MATSEC SEC Business Studies cheat sheet

Business activity combines inputs (land, labour, capital, enterprise) to produce goods or services that satisfy needs and wants; the reward for enterprise is profit, for labour wages, for capital interest, and for land rent.

The three sectors of production: primary (extraction, e.g. farming, mining, fishing), secondary (manufacturing and construction), tertiary (services such as retail, banking, transport). Economic development typically shifts employment from primary to secondary to tertiary.

Sectors of the economy: private sector (owned by individuals, aim profit), public sector (owned by government, aim service), and third sector (non-profit, e.g. charities, cooperatives).

Opportunity cost is the value of the next best alternative forgone. Every business decision involving scarce resources has an opportunity cost, e.g. using profits for expansion rather than dividends.

Stakeholders include owners/shareholders, employees, customers, suppliers, lenders, local community and government. A stakeholder is any group affected by or interested in the decisions of a business.

External environment factors can be summarised by PEST: Political (legislation, taxation, stability), Economic (interest rates, inflation, exchange rates, unemployment), Social (demographics, lifestyles, education), Technological (automation, e-commerce, R&D).

Business objectives may include survival, profit maximisation, growth, market share, customer satisfaction, and social/environmental goals. Objectives differ between private firms, public bodies and social enterprises.

A sole trader is an individual owner with unlimited liability; a partnership has two or more owners sharing capital and risk; a private limited company (Ltd) is a separate legal entity with limited liability and shares not offered to the public; a public limited company (plc) can sell shares on a stock exchange.

Market segmentation divides a market into groups with similar characteristics (demographic, geographic, psychographic, behavioural). A target segment is chosen using criteria such as size, growth, competition and fit with resources.

The marketing mix (4Ps): Product (features, branding, packaging, life cycle), Price (skimming, penetration, cost-plus, competitive, loss leader), Place (channels of distribution, retail vs wholesale, e-commerce), Promotion (advertising, sales promotion, public relations, personal selling, direct marketing).

The product life cycle has four stages: introduction, growth, maturity, decline. Strategies differ: heavy promotion at introduction, price competition at maturity, harvesting or withdrawal at decline.

Price elasticity of demand = % change in quantity demanded ÷ % change in price. Demand is elastic if the value is greater than 1 (price-sensitive), inelastic if less than 1 (price-insensitive).

Market research: primary research collects new data (surveys, interviews, observation, focus groups); secondary research uses existing data (government statistics, trade reports, company records). Primary is more specific but costlier and slower.

Market share = (firm's sales ÷ total market sales) × 100. A rising market share indicates the firm is growing faster than the market overall.

Branding adds value by differentiating a product and building customer loyalty; a brand can command a price premium and reduce the need for price competition.

A market is a place or mechanism where buyers and sellers meet. Demand is the quantity buyers are willing and able to purchase at a given price; supply is the quantity producers are willing to offer; equilibrium price occurs where demand equals supply.

The accounting equation: Assets = Liabilities + Capital (Owner's Equity). Every transaction keeps the equation balanced; this is the basis of double-entry bookkeeping.

Assets are resources owned (cash, stock, machinery, debtors); liabilities are amounts owed (bank loan, creditors); capital is the owner's investment plus retained profit.

Current assets are expected to be converted to cash within one year (stock, debtors, cash); non-current (fixed) assets are held long-term (premises, machinery, vehicles).

Gross profit = Sales revenue − Cost of goods sold. Cost of goods sold = Opening stock + Purchases − Closing stock.

Net profit = Gross profit − Expenses (e.g. rent, wages, advertising, depreciation). Net profit margin = (Net profit ÷ Sales revenue) × 100.

The income statement (profit and loss account) shows revenue, costs and profit over a period; the statement of financial position (balance sheet) shows assets, liabilities and capital at a point in time.

Break-even output = Fixed costs ÷ (Selling price per unit − Variable cost per unit). The contribution per unit is selling price minus variable cost.

Cash flow forecast records expected cash inflows and outflows month by month; a business can be profitable yet fail through cash shortages. Liquidity ratios such as current ratio = current assets ÷ current liabilities measure short-term solvency.

The human resource management function covers recruitment, selection, training, appraisal, remuneration and dismissal. Recruitment may be internal (promotion, transfer) or external (advertising, agencies, job centres).

Motivation theories: Maslow's hierarchy (physiological, safety, social, esteem, self-actualisation), Herzberg's two-factor theory (hygiene factors prevent dissatisfaction; motivators such as achievement and responsibility create satisfaction), and Taylor's scientific management (pay as the main motivator).

Methods of production: job production (one-off, customised), batch production (groups of identical items), flow/mass production (continuous, high volume). Lean production and just-in-time (JIT) reduce stock holding but require reliable suppliers.

Economies of scale: internal (technical, managerial, financial, marketing, purchasing) arise as a firm grows; external economies arise from the growth of the industry. Diseconomies of scale occur when average costs rise with excessive size, often due to communication and coordination problems.

Quality control inspects output after production; quality assurance builds quality into each stage of the process. Total Quality Management (TQM) involves all employees in continuous improvement.

Business growth can be internal (organic - new outlets, products, markets) or external (merger or takeover). Integration may be horizontal (same industry stage), vertical (backward towards suppliers or forward towards customers) or conglomerate (unrelated).

A business plan sets out objectives, market analysis, marketing and operations plans, and financial forecasts; it is used to raise finance and to guide the owner, and is reviewed as circumstances change.

Productivity = output ÷ input (e.g. units produced per worker hour). Raising productivity reduces unit costs and improves competitiveness. Stock control methods include buffer stock, reorder level and economic order quantity.

Business activity combines inputs (land, labour, capital, enterprise) to produce goods or services that satisfy needs and wants; the reward for enterprise is profit, for labour wages, for capital interest, and for land rent.

The three sectors of production: primary (extraction, e.g. farming, mining, fishing), secondary (manufacturing and construction), tertiary (services such as retail, banking, transport). Economic development typically shifts employment from primary to secondary to tertiary.

Sectors of the economy: private sector (owned by individuals, aim profit), public sector (owned by government, aim service), and third sector (non-profit, e.g. charities, cooperatives).

Opportunity cost is the value of the next best alternative forgone. Every business decision involving scarce resources has an opportunity cost, e.g. using profits for expansion rather than dividends.

Stakeholders include owners/shareholders, employees, customers, suppliers, lenders, local community and government. A stakeholder is any group affected by or interested in the decisions of a business.

External environment factors can be summarised by PEST: Political (legislation, taxation, stability), Economic (interest rates, inflation, exchange rates, unemployment), Social (demographics, lifestyles, education), Technological (automation, e-commerce, R&D).

Business objectives may include survival, profit maximisation, growth, market share, customer satisfaction, and social/environmental goals. Objectives differ between private firms, public bodies and social enterprises.

A sole trader is an individual owner with unlimited liability; a partnership has two or more owners sharing capital and risk; a private limited company (Ltd) is a separate legal entity with limited liability and shares not offered to the public; a public limited company (plc) can sell shares on a stock exchange.

Market segmentation divides a market into groups with similar characteristics (demographic, geographic, psychographic, behavioural). A target segment is chosen using criteria such as size, growth, competition and fit with resources.

The marketing mix (4Ps): Product (features, branding, packaging, life cycle), Price (skimming, penetration, cost-plus, competitive, loss leader), Place (channels of distribution, retail vs wholesale, e-commerce), Promotion (advertising, sales promotion, public relations, personal selling, direct marketing).

The product life cycle has four stages: introduction, growth, maturity, decline. Strategies differ: heavy promotion at introduction, price competition at maturity, harvesting or withdrawal at decline.

Price elasticity of demand = % change in quantity demanded ÷ % change in price. Demand is elastic if the value is greater than 1 (price-sensitive), inelastic if less than 1 (price-insensitive).

Market research: primary research collects new data (surveys, interviews, observation, focus groups); secondary research uses existing data (government statistics, trade reports, company records). Primary is more specific but costlier and slower.

Market share = (firm's sales ÷ total market sales) × 100. A rising market share indicates the firm is growing faster than the market overall.

Branding adds value by differentiating a product and building customer loyalty; a brand can command a price premium and reduce the need for price competition.

A market is a place or mechanism where buyers and sellers meet. Demand is the quantity buyers are willing and able to purchase at a given price; supply is the quantity producers are willing to offer; equilibrium price occurs where demand equals supply.

The accounting equation: Assets = Liabilities + Capital (Owner's Equity). Every transaction keeps the equation balanced; this is the basis of double-entry bookkeeping.

Assets are resources owned (cash, stock, machinery, debtors); liabilities are amounts owed (bank loan, creditors); capital is the owner's investment plus retained profit.

Current assets are expected to be converted to cash within one year (stock, debtors, cash); non-current (fixed) assets are held long-term (premises, machinery, vehicles).

Gross profit = Sales revenue − Cost of goods sold. Cost of goods sold = Opening stock + Purchases − Closing stock.

Net profit = Gross profit − Expenses (e.g. rent, wages, advertising, depreciation). Net profit margin = (Net profit ÷ Sales revenue) × 100.

The income statement (profit and loss account) shows revenue, costs and profit over a period; the statement of financial position (balance sheet) shows assets, liabilities and capital at a point in time.

Break-even output = Fixed costs ÷ (Selling price per unit − Variable cost per unit). The contribution per unit is selling price minus variable cost.

Cash flow forecast records expected cash inflows and outflows month by month; a business can be profitable yet fail through cash shortages. Liquidity ratios such as current ratio = current assets ÷ current liabilities measure short-term solvency.

The human resource management function covers recruitment, selection, training, appraisal, remuneration and dismissal. Recruitment may be internal (promotion, transfer) or external (advertising, agencies, job centres).

Motivation theories: Maslow's hierarchy (physiological, safety, social, esteem, self-actualisation), Herzberg's two-factor theory (hygiene factors prevent dissatisfaction; motivators such as achievement and responsibility create satisfaction), and Taylor's scientific management (pay as the main motivator).

Methods of production: job production (one-off, customised), batch production (groups of identical items), flow/mass production (continuous, high volume). Lean production and just-in-time (JIT) reduce stock holding but require reliable suppliers.

Economies of scale: internal (technical, managerial, financial, marketing, purchasing) arise as a firm grows; external economies arise from the growth of the industry. Diseconomies of scale occur when average costs rise with excessive size, often due to communication and coordination problems.

Quality control inspects output after production; quality assurance builds quality into each stage of the process. Total Quality Management (TQM) involves all employees in continuous improvement.

Business growth can be internal (organic - new outlets, products, markets) or external (merger or takeover). Integration may be horizontal (same industry stage), vertical (backward towards suppliers or forward towards customers) or conglomerate (unrelated).

A business plan sets out objectives, market analysis, marketing and operations plans, and financial forecasts; it is used to raise finance and to guide the owner, and is reviewed as circumstances change.

Productivity = output ÷ input (e.g. units produced per worker hour). Raising productivity reduces unit costs and improves competitiveness. Stock control methods include buffer stock, reorder level and economic order quantity.