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IGCSE Businesses Studies Revision Notes

Annual General Meeting – A legal requirement for public companies. All shareholders may attend, next year’s Board of Directors is voted, annual report given, financial data provided Dividends – Payments made to shareholders from the profits of a company after paying corporation tax. They are the return to the shareholders for investing in the company. Joint ventures – When two or more businesses agree to start a new project together, sharing the capital, the risks and the profits. Many European companies have set up joint ventures in China with Chinese businesses, As the local managers will have good knowledge of market needs and consumer tastes.

Franchise – A business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. The franchisee buys the licence to operate this business from the franchisor. Multinationals Multinational businesses are those with production facilities in more than one country. There are several reasons why businesses become multinationals, including: To produce goods and services with low costs, due to lo  wages or taxes Extracting raw materials which the firm might need for production, like Saudi oil.

Producing goods nearer to the market to reduce transport costs, like bricks or cars To avoid import barriers imposed by countries, like

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on Japanese made cars in Europe Expanding into different markets to spread risks and increase sales Advantages of multinationals operating in a country: Jobs are created, which reduces unemployment New investments in buildings and machinery increases output of goods and services in the country Some of the output may be sold abroad, thus helping exports and reducing imports.

Increased tax revenue for the government Disadvantages of multinationals in a country: The jobs created in ‘host countries’ are often unskilled. More educated jobs like R&D stay back home. Local firms may be forced out of business, as new big business might have good economies of scale Profits are often sent back to ‘home country’, so not used in ‘host country’ to buy goods and services Multinationals often use up scarce and non-renewable primary resources in the ‘host country’ (oil) Multinational businesses are very large and can influence the government for grants or subsidies Organisational structure Organisational structure – Refers to the level of management and division of responsibilities within an organisation.

Delegation – Giving a subordinate the authority to perform particular tasks. Only authority to perform the task, not the responsibility, is delegated. Subordinate – Person working under the directions of a listed manager Chain of command – The structure in an organisation which allows instructions to be passed down from senior management to lower levels of management. Shows the hierarchy in the business. Span of control – The number of subordinates working directly under a manager. Internal communication – When messages are sent inside the same organization External communication – When messages are sent between different organizations or individuals Sender –> Medium of communication –> Message –> Receiver –> Feedback

5) Financing business activity A business needs funds to start-up the business, pay wages to workers, pay tax, raw materials etc. Capital expenditure – Money spent on fixed assets which will last for more than one year Revenue expenditure – Money spent on the day-to-day running of the business, like wages or rent Debentures – Long-term long certificates issued by limited companies. No monthly charge. Debt factoring – Selling your debts for ~90% value for immediate cash to a specialist agency. Hire purchase – Allows a business to buy a fixed asset by paying monthly charges. Keeps the thing. Leasing – Allows a firm to use an asset over a length of time for monthly payments. The business could decide to purchase the asset at the end of the leasing period. Otherwise, they don’t keep it.

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