B Canel

Levels of economic activity In order for products to be made and sold to the people, it must undergo 3 different production processes. Each process is done by a different business sector and they are: Primary sector: The natural resources extraction sector. E.g. farming, forestry, mining... (earns the least money) Secondary sector: The manufacturing sector. E.g. construction, car manufacturing, baking... (earns a medium amount of money ) Tertiary sector: The service sector. E.g banks, transport, insurance... (earns the most money) Importance of a sector in a country: no. of workers employed. value of output and sales. Industrialisation: a country is moving from the primary sector to the secondary sector. De-industrialisation: a country is moving from the secondary sector to the tertiary sector. In both cases, these processes both earn the country more revenue. Types of economiess Free market economy: All businesses are owned by the private sector . No government intervention. Pro...

Almost every country consists of two business sectors, the private sector and the public sector. Private sector businesses are operated and run by individuals, while public sector businesses are operated by the government. The types of businesses present in a sector can vary, so lets take a look at them. Private Sector Sole Traders Sole traders are the most common form of business in the world, and take up as much as 90% of all businesses in a country. The business is owned and run by one person only. Even though he can employ people, he is still the sole proprietor of the business. These businesses are so common since there are so little legal requirements to set up: The owner must register with and send annual accounts to the government Tax Office . They must register their business names with the Registrar of Business Names . They must obey all basic laws for trading and commerce. There are advantages and disadvantages to everything, and here are ones for sold traders: Pros: There ...

The impact of business activity on society All business activity has benefits and undesirable effects on society. These reasons are why governments want to have some control over business activity: Possible benefits: Production of useful goods to satisfy customer wants. Create employment /increases workers living standards . Introduction of new products or processes that reduces costs and widen product range . Taxes help finance public services. Business earn foreign currency in exports and this could be spent on imports. Possible undesirable effects: Business might ruin cheap but beautiful areas . Low wages and unsafe working conditions for workers because businesses want to lower costs. Pollution Production of dangerous goods. Monopolies Advertising can mislead customers. Governments tend to pass laws that restrict undesirable activities while supporting desirable activities. Governments and the economy Government economic objectives: Governments all have aims for their country,...

External constraints and constraints on business activity Businesses cannot survive by neglecting the "real world", which includes influences that forces a business to make certain decisions or constraints that limits or controls actions. External constraints are things that businesses cannot control, these are: Technological change: New products. Technological change: New production processes. Increased competition. Environmental issues. Here is a table from the book giving examples and the possible impacts on business activity : Technological changes Technological change bring about constant changes in consumer products and production processes . By using R&D to develop new products , companies could open up new markets and make huge amounts of money. Such companies include Microsoft, Sony and Apple. However, new products quickly replace old ones just like how machines are replacing workers in production processes. There are two general things a firm coul...

Business costs All business activity involves some kind of cost. Managers need to think about the because: Whether costs are lower than revenues or not. Whether a business will make a profit or not. To compare costs at different locations. To help set prices. There are two main types of costs, fixed and variable costs. Here are some types of costs: Fixed costs = stay the same regardless of the amount of output. They are there regardless of whether a business has made a profit or not. Also known as overheads . Variable costs = varies with the amount of goods produced. They can be classified as direct costs (directly related to a product). Total costs = fixed + variable costs Break-even charts, comparing costs with revenue Drawing a break-even chart Uses of break-even charts There are other benefits from the break-even chart other than identifying the breakeven point and the maximum profit. However, they are not all reliable so there are some disadvantages as well: Pros: The expected pr...

What are accounts an why are they necessary? Accounts are financial records of a firm's transactions that is kept up to date by the accountants , who are qualified professionals responsible for keeping accurate accounts and producing the final accounts. Every end of the year, a final accounts must be produced which gives details of: Profits and losses made. Current value of the business. Other financial results. Limited companies are bound by law to publish these accounts, but not other businesses. Financial documents involved in buying and selling. Accountants use various documents that are used for buying and selling over the year for their final accounts. They can help the accountant to: keep records of what the firm bought and from which supplier. keep records of what the firm sold and to which customer. These documents are: Purchase orders : requests for buying products. It contains the quantity, type and total cost of goods. Here is an example. Delivery notes: These are sent ...

What is meant by cash flow? Cash is a liquid asset , meaning that i can be spent on goods and services any time. Many business experience cash flow problems , meaning that they do not have enough cash to do what they want to do. Cash flow means "the flow of money in and out of a business". These are ways cash flow can occur: Cash inflows: Sale of goods for cash. Payment from debtors. Borrowing from a source (but will inevitably lead to cash outflow in the future). Sale of unwanted assets . Investment from investors: shareholders and owners Cash outflows: Purchasing goods for cash. Payment of wages, salaries and others in cash. Purchasing fixed assets . Repaying loans . Repaying creditors . Cash flow cycle A cash flow cycle explains the stages that are involved in the process of cash out and finally into the business. This is what happens: The longer it takes for cash to get back to the business, the more they will need working capital to pay off their short-term debts. This c...