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Functions of a Business

Functions of a Business. 1. Production. Production is the making of a good and or service. The term production can be used to mean/include: Land: The physical space in which the product will be produced/sold Labour: The workforce that will make the product

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Functions of a Business

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  1. Functions of a Business

  2. 1. Production • Production is the making of a good and or service. The term production can be used to mean/include: • Land: The physical space in which the product will be produced/sold • Labour: The workforce that will make the product • Capital: The money/equipment/machinery used for production • Information: the information and tracking necessary for production

  3. Costs of production For this project your production costs will include: • Bill of materials costs (provided) • Equipment list (researched)

  4. 1. Production Explain below how you will use each of these factors of production for your project:

  5. 2. Human resources • The people involved in the business • Can be internal • Permanent employees for your company • Can be external • People brought in and paid to work on specific projects

  6. Cost of Human Reources • Since you are the owner of your business, you will be the only employee • Questions for you to answer about your business: • What skills for this business do you have? • What skills for this business do you need to improve? • In what ways will you have to be flexible?

  7. 3. Marketing • The activities a business does in order to convince people to sell a product. In this project this could include: • Personal selling: one on one communication to promote or sell a product • In your opinion, what are two advantages to selling things to one customer at a time? • In your opinion, what are two disadvantages to selling things to one customer at a time? • Advertising • Mass advertising through the use of a medium (such as posters, t.v. adds, the internet, magazines, newspapers, radio, outdoor advertising) • In your opinion, what are two advantages to selling things this way? • In your opinion, what are two disadvantages to selling things this way?

  8. Costs of marketing Your marketing will have four components: • Creation of a name for your business (to be included on the reports that follow) • Creation of a prototype • Creation of a sign • Creation of business cards to hand out to friends/family • Using the website www.staplescopyandprint.ca, come up with and print off estimates for the cost of a colour sign for your business (size 24 X 36), as well as the cost of 100 one sided black & white business cards

  9. Costs of marketing

  10. 4. Financing • Obtaining money to start and continue to operate the business • Initially done through either debt or equity financing • If successful, business can continue to operate using operating revenue (revenue from sales of goods/services) • There are two general ways of finding the financing to start up a business

  11. Debt Financing • Debt Financing occurs when a person is loaned money to complete a task (or assist in a business). The person lending the money is then given the money back either over time or at the end of a period with interest • Interest is extra money paid for the use of money (the cost of borrowing)

  12. Debt Financing • Example • Todd wants to buy a car • He borrows $10,000 from the bank to buy the car • The bank charges a yearly interest rate of 5% • At the end of the year, how much will he have to pay back to the bank? Answer below • In this case, the principal is the amount originally loaned out ($10,000) Answer:

  13. Debt Financing • Advantages • You do not give up ownership in your business • You can do whatever you want with the money • Disadvantages • You must pay back the loan with interest

  14. Equity Financing • Equity Financing occurs when a business allows investors to become co-owners in a business • The new owner may or may not have say in what happens to the business, but MUST have a share of the profits and/or losses of the business

  15. Equity Financing • Advantages • You do not have to pay back the new owner’s investment • You don’t have to pay any interest • Disadvantages • You are giving up some ownership and say in the business • You are giving up a share of the profits

  16. Potential Financing Costs • There are two options for this business: • The bank will offer you a loan (debt financing) • Anywhere between $500 and $5000 • You choose amount loaned • Interest rate is 8% annual (8% / 12 for each month) Principal is due at the end of August. • A friend, Dave Smith, has offered to be a partner (equity financing) • Will give you $2000 to become a 50% partner in the business • The friend does not want to work for the business at all, but must share 50-50 in projected profit

  17. Financing advtanges and disadvantages • Complete the chart to analyze the two options for financing

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