JC Business Studies cheat sheet

A budget balances planned income against planned expenditure: Budget surplus = income − expenditure; a deficit occurs when expenditure exceeds income.

Compound interest on a lump sum: A = P(1 + r)^n, where P is principal, r the rate per period as a decimal, and n the number of periods.

Rule of 72: approximate doubling time in years ≈ 72 ÷ annual percentage interest rate.

Simple interest: I = P × r × t; simple interest grows linearly while compound interest grows exponentially.

Real interest rate ≈ nominal interest rate − inflation rate; a negative real rate erodes purchasing power of savings.

Gross pay − statutory deductions (income tax, social insurance) − voluntary deductions = net pay.

Current ratio = current assets ÷ current liabilities; a ratio below 1 signals short-term liquidity strain for a household or firm.

Net worth = total assets − total liabilities; it measures wealth at a point in time, not income over a period.

Higher expected return on an investment is normally accompanied by higher risk; diversification reduces unsystematic risk but not market-wide risk.

Typical statutory consumer rights cover goods being of merchantable quality, fit for purpose, and matching their description.

A contract of sale requires offer, acceptance, consideration, and intention to create legal relations; a receipt is evidence of the transaction, not the contract itself.

Remedy hierarchy: repair or replacement first, then price reduction, then refund; refunds are typically due where goods are faulty at the time of sale.

A warranty is a manufacturer's or seller's voluntary promise; statutory rights exist independently of any warranty and cannot be signed away.

Cooling-off periods apply to certain distance and doorstep contracts, allowing cancellation within a set number of days of delivery or agreement.

Consumers have duties too: read terms, keep proof of purchase, use goods as intended, and complain within limitation periods.

Redress routes escalate: seller complaint, then manufacturer, then consumer protection agency or ombudsman, then small claims court.

Misleading advertising and false claims about price or quality are unfair commercial practices subject to regulatory sanction.

Data protection gives consumers rights of access, correction, and erasure of personal data held by businesses.

Factors of production: land, labour, capital, and enterprise; enterprise organises the other three and bears risk.

Opportunity cost is the value of the next best alternative forgone when a resource is committed to one use.

Break-even output = fixed costs ÷ (selling price per unit − variable cost per unit); contribution per unit is price minus variable cost.

Margin of safety = actual or planned output − break-even output.

A business plan typically covers the product, market research, operations, finance, and owner's background; it supports loan and investment applications.

Value added = sales revenue − cost of bought-in materials and components; it funds wages, overheads, and profit.

Sources of finance split into internal (retained profit, sale of assets) and external (bank loan, overdraft, equity, trade credit, leasing).

Cash flow forecast records expected inflows and outflows by period; profit is not the same as cash, since credit sales generate profit before cash arrives.

Enterprise benefits an economy through job creation, innovation, tax revenue, and increased competition, but entails risk of loss for the owner.

Sole trader: unlimited liability, full control, taxed as personal income; the business has no separate legal personality.

Partnership: shared capital and workload, unlimited liability unless a limited liability partnership is formed; a partnership agreement governs profit sharing.

Private limited company: separate legal personality, limited liability, shares not offered to the public; public limited company may float shares on a stock exchange.

Span of control is the number of subordinates reporting to one manager; a narrow span gives closer supervision but a taller hierarchy.

Chain of command is the line of authority from top to bottom; delayering removes management levels and widens spans of control.

Tall structures have many levels and narrow spans; flat structures have few levels and wide spans and often delegate more.

Centralisation concentrates decision-making at head office; decentralisation delegates it to branches or regions.

Motivation theories: Maslow's hierarchy of needs, Herzberg's two factors (hygiene factors versus motivators), and Taylor's scientific management based on pay incentives.

Leadership styles include autocratic, democratic, and laissez-faire; the choice affects motivation, decision speed, and quality of decisions.

Accounting equation: Assets = Liabilities + Owner's equity; every transaction preserves this balance.

Double entry: each transaction is recorded with equal debits and credits; total debits must equal total credits in the ledger.

Trial balance lists ledger balances to test arithmetic accuracy; it does not detect errors of principle, omission, or compensating errors.

Income statement: gross profit = revenue − cost of sales; profit for the year = gross profit − expenses.

Statement of financial position: assets − liabilities = net assets, which equals owner's equity.

Depreciation methods: straight line = (cost − residual value) ÷ useful life; reducing balance applies a fixed percentage to the net book value each year.

Gross profit margin = gross profit ÷ revenue × 100%; net profit margin = profit for the year ÷ revenue × 100%.

Return on capital employed = operating profit ÷ capital employed × 100%; capital employed = total assets − current liabilities.

Inventory valuation follows the lower of cost and net realisable value; accruals match income and expenses to the period they relate to.

Gross domestic product measures the total output of goods and services produced in an economy over a period; real GDP is adjusted for inflation.

GDP per capita = GDP ÷ population, used as a rough indicator of living standards.

Economic cycle phases: boom, downturn, recession (typically two consecutive quarters of falling real GDP), and recovery.

Demand-pull inflation arises from excess aggregate demand; cost-push inflation arises from rising input costs such as wages or energy.

Unemployment types include cyclical (demand-deficient), structural (mismatch of skills), frictional (between jobs), and seasonal.

Fiscal policy uses government spending and taxation; expansionary policy raises spending or cuts tax, contractionary policy does the reverse.

Monetary policy is set by the central bank, chiefly via the policy interest rate, which influences borrowing, saving, and inflation.

A budget deficit occurs when government spending exceeds tax revenue in a year; national debt is the accumulated stock of past borrowing.

Balance of payments records trade and financial flows; a current account deficit means imports of goods and services exceed exports.