NCEA Level 2 Business Studies cheat sheet

Business activity is organised around producing goods and services to satisfy needs and wants; a need is necessary for survival, a want improves wellbeing but is not essential.

The three factors of production are land (natural resources), labour (human effort) and capital (machinery, tools, finance); enterprise combines them and takes the risk.

Scarcity forces choice: opportunity cost is the value of the next best alternative forgone when a decision is made, not the sum of all alternatives.

Business objectives typically include profit, survival, growth, market share and social/environmental goals; objectives should be specific and measurable to be useful for evaluation.

Stakeholders include owners/shareholders, employees, customers, suppliers, the community and government; each has different interests that can conflict (e.g. higher wages vs higher profit).

Profit = total revenue − total costs; revenue = price × quantity sold; a business breaks even where total revenue equals total costs.

Business structures: sole trader (unlimited liability), partnership (shared liability), company (separate legal entity, limited liability) - liability is the key distinguishing factor.

A business is a system of inputs, transformation processes and outputs; feedback from the environment informs adjustments to inputs and processes.

Demand is the quantity consumers are willing and able to buy at a given price; the law of demand states quantity demanded falls as price rises, all else equal (ceteris paribus).

Supply is the quantity producers are willing and able to offer at a given price; quantity supplied generally rises with price. Market equilibrium occurs where demand equals supply.

Market structures range from perfect competition to monopoly; a monopoly has a single seller with market power, while perfect competition has many sellers of an identical product.

The marketing mix is the 4Ps - Product, Price, Place, Promotion; a coherent mix aligns each P with the target market segment.

Market segmentation divides a market by demographic, geographic, psychographic or behavioural factors; a segment must be measurable, accessible and large enough to be viable.

Pricing strategies include cost-plus, penetration (low initial price to gain share), skimming (high initial price), and competitive pricing; each has different cash-flow and image implications.

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

Cash flow differs from profit: cash flow records the timing of money in and out, while profit matches revenue and expenses over a period; a profitable business can still fail from poor cash flow.

Financial statements: the income statement shows revenue, expenses and profit over a period; the balance sheet shows assets, liabilities and equity at a point in time (assets = liabilities + equity).