use it (desk research)

Primary research
Primary Research: Collection for the first hand data
which has not been collected in the past. It is also
called field research as the research has never been
done and the researcher will have to go out and collect
the date through the following types of primary
research methods
• Surveys
• Questionnaire: designing a list of questions and asking people to write
answers.
• Interview: drafting a list of questions and asking people to answer these
questions.
• Focus Group: bringing a group of people together who can discuss a
topic and you can gather information
• Observations
• Observing people silently and making notes, no questions are asked, the
researcher quietly observes.

Secondary research
Secondary Research: A process of collecting used or
second hand data, the data has been collected by
someone or an organisation in the past, it is also
called Desk research
• Internal secondary research: (within departments) when you

simply ask other departments in the business if they have already conducted the
research and willing to share.
• External Secondary research: (Government, newspaper,

agencies, internet) there are many such sources who have already conducted the
research and are willing to share the research

SAMPLE
• Sample: is a group of people selected to represent
the complete target market, the market research is
conducted on the chosen group, who are called a
sample.
• Random sampling: when a sample to be research is

chosen at random, which means anyone can be part
of the sample, there are no criteria to enter a
sample. Maybe a computer a can do a lucky draw to
put people in the sample
• Quota sampling: when a sample to be researched is

first characterised into smaller segments such as
age, income and gender and a specific number/
quote of people are chosen from each segment. Once
they have the required number of people from each
segment, then the research is conducted.

MARKETING MIX
Marketing Mix: are all the activities used into
marketing a product. These activities are called
marketing mix or 4Ps
•
• Product (features, design, packaging, product life)
• Price (the right price)
• Place (distribution of the product)
• Promotion (advertising and promoting)

tYPES OF PRODUCTS
• Consumer Goods: goods which are consumed by people
(laptop, phone, cars, toothpaste)
• Consumer Services: services which are consumed by
people (haircut, banking, teacher)
• Producer Goods: goods produced for other businesses
(machinery, components, trucks)
• Producer Services: services provided to other businesses
(insurance, advertising, banking)

pRODUCT DEVELOPMENT
Different stages of product development.
1. Generate Ideas: thinking of a new product idea, the idea

can from: employees, competitors, customers
2. Select the best Idea: research and shortlist the best idea,
out of many ideas the business will only choose an idea
which is easy to make, profitable and satisfy consumer
needs.(choose the idea with maximum sales forecast)
3. Develop a prototype: make a small version of the product
to see how it looks, features and design
4. Test Market – soft launch: launch the product in the small
market and study customer feedback to make the product
better
5. Full Launch : finally launch the product in the complete
market

Brand
Brand name: A unique name of
the business which is different
from all other products.
Brand Loyalty: customers

come back and purchase you're
brand again and again, do not
go to competitors.
Brand Image: a perception or

an image of your brand in
customers mind

Packaging
Packaging: The physical
wrapping and covering of the
product
Benefits of Packaging:
• Protects the product
• Easy to transport
• Eye catching
• Provide information
• Help with brand image

Product life cycle
Product life cycle the stages a product goes throughout it’s life. The
product sales are gauged at every stage through out the life cycle.
• Development stage: no sales, the product is still under development stage, it has not
been launched.
• Introduction stage:The product has been launched in the market, its a very new
product, most probably low pricing strategy, the business will use informative
advertisement to let people know about the product
• Growth: the products sales are increasing very fast, business is making profit, new
competitor are also trying to enter the market.
• Maturity: the product is at the maximum sales point. Sales not increasing further
because many competitors have entered.
• Saturation: Due to many competitors selling a similar product, the sales have started to
drop
• Decline: Sales dropped, business need to stop producing thus product

Extension strategy -product life
cycle.
Extension strategy: in order to increase the product alive, and
keep it in the growth stage, the business has to come up with many
strategies which are used to increase the life of a product.
• Launch new version of the product: like iPhone launches new version, iPhone
X, Xs, XR
• Rebranding: Change the logo, design and packaging of the product
• More advertising: focus on advertising
• Launch in a new market: try to find new market where there is competition.
• Price and discounting strategy: decreasing prices to increase sales.

Pricing - mARKETING MIX
Importance of right pricing strategy: if the price is too low
business will loose profit or gives a brand image that it is not
a quality product. Too high prices may loose a lot of sales

Cost plus pricing
Cost plus: adding a profit
percentage to the cost of
the product

Competitive
pricing
Competitive: charging
price slightly lower or
similar to competitive
prices.

Psychological
pricing
Psychological: prices that
influence the thought
process of customer,
example pricing 4.99$ to
make it look like less than 5$
•

PRICE
SKIMMING
Price skimming:
entering the market
with slightly higher
price and later on
reduce the price

PROMOTIONAL
PRICING
Promotional: reducing the
prices for a short period of
time and later on bring
the prices back to normal

DYNAMIC
PRICING
Dynamic: charging different
prices to different segment for
the same product, example
different prices for the same
plane ticket to child or adult.

PRICE ELASTICITY OF
DEMAND
Change in price lead to a change in
demand but how much change in
demand will the change in price will
have? To find out this we find out the
price elasticity of demand.
Price elasticity of demand: A

percentage change in demand due to a
percentage change in price.
Elastic demand: a small change in price

will lead to a higher change in demand
Inelastic demand: a change in price will

lead to a smaller change in demand

PROMOTIONAL MIX
Promotion is giving information
about the product to the consumers,
communicating information about
the product to customers, it can be
done through various promotional
strategies:
• Advertising
• Sales promotion
• Public relations

ADVERTISING
Advertising is “Above the line” promotion
which means promoting product or service
through a media, like TV, radio,
newspapers, billboard, flyers. There are
two types of advertisements:
1. Informative advertisement: when the

advertisement only focus on providing
information about the product.
2. Persuasive advertisement: when the

advertisement focuses on persuading
the consumer to buy the product and
giving an impression that they need the
product
Types of Media: TV, Social media, radio,

newspaper, magazine, posters, billboards,
leaflet, internet

SALES PROMOTION
Sales promotions are incentive given to
consumers to increase short term sales
and get rid of the inventory. Types of
sales promotion:
• Gifts
• BOGOF – Buy one Get one Free
• Competition
• After- sales service
• Free samples

PLACE - MARKETING MIX
Distribution channels are ways through which a
product is passed or transported from manufacturer
to customer
•
• Producer – consumer
• Producer – retailer – consumer
• Producer – wholesaler – retailer – consumer
• Producer – agent – retailer – consumer
• Ecommerce

OPERATIONS
MANAGEMENT

OPERATIONS
MANAGEMENT
The production process: is the
process of adding value to the
inputs and converting them into
out puts:
Inputs: Economics resources,

Factors of Production (Land,
Labour, Capital and Enterprise)
Creative value: production

process,
Output: Product, goods and

services.

OPERATIONS
DEPARTMENT
Operations department takes care of the
production process (Input-process-output)
and the department is lead by the
Operations Manager who also has few
other managers helping him/her in the
operations department
• Factor Manager: responsible of
production, quality and quantity
• Purchasing Manager: responsible of
purchasing raw material for production
• Research and Development Manager:
responsible of developing product
design and testing

Productivity
Productivity is when a business
measures its efficiency by
measuring the number of out put
produced against the number of
input used.
Productivity= Quantity of output/
Quantity of Input
Labor productivity is the number

of employees used to make the
number of products.
Labour Productivity=
Quantity of output/number of
employees

Types of
wastage
• Over production
• Defected products
• Unnecessary inventory
• Delay and wait
• Unnecessary motion

Lean
production
Lean production are the techniques
used by the business to cut down
wastage to increase efficiency. Below
are the methods of lean production:
• KAIZEN
• JUST IN TIME
• CELL PRODUCTION

KAIZEN
Kaizen: A Japanese term which means
continues improvement, which comes by
reducing wastage. In this method companies
do not decrease waste by investing, they
organise regular employee meetings so the
employees can come up with ideas of
reducing wastage.

JUST IN TIME
Just in time: the focus is on reducing
inventory storage. The business does not
keep any inventory and only get the
inventory when they receive a production
order, this helps the business in reducing
storage cost, reducing defect cost and the
product they are producing is already sold

CELL
PRODUCTION
Cell production: focus on working in groups
and not in a conveyer belt setup, when the
employee work together in a group to
produce a product, they help each other and
reducing wastage and are motivated as they
work together.

METHODS OF PRODUCTION
JOB
PRODUCTION
Job production: Customised
products are made one at a time,
as they are made to order.
• Products are mostly in a niche
market
• Product usually require skilled
labour
• Production cost is high
• The products normally are
expensive
• Making the product is also

BATCH
PRODUCTION
Batch production: similar products are
made in small batches with minor
changes
Quantity of one batch is made and then
a different quantity of second batch.
• It is a flexible way of working
• Allows more variety of products
• It maybe expensive to change/switch
• More warehouse space needed
• More training for staff

FLOW
PRODUCTION
Flow production is where large
quantities of products are produced in a
continues process
Large output
Standardised products
Costs are kept low due to large
production
Machinery installation costs are high
Capital intensive
Goods are produced quickly
Change in production and product is not
easy

INVENTORY
CONTROL
Buffer stock is the extra inventory
and stock kept to be used in the time
of product going out of stock due to
late delivery or unexpected increase
in demand
Reorder level is the level of quantity
at which the business places a new
order to the supplier
Lead time: is the time in between the
reorder time and the time at which
the inventory and stock is delivered

COSTS
• Fixed cost: those costs which do
not change when the production
changes, also called overhead.
• Variable cost: those costs which
change with the number of
products produced
• Total cost: total average costs +
total fixed costs
• Average cost: an average cost of
one product, total cost of
production/total output.

ECONOMIES OF
SCALE
when a business increase its size,
the production costs decreases.
The factors that lead to decrease
in production costs due to an
increase in size of a business are
called Economies of Scale
• Purchasing Economies
• Managerial Economies:
• Marketing Economies:
• Technical Economies:
• Financial Economies:

PURCHASING
ECONOMIES OF
SCALE
Purchasing Economies
When a business buys large
number of material on bulk
(because they are big and
can afford bulk purchase)
the business will get a
discount on the bulk
purchase. Discount on the
bulk purchase will reduce
the costs

MANAGERIAL
ECONOMIES OF
SCALE
Managerial Economies:
When businesses are large,
they can afford to pay high
salary and hire expert
employee from the industry.
THE EXPERTS can then help
the business grow more and
further reduce the cost of
production

Marketing
economies of
scale
Marketing Economies:
When a business can afford
to pay for larger
advertisements and they get
a discount because of large
advertisements. The more
advertising a business can
afford, the more sales it will
do, which will reduce the
production cost.

Technical
economies of
scale
Technical Economies:
Businesses can afford large
machinery and technology
which can help them reduce
labour or employee cost.
Large technology will
produce products fast which
will reduce the production
cost

Financial
economies
Financial Economies:
Large businesses can easily
get loans on low interest
rates whereas a small
business doesn’t easily get
loans and if they do the
interest charged is higher.
Loans on lower interest rates
will reduce the costs for the
business.

Diseconomies
of scale
Diseconomies of scale are those factors which
lead to an increase in costs due to an increase
in the size of Business.
• Poor communication:
The bigger the organisation is the

communication gets slower because of so many
level and the information is reached late which
effects efficiency and increase average cost
• Slow Decision Making:
Because of large organisational structure, the

decision for manager is slow, due to which the
business misses opportunities, looses
customers, sales decreases and the costs
increases
• Low Morale:
Employees of large organisation are not

motivated because the organisation is too large
and employee never had the opportunity to
meet the senior leaders which decreases the
morale.

Break-even
level of
output
Breakeven level of output are the
number of output that must be
produced and sold so the total
revenue equals total cost
Breakeven point are the level of

sales a business need to reach
where costs are equal to revenue
Contribution = Selling price –
variable cost
Break even level of production =

total fixed cost/contribution per
unit

QUALITY
• Quality is to produce goods and
services which meets customer
expectations
• Quality Control is checking of quality

at the end of the production process
• Quality Assurance is checking the

quality standards through out the
production process
• Total Quality Management is when

the quality is maintained throughout
the business and in all the
departments

FINANCE

FINANCE
Start up capital: Finance needed
for a new business to pay for the
expenses so the business can start
its operations.
Working capital: Finance needed
for the business to pay for its day
to day expenses like wages and raw
materials.
Capital expenditure: Money spent
on assets which lasts for more than
a year

SOURCES OF FINANCE
INTERNAL
SOURCES
What are internal sources of
finance
1. Retained profit
2. Sales of Existing Assets
3. Sales of inventories
4. Owner saving

SOURCES OF FINANCE
EXTERNAL SOURCES
• Issue of shares
• Bank Loans
• Selling Debentures: long term loan certificates

which limited companies sell, the holder does not
get any dividends, they only receive interest
• Factoring of Debts: A third party will pay off your

loan now but in a lesser amount but will receive in
full at a later date
• Grants and Subsidies
• Micro-finance: Small bank loans for poor people to

start up business

SOURCES OF FINANCE
SHORT TERM
SOURCES
• Overdrafts: when you
withdraw more money from
your account than your
actual balance, the bank
will give you more money
but will put extra interest
• Trade credit: sold goods on
credit
• Factoring of Debts

SOURCES OF FINANCE
LONG TERM
SOURCES
• Bank loans
• Hire purchase: buying a fixed
asset for a long period of time
• Leasing: when you take as
asset on rent for a very long
time and have the option to
buy it at the end.
• Issue of Shares
• Long term loans
• Selling Debentures

Cashflow
Cashflow means the cash coming in
the business and leaving the
business, it does not mean profit, it
is any cash in any form coming inside
the business and or cash leaving the
business
• Cash inflow: cash coming in the

business
• Cash outflow: cash going out of
the business
• Net cash flow: the balance left
after deducting cash outflow from
cash inflow
• Closing Balance: the cash in hand
at the closing time of last day/
month/quarter/year
• Opening Balance: the cash in hand
when we start the day/month/
quarter/year

Income statement
• Sales Revenue: Income of the business (Price per product x number of
products sold
• Cost of Goods Sold: cost of producing the product (cost per product x number
of products sold)
• Gross Profit: profit made only after deducting cost of goods sold from Sales
Revenue (Sales Revenue – Cost of Goods Sold)
• Expenses and over heads: All other expenses, like salaries, rent, electricity
• Net profit: Profit from deducting Expenses from Gross profit (Gross profit –
expenses)
• Taxes: Direct taxes to be paid to government
• Net profit after tax: (Net profit – Taxes)
• Dividends: profit to be paid to the shareholders
• Retained profit: Net profit after tax - Dividends

Balance sheet
Balance sheet: shows the value of business assets and liabilities at a particular
time.
• Assets: Those items of values that are owned by business

• Non current assets (land, machinery and assets that are kept for over a
year – Fixed assets
• Current assets (Cash and account receivable which are kept in a business
for less than a year)
• Liabilities: all the debts owed by business

• Non current liabilities: (Long term borrowing which the business has to
pay back)
• Current liabilities: (Amount owed by business which must be paid within a
year, like supplier)
• Total Assets – Total Liability: this is the owner’s equity (Shareholders equity)
• Share capital – money invested in the business by shareholders
• Retained profit – profit reserves from last year
• Total Shareholders Equity

Ratios
• Profitability Ratio
• Return on Capital
Employed
• Gross profit Margin
• Net profit Margin
• Liquidity Ratio
• Current Ratio
• Acid Test Ratio

Profitability Ratio
Return on
capital
employed
• How much return did the
company made on it’s capital
employed
• Higher the result, this means
the business is successful in
earning more profit from the
capital invested
• The returns are compared
every year and it should be
higher from last year
Net Profit/Capital employed x

100

Profitability Ratio
Gross profit
margin
• Gross profit from value of
sales
• What is the percentage of
Gross profit which the
company is making with
every sale
Gross profit/sales revenue x

100

Profitability Ratio
Net profit
margin
• Net profit from value
of sales
• What is the
percentage of Net
profit which the
company is making
with every sale
Net profit/sales x 100

LIQUIDITY
RATIOS
• Availability of business to pay
back it’s short term debts from
liquid assets
Current Ratio: current assets/

current liability
Ability to pay back current

liabilities from current available
assets
Acid test Ratio: current assets –

inventories/current liability
Ability to pay back current

liabilities from most liquid current
assets

ECONOMY
AND
EXTERNAL
FACTORS

Government
economic
objectives
• Inflation
• Unemployment
• Economic Growth
• Balance of payment

Inflation
• A sustain rise in prices of all or
most of the products in an
economy
• Increase price will lead to
decrease in the real income,
buying power
• This will lead to less demand of
products
• The production will be
decreased
• Employees will be asked to
leave - unemployment

Unemployment
• When people are actively
looking for a job but cannot
find it.
• Unemployment will lead to
decrease in buying power
• Reduce buying power will
reduce demand of products
• Output will decrease,
businesses will be closed

ECONOMIC
GROWTH
Gross Domestic Product (GDP)
is the total value of final goods
and services produced in an
economy in a given period of
time
Reduce GDP, will lead to reduce
output, leading to
unemployment
The Business Cycle (Growth,

Boom, Recession, Slump)

BALANCE OF
PAYMENT
• Record of all the financial transaction of
money leaving and entering the country.
The biggest part of Balance of payment
is Balance of Trade which means money
came in the country from exports and
money left the country due to imports

GOVERNMENT
ECONOMIC POLICIES
• Demand Side policy (controlling total demand of all the
products in the economy)
• Fiscal Policy – taxes and government spending
• Monetary policy – interest and money supply
• Supply Side Policy (controlling total supply of all the

products in the economy)
• Government subsidies
• Increase competition
• Improve training and education

TAXES
Direct Tax: Paid directly
from income (income tax,
corporation tax, inheritance
tax)
Indirect Tax: these taxes are

added to the price of
products bought (VAT, Import
Tariff)

SOCIAL COSTS AND
BENEFITS
• Private Cost: cost of an activity paid by
a business
• Private benefits: benefit from an

activity gain by the business
• External Cost: cost of an activity of the

business paid by the society
• External benefit: benefit from an

activity by the business gained by
society
• Social Cost: private cost + external cost

• Social benefit: private benefit +

GET THE COMPLETE
TOOL KIT
• Detailed video lectures
• Definition book
• Quizzes
• Past papers
• How to attempt past-papers
• Topic presentations
Detailed resources to help you get an A

grade in Business Studies & Economics
IGCSE, O-level, As level and A level
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BLACKBOARD EDUCATION

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production goods and services.

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Because they are only doing the work they are

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• Public sector: All Businesses are owned by

• Mixed economy: An economy which is a

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Some of the features of an entrepreneur

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Preparing this document can help them

1. Get loan from the bank by showing it

2. Convince people to invest in the

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• Merger: join with other firms, two businesses willingly join

• Takeover: buys another business, when one business forcefully

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• Vertical integration: An external growth, when a firm merges or

The firm usually merges or takeover it’s supplier (vertical

• Conglomerate: an external growth, when a firm merges or takeover

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Advantages of being a sole trader:

1. Takes all the profits

2. Makes all the decisions

3. His own boss

4. Easy to start a sole trader

Disadvantages of being a sole trader:

1. Takes all the risks

2. Does all the work, no one to share the work.

4. If he is sick or dies, the business will stop.

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1. Share the work load

2. Bring expertise to the business

1. Share the profit

2. Need partners approval to do a task

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Advantages of a Private limited company:

2. Ownership is shared with trustworthy people

3. Founder gets to keep the maximum shares

Disadvantages of a Private limited company:

1. Ownership and control is shared

2. Profits are shared

3. Business information is shared

BLACKBOARDEDUCATION.ORG Page 18 of 113

Advantages of a Public limited company:

1. Generate bigger investments

2. Limited liability: owners and shareholders only loose their investment in

Disadvantages of a Private limited company:

1. Ownership and control is shared

2. Profits are shared

3. Business information is shared

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• Internal Stake holders: work for the business or inside the

• External Stake holders: work outside the business