IGCSE Business Studies

A business 企业 is an organisation that makes goods 商品 or provides services 服务 for customers 顾客.

• Goods are physical things you can touch — bread, phones, cars.
• Services are useful actions done for you — a haircut, a bus ride, a doctor's visit.

The purpose of business activity is to use resources 资源 to make goods and services, so that people's needs 需要 and wants 欲望 are met.

• Needs are things you must have to live: food, water, shelter, clothes.
• Wants are things you would like but can live without: a holiday, a games console.

Factors of production

To produce anything, a business brings together four factors of production 生产要素 — the resources needed to make goods and services.

The economic problem

People's needs and wants are unlimited. But resources are scarce 稀缺 — there are not enough of them for everything. This is the economic problem 经济问题.

Because resources are scarce, you must always choose. You cannot have everything.

Opportunity cost

When you choose one thing, you give up the next best thing. The opportunity cost 机会成本 is the next best choice you give up.

Example: a business has some money and spends it on a new machine. Now it cannot also spend that money on a bigger shop. The bigger shop is the opportunity cost.

Added value

Added value 增值 is the difference between the price a business sells a product for and the cost of the raw materials 原材料 bought in to make it.

A business can increase added value by:

• raising the price, often through a strong brand 品牌 or better design,
• lowering the cost of materials, for example by finding cheaper suppliers,
• improving the product so customers will pay more.

Worked example. A furniture maker buys the wood and fabric for a chair for £40 and sells the chair for £110. The factory rent is £6,000 a month. Find the added value per chair.

The rent is a deliberate distractor. Added value counts only the cost of the bought-in materials, so rent, wages and other running costs stay out of it - they matter for profit, not for added value. Subtract only what was bought in to make the product, and never treat added value as if it were profit.

Why businesses succeed or fail

A business is more likely to succeed when it has:

• good management 管理 — skilled leaders who plan well,
• enough finance 资金 — money to pay bills while it grows,
• a product customers want, and an edge over the competition 竞争 (the other businesses selling similar things).

A business may fail and close down when it runs out of cash, manages money badly, or cannot compete. Weak management and poor cash control are the most common causes.

The three sectors

We sort all business activity into three groups, by how far the work is from the final customer.

How the sectors change

The importance of each sector changes as a country grows richer.

• In a developing economy 发展中经济体 (a poorer country building up its industry), the primary sector is often large — many people farm.
• As the country grows, the secondary sector grows too.
• In a developed economy 发达经济体 (a rich, industrialised country), most people work in the tertiary sector.

De-industrialisation 去工业化 is when the secondary sector shrinks and the tertiary sector grows. This has happened in many developed economies as factories move abroad.

Private sector and public sector

The private sector 私营部门 is made up of businesses owned by private people and groups. Most aim to make a profit 利润. The public sector 公共部门 is made up of organisations owned by the government, which aim to provide a service to the public.

The entrepreneur

An entrepreneur 企业家 is a person who sets up a business and takes the risk of running it. Successful entrepreneurs usually:

• are willing to take risk 风险 — to risk their own money on a new idea,
• work hard and do not give up,
• are innovative 创新 — full of new ideas,
• are confident and good at making decisions,
• are well organised, able to manage time, money and people.

The business plan

A business plan 商业计划书 is a document that describes the business and its future. It usually contains the business idea and objectives, the product, the market 市场 it will sell to, who will run it, and a plan for the money.

A business plan has two main uses:

• it makes the owner think carefully and plan ahead,
• it helps the business raise finance 筹集资金 — banks and investors want to see a plan before they lend or invest.

Government support for start-ups

A start-up 初创企业 is a brand-new business. New businesses create jobs and help the economy grow, so governments often support them with:

• grants 补助金 — money given that does not have to be paid back,
• low-interest loans 贷款 — money lent on easy terms,
• training and advice for new owners,
• lower taxes in the first years.

Measuring the size of a business

You can measure how big a business is in several ways. Each one has a weakness.

Staying small or growing

Some businesses stay small on purpose: the owner wants to keep control, the market is small, or the product is specialised.

Businesses that want to grow bigger — to achieve growth 增长 — can do it in two ways.

• Internal growth 内部增长 (also called organic growth): the business grows by itself, by selling more, opening new branches, or adding new products. It is slower but lower-risk.
• External growth 外部增长: the business joins with another business. This is faster. It happens through a merger 合并 (two businesses agree to join into one) or a takeover 收购 (one business buys control of another).

External growth is classified by the kind of business that is joined.

Economies and diseconomies of scale

As a business grows, its cost per unit can fall. These savings are called economies of scale 规模经济.

If a business grows too big, the cost per unit can start to rise again. These are diseconomies of scale 规模不经济. They happen because communication 沟通 in a huge firm gets worse, workers feel less important and work less hard, and managers find the firm hard to control.

Liability

Liability 责任 means who must pay the debts 债务 if a business cannot pay them itself.

• With unlimited liability 无限责任, the owner is personally responsible for all the debts. If the business fails, the owner may lose personal things, like a house or car, to pay them.
• With limited liability 有限责任, the owner can only lose the money they put into the business. Their personal things are safe.

Incorporated and unincorporated

• An incorporated 法人 business has a separate legal identity from its owners. The business itself can own things and be taken to court. Its owners get limited liability. Companies are incorporated.
• An unincorporated 非法人 business is not separate from its owner in law. Sole traders and partnerships are unincorporated.

The four main types

A sole trader 独资企业 is a business owned by one person.

A partnership 合伙企业 is owned by two or more people who share the work, the decisions and the profit. They usually sign a written agreement.

A private limited company 私人有限公司 (often "Ltd") is owned by shareholders 股东, but its shares cannot be sold to the public. The owners are often family and friends.

A public limited company 公众有限公司 (often "plc") is a large company whose shares 股份 can be bought by the public on the stock exchange 证券交易所.

Shareholders may receive a share of the profit, called a dividend 股息.

Other forms of organisation

• Franchise 特许经营: a person (the franchisee 加盟商) pays to use the name, products and methods of an existing successful business (the franchisor 授权商). The franchisee gets a known brand, training and lower risk, but must pay fees and a share of the profit and has less freedom. Many fast-food chains work this way.
• Joint venture 合资企业: two businesses agree to share the cost, risk and profit of one project, while staying separate companies.
• Social enterprise 社会企业: a business that trades to help society or the environment, not only to make profit. Most of its profit is put back into its social aims.

Public sector organisation

A public corporation 国有企业 is a business owned and run by the government, such as a national rail or postal service. Its aims include giving an important service to everyone, not only making a profit.

Business objectives

An objective 目标 is a goal that a business aims for. Common objectives are:

• survival 生存 — staying in business, especially when new or in hard times,
• profit — earning more than it spends; the main aim of most private firms,
• growth — getting bigger, to be safer and earn more,
• market share 市场份额 — the share of total sales in a market that one business holds,
• customer service 顾客服务 — keeping customers happy so they come back,
• social objectives — helping society or the environment 环境.

Objectives of a social enterprise

A social enterprise aims for three kinds of objective together:

• economic — earn enough money to survive and grow,
• social — help people, for example by giving jobs to those who find work hard to get,
• environmental — protect the planet, for example by cutting waste.

Stakeholders

A stakeholder 利益相关者 is any person or group that is affected by a business or has an interest in it.

Why stakeholder objectives conflict

Stakeholders often want different things, so their objectives can conflict 冲突. A business cannot fully please everyone at once.

• Owners want higher profit, but employees want higher pay. Higher pay lowers profit.
• Owners want to cut costs, but the local community wants less pollution 污染. Cutting costs may create more pollution.
• Customers want low prices, but suppliers want to be paid more.

Good managers try to balance these different objectives.

• Added value = selling price − cost of bought-in materials. A business raises it with a strong brand, better design, or cheaper materials.
• Know the three sectors: primary (extracts raw materials), secondary (makes goods), tertiary (services). As a country develops, employment shifts from primary towards tertiary.
• Unlimited liability (sole traders, partnerships) puts the owner's personal things at risk; limited liability (Ltd, plc) limits any loss to the money invested.
• A stakeholder is anyone affected by the business, and their objectives often conflict — owners want profit, workers want higher pay, the community wants less pollution.
• Economies of scale cut the cost per unit as a firm grows; growing too big brings diseconomies of scale (cost per unit rises).

Vocabulary card meanings

needs: Things required for living, such as food and shelter, kept separate from things people only desire. developing economy: A country whose income and industry are still growing from a lower base. developed economy: A country with high income and established industry. de-industrialisation: A fall in manufacturing's share of employment, of output, or of both. innovative: Introducing new ideas, products, or methods. raise finance: To obtain the money a business needs. loans: Sums borrowed and later repaid, usually with an extra charge. output: The quantity produced in a given period. horizontal integration: Joining with a firm at the same stage of making or selling. vertical integration: Joining with a firm at an earlier or later stage of the same chain. conglomerate integration: Joining with a firm in an unrelated line of business. advertising: Paid messages that promote a product to possible buyers. liability: The legal duty to meet debts or to pay for harm. incorporated: Set up as a company with its own legal identity. unincorporated: Run without a separate legal identity from the owners. franchise: A right to trade under another firm's name and system. franchisee: The person who buys the right to use a firm's name and system. franchisor: The firm that sells others the right to use its name and system.

Motivation 激励 is the drive that makes people want to work hard. A well-motivated workforce 员工队伍 — all the employees 员工 in a business — brings real benefits:

• higher productivity 生产率 — each worker produces more,
• lower absenteeism 缺勤 — fewer workers stay away from work,
• lower labour turnover 员工流动率 — fewer workers leave, so the business spends less time and money hiring and training new staff.

Motivation theories

Three thinkers explain what makes workers work hard.

Financial methods of motivation

These reward workers with money.

Worked example. A factory pays a piece rate of £3 per item. Anya makes 210 items in a week. Ben is on a time rate of £12 per hour for a 40-hour week. Who earns more, and what risk does the piece rate carry? Anya earns 210 × £3 = £630. Ben earns 40 × £12 = £480, so Anya earns £150 more. But paying for each item made tempts workers to rush, so quality may fall and more items are rejected - which is why a piece rate usually has to be paired with quality checks. Show the calculation, then judge it: a question that asks who earns more and for an evaluation gives marks for the number and for the drawback.

Non-financial methods of motivation

These motivate without extra money.

• job rotation 工作轮换 — workers switch between different tasks, so work is less boring.
• job enlargement 工作扩大化 — adding more tasks at the same level.
• job enrichment 工作丰富化 — giving more challenging tasks and more responsibility.
• autonomy 自主权 — letting workers make some of their own decisions.
• teamworking 团队合作 — working in small groups.
• training 培训 and chances for promotion 晋升 — helping workers improve and move up.

Organisational charts

An organisational chart 组织结构图 is a diagram that shows how a business is organised — who reports to whom. It shows several ideas:

• hierarchy 层级 — the levels of staff, from the top down.
• chain of command 指挥链 — the line along which orders pass down from managers to workers.
• span of control 管理幅度 — the number of subordinates 下属 (people directly below) that one manager controls.
• delayering 扁平化 — removing one or more levels to cut costs and speed up messages.

A long chain of command (a "tall" structure) slows messages down. A wide span of control gives one manager many people to watch.

Functions of management

The five main jobs (functions) of management 管理 are:

• planning 计划 — setting aims and deciding how to reach them,
• organising 组织 — arranging people and resources,
• coordinating 协调 — making different parts work together,
• commanding 指挥 — giving instructions and guiding staff,
• controlling 控制 — checking that targets are met.

Leadership styles

A leadership style 领导风格 is the way a manager leads people.

Trade unions

A trade union 工会 is a group of workers who join together to protect their shared interests. A union can bargain for better pay and conditions, support a worker in a dispute, and push for safer work.

The recruitment process

Recruitment 招聘 is finding and attracting people to apply for a job. Selection 选拔 is choosing the best person from those who apply. The process starts with three documents:

• job analysis 工作分析 — studying what the job involves,
• job description 工作描述 — a list of the duties and tasks of the job,
• person specification 人员规格 — the skills, qualities and qualifications the right person needs.

Internal and external recruitment

• Internal recruitment 内部招聘 fills the job with someone already in the business. It is cheaper and quicker, and the person is already known, but it brings in no new ideas.
• External recruitment 外部招聘 fills the job from outside. It brings new ideas and skills, but it costs more and takes longer.

Common selection methods include the application form 申请表, the CV 简历 (a short summary of a person's education and work history), the interview 面试, and skills tests 测试.

Training

Training improves workers' skills. There are three main types.

• induction training 入职培训 — given to new workers, to learn about the business and their role.
• on-the-job training 在职培训 — learning while doing the job, beside an experienced worker.
• off-the-job training 脱产培训 — learning away from the workplace, for example at a college.

Reducing the workforce

Sometimes a business must cut staff numbers.

• Redundancy 裁员 — the job is no longer needed, for example because a machine now does it. It is not the worker's fault.
• Dismissal 解雇 — the worker is removed for a good reason, such as breaking rules or poor work.

Most countries have employment laws 劳动法 that protect workers. They cover a fair contract of employment 雇佣合同, safe conditions, fair pay, and protection from being sacked unfairly.

Why communication matters

Good communication 沟通 means information is sent, received and understood correctly. It helps workers know what to do, cuts mistakes, and makes people feel valued.

The communication process has five parts: a sender 发送者, a message 信息, a medium 媒介 (the way it is sent), a receiver 接收者, and feedback 反馈 (the receiver's reply, which shows the message was understood).

Types of communication

• One-way communication 单向沟通 — information flows in one direction only, with no reply (for example, a public notice).
• Two-way communication 双向沟通 — the receiver can reply and give feedback. It is usually better, because it checks understanding.
• Internal communication 内部沟通 — between people inside the business.
• External communication 外部沟通 — between the business and outside people, like customers 顾客 or suppliers 供应商.

Barriers to communication

A communication barrier 沟通障碍 is anything that stops a message getting through clearly. Common barriers include:

• a message that is too long or unclear,
• a poor medium, such as a weak phone line,
• language differences between sender and receiver,
• a receiver who is not paying attention.

To reduce barriers: keep messages short and clear, choose the right medium, and ask for feedback to check the message was understood.

• Link motivation to its benefits: higher productivity, lower absenteeism, and lower labour turnover.
• Match each theory: Taylor (pay / piece rate), Maslow (a hierarchy of needs — lower needs before higher), Herzberg (hygiene factors stop unhappiness; motivators drive real effort).
• Separate financial methods (wage, piece rate, salary, commission, bonus) from non-financial ones (job rotation, job enlargement, job enrichment, autonomy).
• On an organisation chart, know the chain of command (the line orders travel down) and the span of control (how many people report to one manager).
• Distinguish redundancy (the job is no longer needed — not the worker's fault) from dismissal (the worker is removed for a reason such as breaking rules).

Vocabulary card meanings

workforce: All the people employed by an organisation. absenteeism: Staff being away from work when they were expected to attend. labour turnover: The share of the workforce that leaves during a period, whether or not the jobs are filled again. hierarchy of needs: A ranking of human requirements from basic survival up to personal growth. promotion: A move to a more senior job in the same organisation. internal recruitment: Filling a vacancy with someone who already works there. external recruitment: Filling a vacancy with someone from outside the organisation. application form: The official sheet a candidate completes when seeking a job. CV: A summary of education and work history sent to an employer. tests: Tasks used to check what a job applicant can do. dismissal: Ending a person's job, usually because of conduct or capability. employment laws: Statutes that set rights and duties of employers and staff. contract of employment: The agreement that states pay, hours, and duties for a job. sender: The person who starts a message. message: The information a sender wants another person to receive. receiver: The person a message is aimed at. one-way communication: A message sent without an exchange of feedback. two-way communication: An exchange in which the other person can reply. internal communication: Messages that stay inside an organisation. external communication: Messages that travel between the organisation and people outside it, in either direction. communication barrier: Anything that stops a message being understood as intended.

Marketing 营销 is the work of finding out what customers 顾客 want, then making, pricing, selling and promoting products to meet those wants at a profit.

Marketing has several roles:

• find out and satisfy what customers want,
• keep and increase sales 销售额 and market share 市场份额,
• build customer loyalty 顾客忠诚度 so buyers come back again.

Why customers matter

Customers bring in the money, so keeping them is vital. Losing customers is costly: the business loses their future spending, and it must spend a lot on advertising 广告 to win new ones. It is usually far cheaper to keep a customer than to find a new one.

Niche and mass markets

A market 市场 is all the buyers and sellers of a product.

• A niche market 利基市场 is a small part of a market with special needs, for example left-handed tools.
• A mass market 大众市场 is a large market with many similar buyers, for example soft drinks.

Market segmentation

Market segmentation 市场细分 means splitting a market into groups of buyers who share something, such as age, income, gender or location. Its benefits:

• the business can design a product to fit each group,
• it can aim its advertising at the right people,
• it can spot gaps in the market.

Market research 市场调研 is collecting information about customers, rivals and the market, to help make good decisions.

Primary and secondary research

• Primary research 一手调研 (also called field research) collects new information directly, for the first time. Methods include questionnaires 问卷, interviews, surveys and tests. It is up to date and fits the exact need, but costs time and money.
• Secondary research 二手调研 (also called desk research) uses information that already exists, such as government reports, websites and past sales records. It is cheap and quick, but may be old or may not fit the need.

Sampling and reliable data

A business cannot ask everyone, so it asks a small group, called a sample. Sampling 抽样 must be done with care. If the sample is too small or not typical, the data 数据 will not be reliable, and decisions based on it may be wrong.

Using research data

Research results are shown in tables, charts and graphs. You should be able to read them — for example, find the most popular product, or see how sales change over time — and use them to support a decision.

The marketing mix 营销组合 is the four main choices a business makes about a product. They are often called the four Ps: product, price, place and promotion.

Product

The product 产品 must meet customers' needs. Two ideas matter here.

The product life cycle 产品生命周期 describes the sales of a product over time, in four stages: introduction, growth, maturity and decline. When sales begin to fall, a business can use an extension strategy 延长策略 — such as a new design, a new advert, or selling in a new market — to keep the product selling.

A strong brand 品牌 (a name, logo and image that customers recognise) and good packaging 包装 (the wrapping that protects the product and attracts buyers) both help a product sell. Building a brand is called branding.

Price

The price 价格 is what the customer pays. A business can choose from several pricing methods.

The right price also depends on the cost of making the product, on what customers will pay, on rivals' prices, and on the product's stage in its life cycle.

Worked example. One firm launches a smartphone using technology no rival has. Another enters a crowded soft-drinks market. Which pricing method suits each, and why? The smartphone is new and special with no direct competition, so use price skimming: charge a high price at first to recover the development cost from customers who must have it, then lower it as rivals catch up. The soft drink faces many established rivals, so use penetration pricing: a low price wins customers quickly and buys market share, and it can be raised later. Match the method to the market conditions - a pricing strategy is only right or wrong relative to the competition and the product's stage in its life cycle.

Place

Place 地点 is about how and where the product is sold, so it reaches the customer at the right time. The route a product takes from maker to customer is called a channel of distribution 分销渠道.

Many channels use a wholesaler 批发商 (buys large amounts from makers and sells smaller amounts to shops) and a retailer 零售商 (a shop that sells to the final customer). A business can also sell directly 直销 to customers, or online through e-commerce 电子商务.

Promotion

Promotion 推广 means telling customers about a product and persuading them to buy it. It includes:

• advertising — paid messages on TV, online, on posters and so on,
• sales promotion 促销 — short-term offers like discounts, free gifts, or "buy one get one free".

Technology now plays a big part. The internet 互联网 and social media 社交媒体 let a business reach many people cheaply, target the right customers, and sell all over the world.

A marketing strategy 营销策略 is a plan that uses the four Ps together to reach the business's objectives 目标. The four Ps must fit each other and fit the target customers. For example, a high-price luxury product needs high-quality packaging, expensive shops and image-based adverts.

Legal controls on marketing

Many countries have legal controls 法律管制 that protect buyers:

• consumer protection 消费者保护 laws stop the sale of unsafe or faulty goods,
• rules ban misleading 误导 promotion — adverts that lie about what a product can do.

Selling in other countries

A business can grow by entering an international market 国际市场 in another country.

• Opportunities: many more customers, higher sales, and spreading risk across markets.
• Problems: different languages and tastes, higher transport costs, foreign laws and tariffs 关税 (taxes on imports), and strong local competition 竞争.

• Learn the four Ps of the marketing mix — product, price, place, promotion — and remember they must fit each other and the target customer.
• Primary research collects new data (surveys, questionnaires; up to date but costly); secondary research uses existing data (cheap and quick but may be out of date).
• Know the product life cycle (introduction, growth, maturity, decline) and that an extension strategy revives falling sales.
• Match the pricing methods: penetration (low, to enter a market), skimming (high, for a new product), plus cost-plus, competitive, promotional and dynamic pricing.
• A niche market is small and specialised; a mass market is large, with many similar buyers.

Vocabulary card meanings

sales: The value of what customers have bought in a period. customer loyalty: Customers returning to buy from the same firm again. market segmentation: Dividing buyers into groups with similar wants. product: The good or service a firm offers to buyers. extension strategy: A plan to keep demand going after growth has slowed. packaging: The wrapping and design that protect a product and present it. price: The amount of money asked for one item. place: Where and through which channels buyers can obtain a product. channel of distribution: The path a product takes from the maker to the final buyer. wholesaler: A business that buys in bulk and sells on to shops. retailer: A shop that sells to the final customer. direct selling: Selling to the final customer with no wholesaler or retailer in between. e-commerce: Buying and selling over the internet. promotion (marketing): Activities that tell customers about a product and try to persuade them. internet: The global network used to send data between computers. legal controls: Laws that limit what firms may do. consumer protection: Laws that stop firms misleading or harming buyers. international market: Buyers and sellers in other countries.

Production 生产 means turning materials and labour 劳动力 into finished goods and services 服务. There are three main methods.

Productivity

Productivity 生产率 measures how much each worker or machine produces in a set time. Higher productivity lowers the cost per item. A business can raise productivity by:

• training workers,
• using better machines and technology 技术,
• improving motivation 激励,
• organising the work better.

Lean production and just-in-time

Lean production 精益生产 means cutting all waste — wasted time, materials, space and effort — while keeping quality.

One key method is just-in-time 准时制 (JIT). With JIT, materials arrive just as they are needed, and finished goods are sold quickly, so the business holds very little inventory 库存 (its stock of materials and goods). This saves storage cost, but one late delivery can stop production. Good management of inventory keeps enough stock to meet demand, but not so much that money is tied up or goods go out of date.

Technology in production

Technology has changed production. Automation 自动化 (machines and robots doing tasks), computer design and online ordering all make production faster, cheaper and more exact. But machines cost a lot to buy and can replace workers' jobs.

Types of cost

A business has different kinds of cost 成本.

• fixed costs 固定成本 do not change with output — rent, salaries, insurance. You pay them even if you make nothing.
• variable costs 可变成本 change with output 产量 — materials, and pay for each item made. More output means more variable cost.
• total cost 总成本 is fixed costs plus variable costs.
• average cost 平均成本 is the total cost divided by the number of items made.

Worked example. A factory has fixed costs of £8,000 and variable costs of £2 per unit, and makes 1,000 units. Find the total cost and the average cost per unit.

Revenue and profit

Revenue 收入 is the money a business gets from selling its products.

Profit 利润 is what is left after all costs are paid.

Worked example. The same factory sells all 1,000 units at £15 each. Find its total revenue and its profit.

Break-even

The break-even 盈亏平衡 point is the level of output where total revenue exactly equals total cost: the business makes no profit and no loss. Below it the business makes a loss; above it, a profit.

Each item sold gives an amount towards covering the fixed costs. This amount is the selling price minus the variable cost of one item (sometimes called the contribution 贡献 per unit).

A break-even chart 盈亏平衡图 plots total cost and total revenue against output. The two lines cross at the break-even point 盈亏平衡点.

The margin of safety 安全边际 is how far the actual output is above the break-even output.

Worked example. A product sells for £15 with a variable cost of £5 per unit, and the firm's fixed costs are £8,000. Find the break-even output, and the margin of safety if the firm actually makes 1,200 units.

The contribution per unit is $\text{\pounds} 15 - \text{\pounds} 5 = \text{\pounds} 10$, so

A large margin of safety is safer, because sales can fall a long way before the business makes a loss.

Limits of break-even analysis. It assumes that all output is sold, and that the selling price and the costs stay the same at every level of output. In real life these often change, so break-even is only a guide.

Why quality matters

Quality 质量 means a product is good enough for what customers 顾客 need. Good quality:

• builds a strong brand 品牌 and customer loyalty 顾客忠诚度,
• means fewer returns, complaints and wasted materials,
• lets a business charge a higher price.

Poor quality loses customers and damages the brand.

Quality control and quality assurance

There are two main ways to manage quality: quality control 质量控制 and quality assurance 质量保证.

Locating a business

Where a business sits affects its costs and its sales. A manufacturing 制造业 business (one that makes goods) looks at:

• nearness to raw materials 原材料, because heavy or bulky materials cost a lot to move,
• nearness to customers and the market 市场,
• the cost and size of the land,
• a supply of suitable labour,
• good transport links,
• government grants offered in some areas.

A service business (one that sells services, such as a shop or a hair salon) looks more at being close to customers, passing foot traffic, nearby shops, and the rent.

Locating in another country

A business may produce or sell abroad in order to reach new customers and bigger markets, pay lower wages or rent, get nearer to raw materials, or avoid tariffs 关税 (taxes on imports) by making goods inside the country. But it must then deal with different laws, languages and customs, and follow the legal controls 法律管制 of both countries.

• Match the production methods: job (one-off items to order), batch (a group, then switch to another), flow (non-stop mass production on a line).
• Learn the formulas: total cost = fixed + variable; average cost = total cost ÷ output; total revenue = price × quantity; profit = total revenue − total cost.
• Break-even output = fixed costs ÷ (selling price − variable cost per unit). How far actual output is above break-even is the margin of safety.
• Break-even analysis assumes everything made is sold at one fixed price and cost, so it is only a guide.
• Quality control checks finished goods at the end; quality assurance builds quality in at every stage.

Vocabulary card meanings

break-even chart: A graph that shows where income meets total costs.

Finance 资金 means the money a business needs. A business needs finance to:

• start up — start-up capital 启动资金 to buy equipment and stock before it earns anything,
• grow — money for expansion 扩张, such as new shops or machines,
• run day to day — working capital 营运资金 to pay wages and suppliers while waiting for customers to pay,
• survive a cash-flow 现金流 problem, when more money is going out than is coming in.

Sources of finance

Finance can be short-term 短期 (paid back within a year) or long-term 长期 (over several years). It can come from inside the business (internal) or from outside (external).

Choosing a source

The best source depends on how much money is needed and for how long, the cost (interest and fees), the size and legal type of the business (only companies can sell shares), and how much risk and control the owners will accept.

Cash is not the same as profit

Cash 现金 is the money a business can use right now. Profit 利润 is revenue 收入 minus costs over a period. A business can be making a profit yet still run out of cash — for example, if customers have not paid yet. Running out of cash can force even a profitable business to close.

The cash-flow forecast

A cash-flow forecast 现金流预测 predicts the money coming in and going out each month. It uses:

• inflows 流入 — money coming in (sales, loans),
• outflows 流出 — money going out (wages, rent, materials),
• net cash flow 净现金流 — inflows minus outflows,
• opening balance 期初余额 — the cash held at the start of the month,
• closing balance 期末余额 — the cash held at the end of the month.

Worked example. A shop expects inflows of £12,000 and outflows of £9,000 next month, and starts the month with £2,000 in the bank. Find the net cash flow and the closing balance.

Working capital

Working capital is the money available for day-to-day running. It is the current assets 流动资产 (cash and things soon turned into cash) minus the current liabilities 流动负债 (debts due within a year).

To overcome cash-flow problems, a business can arrange an overdraft, delay paying suppliers, ask customers to pay sooner, sell spare assets, or cut spending.

An income statement 损益表 shows how much profit a business made over a period, usually a year.

Worked example. A business has revenue of £200,000, cost of sales of £120,000 and expenses of £50,000. Find its gross profit and its profit for the year.

Income statements are used by stakeholders 利益相关者: owners check the profit, lenders check whether their loans are safe, and managers look for problems.

A statement of financial position 财务状况表 (also called a balance sheet) shows what a business owns and what it owes (its liabilities 负债) on one day.

• non-current assets 非流动资产 — things kept for the long term: buildings, machines.
• current assets — short-term items: inventory 库存, money owed by customers, and cash.
• current liabilities — debts due within a year: an overdraft, money owed to suppliers.
• non-current liabilities 非流动负债 — debts due after more than a year: a long-term loan.
• owners' equity 所有者权益 — the money the owners put in, plus profit kept in the business.

It is used to check what the business is worth, how much it owes, and whether it can pay its debts.

You can judge a business by working out ratios 比率 from its accounts. A ratio compares two figures.

Profitability ratios

Profitability 盈利能力 ratios show how good a business is at making profit.

• gross profit margin 毛利率 — gross profit as a percentage of revenue.
• profit margin 利润率 — profit for the year as a percentage of revenue.
• return on capital employed 资本回报率 (ROCE) — profit as a percentage of the capital employed 所用资本 (money invested). It shows how well the investment is used.

A higher percentage is better for all three.

Worked example. The same business (revenue £200,000, gross profit £80,000, profit for the year £30,000) has capital employed of £150,000. Find its three profitability ratios.

Liquidity ratios

Liquidity 流动性 ratios show whether a business can pay its short-term debts.

• the current ratio 流动比率 compares current assets with current liabilities. Around 1.5 to 2 is healthy.
• the acid test ratio 速动比率 is stricter: it leaves out inventory, because inventory is not yet sold.

Worked example. A business has current assets of £40,000 (including £10,000 of inventory) and current liabilities of £20,000. Find its current ratio and acid test ratio.

Who uses account analysis

• internal users (owners and managers) use it to control the business and to plan.
• external users (banks, suppliers, the government and investors) use it to decide whether to lend, supply or invest.

• Cash is not profit: a profitable business can still run out of cash if customers pay late. Watch the closing balance on a cash-flow forecast.
• Separate internal sources (retained profit, sale of assets, owners' savings) from external ones (bank loan, overdraft, shares, leasing, trade credit).
• Key formulas: net cash flow = inflows − outflows; closing balance = opening balance + net cash flow; working capital = current assets − current liabilities.
• Profitability ratios (gross margin, profit margin, ROCE) — higher is better. Liquidity: the current ratio (healthy ≈ 1.5–2) and the stricter acid test (which leaves out inventory).
• Only limited companies can raise money by issuing shares; a sole trader or partnership cannot.

Vocabulary card meanings

cash-flow: Money moving into and out of a firm over time. short-term: Covering a brief period, such as weeks or months. long-term: Covering years rather than weeks. loan: A sum borrowed now and repaid later, usually with interest. debentures: Long-term loans to a company, often secured on its assets. leasing: Paying to use an asset without owning it. hire purchase: Paying for an asset in instalments and owning it at the end. crowdfunding: Raising money from a large number of small contributors. return on capital employed: Profit compared with the long-term capital used in the business. acid test ratio: A check of whether short-term assets, excluding stock, cover short-term debts.

Every business is affected by external influences 外部影响 — things outside the business that it cannot control, such as the economy, the law and the environment. A good business watches these and plans for them.

The business cycle

The economy does not grow at a steady pace. It moves in a repeating pattern called the business cycle 经济周期, with these stages.

In hard times a business may cut costs, lower prices, or sell cheaper products.

Government economic aims and how they affect business

Governments try to keep the economy healthy. Their main aims are stable prices, plenty of jobs, steady growth, and a stable currency. To manage the economy, a government uses or watches several economic factors. Each one affects every business.

External costs and external benefits

When a business acts, other people can gain or lose.

• external costs 外部成本 are costs paid by other people or by society, not by the business — for example pollution 污染, noise and heavy traffic.
• external benefits 外部收益 are gains for others — for example new jobs and better roads.

Sustainable development

Sustainable development 可持续发展 means meeting today's needs without harming the ability of future people to meet their own needs. A business can harm the environment 环境 — through waste, pollution, and using up resources — or protect it, through recycling, clean energy and less packaging.

Pressure groups

A pressure group 压力团体 is a group that tries to influence businesses and governments, for example to cut pollution. Pressure groups use the media, protests and boycotts. A business may change its behaviour to avoid bad publicity.

Ethics and profit

Ethical behaviour 道德行为 means doing what is morally right, even when no law forces it — for example fair pay, safe products, and no child labour. Acting ethically can cost more in the short term, so it may conflict 冲突 with profit. But it can also win loyal customers and a good name, which raise profit in the long term.

Globalisation

Globalisation 全球化 is the growing trade and movement of goods, money and people between countries, so the world acts more and more like one single market. It has grown because of cheaper transport, better communication, the internet, and fewer trade barriers such as tariffs 关税 (taxes on imports).

Multinational companies

A multinational company 跨国公司 has operations — factories, branches, or offices — in more than one country. (Simply exporting to other countries is not enough; the firm must actually operate there.)

Exchange rates and trade

An exchange rate is the price of one currency in another. A change affects businesses that import 进口 (buy from abroad) and those that export 出口 (sell abroad).

• If the currency gets stronger (rises), exports become dearer for foreign buyers, so they sell less, while imports become cheaper.
• If the currency gets weaker (falls), exports become cheaper and sell more, while imports become dearer.

A useful memory aid is SPICED: Strong Pound → Imports Cheaper, Exports Dearer.

Worked example. A UK firm exports a machine priced at £20,000. The exchange rate moves from £1 = 1.50 USD to £1 = 1.20 USD. What happens to the price a US buyer pays, and is that good for the exporter? Convert the UK price at each rate: at the old rate 20,000 × 1.50 = 30,000 USD; at the new rate 20,000 × 1.20 = 24,000 USD. The pound has weakened, so the machine is 6,000 USD cheaper abroad and the firm should sell more - good for an exporter. Check it against SPICED: a weak pound is the reverse of it, so exports are cheaper. Convert the actual figures rather than only reciting the mnemonic, and notice that the UK price never changed at £20,000 - it is the foreign price that moves.

• Learn the business cycle (growth, boom, recession, slump, recovery) and how each stage changes sales, profit and jobs.
• Trace each economic factor to the business: higher interest rates → dearer loans, so less borrowing and spending; higher tax → people have less to spend; inflation → higher costs.
• External costs (pollution, noise) fall on other people, not the business; external benefits (new jobs, better roads) help others.
• Use SPICED for exchange rates: Strong Pound → Imports Cheaper, Exports Dearer.
• Ethical behaviour can cost more in the short term (so it may conflict with profit), but it can win loyal customers and a good name that raise profit later.

Vocabulary card meanings

external influences: Forces outside the firm, such as the economy or the law. slump: A deep fall in spending, output, and jobs. external benefits: Gains that fall on a third party outside the deal between buyer and seller. ethical behaviour: Conduct judged right, not only legal.