What Makes a Business Successful? (Edexcel IGCSE Business): Flashcards
Exam code: 4BS1
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What makes a business 'successful'?
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What makes a business 'successful'?
A successful business is one that achieves its objectives — measured in financial and non-financial ways.
Name three financial measures of business success.
Revenue, market share, profitability, business growth, and shareholder satisfaction.
Why is rising revenue a sign of success?
An increase in revenue suggests the business is growing and its decision-making is effective.
A high profit means a business can cover its costs, reinvest and reward investors.
A high profit margin means a business can cover its costs, reinvest and reward investors.
When are shareholders most likely to be satisfied?
When share prices and dividends are increasing.
True or False?
An increase in market share can improve a business's competitiveness.
True.
Growing market share improves a business's market position and competitiveness.
Name three non-financial measures of business success.
Customer satisfaction, employee satisfaction, and owner satisfaction.
How can a business measure customer satisfaction?
Through positive reviews and recommendations and the number of returning customers.
Low staff turnover and many applications for job vacancies indicate high satisfaction.
Low staff turnover and many applications for job vacancies indicate high employee satisfaction.
True or False?
Non-financial measures of success are especially important to charities and public sector organisations.
True.
Non-financial objectives are particularly important to the public sector, charities and non-profits.
Define profitability.
Profitability is the proportion of sales converted to profit, compared over time and against competitors.
How does business growth indicate success?
Opening new outlets or facilities or increasing the workforce shows growth, letting a business gain economies of scale.
Give two reasons why a new business is often more at risk of failure.
Lack of management skills, limited experience, cashflow problems, and being overwhelmed by tasks.
Name the four main reasons why businesses fail.
Financial factors, poor management, external factors, and overtrading.
Define overtrading.
Overtrading occurs when a business expands too quickly, leading to diseconomies of scale and higher costs.
A common financial cause of failure is a cash , which means creditors cannot be paid what they are owed.
A common financial cause of failure is a cash shortage, which means creditors cannot be paid what they are owed.
How can poor management cause a business to fail?
Making decisions on hunches rather than market research, and ineffective coordination of operations.
True or False?
Business failure is only a risk to new businesses, not established ones.
False.
Business failure is a risk to both new and established businesses.
Give one external factor that can cause a business to fail.
A delayed response to new technology or competitors, or changes in laws or taxation.
A business that expands too quickly may suffer diseconomies of scale, which its costs.
A business that expands too quickly may suffer diseconomies of scale, which increase its costs.
Why might a start-up's market research be a weakness?
It is unlikely to be detailed, and owners may lack the skills to understand findings and make effective decisions.
Business failure can happen when a business is unable to generate enough to sustain its operations.
Business failure can happen when a business is unable to generate enough revenue to sustain its operations.
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