Essential Business Management and Finance Key Concepts
Posted on Oct 5, 2026 in Business Administration and Management (BAM)
Financial Objectives
- Survival
- Increase market share
- Profit
Private and Public Limited Companies
Private Limited Companies
- Advantages: Control can’t be lost, shareholders have limited liability
- Disadvantages: Profit is shared, can’t raise huge amounts of money
Public Limited Companies
- Advantages: Large amounts can be raised, shareholders have limited liability
- Disadvantages: Setting up is very expensive, outsiders can take control
Location
- Proximity to market: To keep transport costs down
- Proximity to competitors: Where there are no competitors or near them so important industries are compared
Globalisation for Business
- Access to larger markets
- Free movement to access labour
Multinational Corporations
- Larger customer base: There is a much wider market
- Lower taxes: This is because they can locate wherever they want so they will go to a country with a low rate of corporation tax
Measuring Success
- Customer and owner satisfaction
- Profit and growth
- Profit: Private sector will look for profit, therefore, more profit means more success
Business Failure
- Poor leadership
- Ineffective marketing
- Poor financial management
Job Recruitment and Controls
Internal Recruitment
- Cheaper
- Familiar with the company
- Staff may be motivated for promotion
External Recruitment
- Larger pool of employees to choose from
- New people may bring fresh ideas that can help
Equal Opportunities Factors
Training Benefits
- Keep workers updated: New legislation, health and safety procedures
- Job motivation: Employees will feel more secure if they have been trained
- Train for promotion
Motivation
- Easier to retain staff
- Higher labour productivity: They will work harder as a result
- Higher levels of output
- Motivation factors: Achieving aims, responsibility, and promotion
- Hygiene factors: Pay, working conditions, and job security
- Methods: Remuneration, promotion, bonuses, job rotation
- Maslow’s Hierarchy: Physiological, safety and security, teamwork
- Herzberg’s Theory: Achieving aims, responsibility
Flat and Hierarchical Structures
- Flat: Easier and more effective communication, management costs lower
- Hierarchical: Communication can be poor as the message has to pass through a long chain, management costs higher, promotion is more likely so employees are more motivated
Centralised and Decentralised Structures
Centralised
- Advantages: Easier to control, managers are trained and have experience, and they have total control
- Disadvantages: Employees may be demotivated without authority, less creativity
Decentralised
- Advantages: Employees have freedom so they may be more motivated, speeds up decision making, provides more promotion opportunities
- Disadvantages: Costs may be higher, employees may lack the ability to make decisions, managers may lose control
Human Resources
- Training
- Employment issues
- Dismissal
- Health and safety
- Recruitment
Costs and Financial Formulas
- Revenue: Price $ imes$ Quantity
- Average Cost: Total Cost / Quantity Produced
- Profit: Total Revenue – Total Cost
- Break-Even Point: Fixed Cost / (Selling Price – Variable Cost per Unit)
Financial Position
- Non-current assets: Assets that last for more than one year
- Current assets: Assets which will change into cash in one year
- Current liabilities: Business debts which must be paid in less than a year
- Net current assets: Current assets minus current liabilities, which shows the amount of working capital available in the business
- Non-current liabilities: Debts that are due after a year
- Net assets: The total at the bottom of the first part of the statement of financial position
- Shareholders’ equity: The money and value belonging to the owners
