MSCE Business Studies cheat sheet

Business activity transforms inputs (land, labour, capital, enterprise) into outputs; value added = selling price of output minus cost of bought-in inputs.

PESTLE analyses the external environment: Political, Economic, Social, Technological, Legal, Environmental factors - used to identify opportunities and threats.

SWOT pairs internal Strengths and Weaknesses with external Opportunities and Threats; strengths/weaknesses are controllable, opportunities/threats are not.

Stakeholders include owners, employees, customers, suppliers, lenders, government and local community; conflict arises when objectives compete (e.g. profit vs. higher wages).

Business objectives: survival, profit maximisation, sales growth, market share, social/ethical goals; objectives shift with business life cycle stage.

Sectors: primary (extraction), secondary (manufacturing), tertiary (services); economic development typically raises the tertiary share.

Macroeconomic influences: inflation raises input costs, interest rates affect borrowing cost, exchange rates affect import/export prices, unemployment affects wage pressure and demand.

Business cycle phases - boom, recession, recovery - change demand, hiring and investment decisions; a recession is two consecutive quarters of falling GDP.

Sole trader: one owner, unlimited liability, taxed as personal income, simplest and cheapest to set up, no separate legal personality.

Partnership: two or more owners sharing capital and profit; a deed of partnership sets profit-sharing ratios; general partners carry unlimited liability unless a limited liability partnership is used.

Private limited company: separate legal personality, limited liability, shares not offered to the public, ownership restricted by share-transfer rules.

Public limited company: shares may be traded on a stock exchange, must meet minimum capital and disclosure requirements, subject to greater public scrutiny.

Cooperative: owned and democratically controlled by members, one member one vote, profit distributed as dividend by patronage rather than shareholding.

Franchise: franchisee pays an initial fee plus ongoing royalties for the right to use a proven brand and system; franchisor gains rapid expansion with lower capital.

Joint venture: two or more firms create a shared entity for a specific project; risks and control are shared but profits are divided.

Choice criteria: liability exposure, capital needs, control retained, privacy of accounts, tax treatment, continuity on death or exit.

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

Income statement: Gross profit = Revenue − Cost of goods sold; Net profit = Gross profit − Operating expenses − Interest − Tax.

Balance sheet reports assets, liabilities and equity at a point in time; current assets/liabilities are those due within 12 months.

Liquidity ratios: Current ratio = Current assets ÷ Current liabilities (target ~2:1); Acid-test = (Current assets − Inventory) ÷ Current liabilities (~1:1).

Profitability ratios: Gross margin = Gross profit ÷ Revenue × 100; Net margin = Net profit ÷ Revenue × 100; ROCE = Operating profit ÷ Capital employed × 100.

Break-even output = Fixed costs ÷ (Selling price − Variable cost per unit); margin of safety = Actual sales − Break-even sales.

Cash flow forecast records expected inflows and outflows; profit is not cash - credit sales, depreciation and stock build-up create the gap.

Sources of finance: internal (retained profit, asset sales) vs. external; short-term (overdraft, trade credit) vs. long-term (loan, share issue, debenture).

Depreciation spreads the cost of a fixed asset over its useful life; straight-line = (Cost − Residual value) ÷ Useful life.

Marketing mix (4Ps): Product, Price, Place, Promotion; services add People, Process and Physical evidence (7Ps).

Market segmentation divides buyers by demographic, geographic, psychographic or behavioural criteria; targeting selects segments to serve; positioning defines perceived value vs. rivals.

Pricing strategies: cost-plus, penetration (low launch price), skimming (high launch price), competitive, predatory, psychological and price discrimination.

Product life cycle stages - development, introduction, growth, maturity, decline - each requires different price, promotion and extension tactics.

Promotion channels: advertising, sales promotion, public relations, personal selling, direct/digital marketing; choice depends on budget, reach and message control.

Distribution channels: direct (producer to consumer) vs. indirect (through wholesaler/retailer); each intermediary adds cost but widens coverage.

Market research: primary (surveys, interviews, observation, focus groups) vs. secondary (published data); sampling errors and bias reduce reliability.

Market share = Firm's sales ÷ Total market sales × 100; brand loyalty and unique selling point support premium pricing.

Methods: job production (one-off, customised), batch production (groups of identical items), flow/mass production (continuous, high volume, low unit cost).

Productivity = Output ÷ Input (or Output per worker per period); raising productivity lowers unit cost if total costs stay constant.

Capacity utilisation = Actual output ÷ Maximum possible output × 100; low utilisation signals excess fixed cost per unit.

Lean production: just-in-time stock control reduces holding costs but raises risk of stock-out if supply is disrupted.

Quality: quality control inspects output after production; quality assurance builds standards into the process; TQM seeks continuous improvement with all employees involved.

Economies of scale: purchasing, technical, financial and managerial - unit cost falls as output rises; diseconomies arise from coordination and motivation problems.

Stock control: buffer stock protects against demand/supply variation; reorder level triggers a new order; lead time is the delay between order and delivery.

Location decisions weigh proximity to market, raw materials, labour supply and cost, transport links, government incentives and competitors' presence.

HR planning forecasts future labour demand against internal supply; gaps are filled by recruitment, training or redundancy.

Recruitment: internal promotion (cheaper, motivating, limited fresh ideas) vs. external hiring (wider pool, higher cost, longer induction).

Selection tools: application forms, CVs, interviews, aptitude and psychometric tests, assessment centres, references; structured interviews improve validity.

Training: induction (orientation), on-the-job (coaching, job rotation) and off-the-job (courses, simulation); appraisal links performance to development and pay.

Motivation theories: Maslow's hierarchy (needs in order), Herzberg's two factors (hygiene vs. motivators), Taylor (scientific management, pay-driven), McGregor Theory X and Y.

Financial rewards: time rate, piece rate, commission, bonus, profit sharing, fringe benefits; non-financial: autonomy, recognition, teamwork, flexible hours.

Labour turnover = (Number leaving ÷ Average number employed) × 100; high turnover raises recruitment and training costs.

Employment legislation covers contracts, minimum wage, working time, health and safety, equal opportunity and dismissal procedures.

Entrepreneur roles: identify opportunity, bear risk, raise capital, organise resources, innovate; rewards are profit and independence, risks are loss and failure.

Business plan components: idea and value proposition, market analysis, marketing plan, operations plan, management team, financial forecasts, funding request.

Small firms compete on flexibility, personal service and niche focus; large firms win on scale economies, brand and access to finance.

Start-up finance sources: personal savings, family and friends, bank loan, overdraft, business angel, venture capital, crowdfunding, government grants.

Cash flow is the leading cause of small-business failure; overtrading (rapid growth without working capital) is a common trap.

Break-even analysis and a cash flow forecast are minimum tools before launch; a feasibility study tests demand and cost assumptions.

Reasons for failure: poor cash management, weak marketing, underestimating costs, strong competition, lack of skills, over-optimistic forecasts.

Growth routes for small firms: organic growth, franchising, merger/acquisition, exporting, e-commerce expansion.

Communication process: sender → encoding → channel (medium) → decoding → receiver → feedback; noise is any interference that distorts the message.

Formal channels follow the hierarchy (reports, memos, notices); informal channels (grapevine) spread fast but risk distortion.

Direction: downward (instructions), upward (feedback, grievances), horizontal/lateral (coordination), diagonal (across levels and functions).

Barriers: semantic (jargon, ambiguity), physical (noise, distance), psychological (attitude, distrust), organisational (too many levels, status).

Written media suit records and detail; oral media suit speed and feedback; electronic media suit reach and speed but risk overload and misinterpretation.

Effective business writing: clear purpose, audience-appropriate tone, active voice, short sentences, structured layout, correct grammar and spelling.

Meetings need an agenda, chair, minutes and action points; poor chairing and unclear objectives waste time.

Customer communication: active listening, acknowledging complaints, resolving promptly and following up builds goodwill and repeat business.

Contract essentials: offer, acceptance, consideration, intention to create legal relations, capacity, legality of purpose.

A contract is void if it lacks legal effect (e.g. illegality); voidable if one party may cancel (e.g. misrepresentation, duress, undue influence).

Consumer protection covers product safety, accurate description, no misleading claims, cooling-off rights and refunds for faulty goods.

Employment law: written contract/statement of particulars, minimum wage, working time limits, anti-discrimination, health and safety duties, fair dismissal procedure.

Business structures carry legal duties: companies must file accounts, keep statutory registers, hold annual meetings and comply with disclosure rules.

Intellectual property: patents protect inventions, trademarks protect brand identifiers, copyright protects original works, trade secrets protect confidential know-how.

Ethical stances: shareholder (maximise profit within law) vs. stakeholder (consider employees, customers, community, environment).

Ethical codes, whistleblowing channels and corporate social responsibility reporting help align conduct with stated values.

Unethical practice (false advertising, bribery, tax evasion, exploitation) carries legal penalties, reputational damage and lost customer trust.

Law of demand: as price rises, quantity demanded falls (ceteris paribus); supply rises with price; equilibrium is where demand equals supply.

Price elasticity of demand = % change in quantity demanded ÷ % change in price; elastic if >1 (revenue falls when price rises), inelastic if <1.

Income elasticity of demand: positive for normal goods, negative for inferior goods; high positive for luxury goods.

Costs: fixed costs do not vary with output; variable costs do; total cost = fixed + variable; average cost falls then may rise as diseconomies appear.

Marginal cost is the cost of producing one more unit; profit is maximised where marginal revenue equals marginal cost.

Market structures: perfect competition (many firms, identical product), monopolistic competition (differentiated), oligopoly (few large firms, interdependence), monopoly (single dominant seller).

Government intervention: taxes and subsidies, price controls, regulation, competition policy; aims are efficiency, fairness and stability.

Interest rates affect borrowing cost and investment; a rate rise typically reduces capital investment and consumer credit spending.

Opportunity cost is the value of the next best alternative forgone - the basis of all business resource decisions.