1. What is a Business?

2. What is a business? Any organisation involved in:
Production of a good, or
Provision of a service

3. Why businesses exist People and organisations have needs and wants
A business aims to satisfy these needs and wants
It tries to make a profit for itself
And to earn a return on investment

4. Difference between a need and a want
Needs satisfy our basic requirements for living:
Food
Water
Warmth
Security
Shelter
Wants are things we desire beyond our needs
A better mobile phone
A faster car

5. Nature of business activity
Business activity refers to any part of a three-stage process
INPUTS (e.g. raw materials, labour & machinery) and
TRANSFORMING them into
OUTPUTS (e.g. products & services)
Transforming inputs is known as “adding value”

6. Main categories of inputs
Land and natural resources
E.g. fields to build factories on; energy to power factory
Labour
E.g. employees needed to operate machines, sell to customers
Capital
E.g. plant and machinery, computers, finance
Entrepreneurship
People who are prepared to invest in and manage a business
Give business a sense of direction and energy

7. Products
Product = anything that satisfies customer needs and wants. This can be:
A “good”
Something tangible
E.g. a mobile phone
A “service”
Usually intangible
Something other people do for you
E.g. service you receive when you stay in a hotel

8. Value Added Occurs when a business transforms inputs into outputs
Value added is difference between:
(1) Cost of inputs and
(2) Price of outputs
Adding value is way a business makes profit

9. What is Profit?
Profit = difference between total revenues and total costs
If total costs are higher than total revenues - business makes a “loss”
Profit or loss of usually measured over a period of time (e.g. a year, six months)
Described in an accounting statement called profit and loss account
In the long-term, businesses need to make profits to survive

10. Entrepreneur A person who is willing to take a risk on a business
Usually invests own money
Organises elements of production within a business
Driving force behind business
Requires:
Persistence
Skill
Judgement
Luck