Understanding Business Concepts

Understanding clientele C erstptsUnit Number Title U35 Business and EntrepreneurshipAssignment 1 Sit 1 Understanding Business ConceptsTable of ContentsTask A practise 1Answer 1.1Answer 2Answer 2.1Answer 3Answer 3.1Answer 3.2Answer 4Task BAnswer 1.Answer 2Answer 3References List of FiguresFigure 1 trick out DiagramTask AAnswer 1Opportunity cost is the next highest valued alternative to ones decision. It is the loss of potential gain from the second best alternative, once a blood decision is adjournn.Answer 1.1A Motor vehicle fraternity has taken a decision to lead astray a new drudgery line for its vehicles with the aim of green technology. It has two options, option one is to start producing a fully electric vehicle man option two is to start producing a hybrid vehicle. If the confederation decides to start producing a fully electric vehicle then the opportunity cost will be the cost of producing a hybrid vehicle.A utility company supplying electricity is going to build a new power plant. It has two options, first option make a power plant using nuclear power while the second option structure a power plant using pictorial gas. If the utility company decides to build the new power plant using natural gas, then its opportunity cost will be the cost of building a power plant using nuclear power.(Henderson, n.d.)Answer 2Double entry system delineate that every transaction will be registered at least into two separate accounts in a companys accounting system. A simple example is shown in table below(Averkamp, n.d.)Answer 2.1 there is more than one advantage for using a double entry system. Some of these atomic number 18There is an arithmetic check on the companys bookkeeping records as for every debit centre there is always a corresponding credit amount. This means that the total debit entries must(prenominal) be matched with the same amount of credit entries.Better understanding of a companys financial situation. It shows the true lettuce or los s of the company more clearly at any effrontery time.Financial reports will be prepargond much easier when double entry system is in place. Examples of these statements are poise sheet, income statement and cash flow.This system similarly helps in detecting and reducing accounting errors.(Advantages and disadvantages of double entry book-keeping, n.d.)Answer 3The rest sheet is one of the most important financial statements inwardly a company. The balance sheet is a snapshot at a single point in time, (usually at the end of month or year), which gives investors an precise and reliable picture of a companys financial position, what it actually owns and owes. The following formula is followed in a balance sheetAssets = Liabilities + Capital (Shareholders Equity)(Balance Sheet, n.d.)Answer 3.1The main purpose of the balance sheet is that it figures up the companys economic resources, obligations and shareholders equities at any point in time. It displays how the resources contrib uted by the shareholders and money lenders are used in the business. The term balance sheet is derived from the fact that at any given time, assets must be equal to liabilities plus capital hence the two sides of the balance sheet must balance out each other. On the other hand the balance has some drawbacks too. One of which is that the true value of the assets are not resileed on the balance sheet. Historical costs of the assets will not reflect the true market value since these assets may know increased or depreciated in value. Another drawback is that sealed assets value are estimated thus does not reflect the true economic situation of the business.(Balance Sheet, n.d.)Answer 3.2Two important financial statements complimenting the balance sheet are the Cash pass statement and the Profit Loss statement.Cash flow is comprised of three components which displays the cash generated and used by the company for any given point of time. These components are operations, investing a nd financing activities. Operation activities measure the income and expenditure caused by the core business operations of a company. It reflects how much profit is generated from the companys products and services.Investing activities reflect the investment in purchasing of new assets such as property, land and equipment.Financing activities reflect changes in debts, loans and dividends paid. These include issue of shares and/or bonds, re-purchase of shares and/or bonds, post paid to bond-holders.(What is a Cash Flow Statement, n.d.)The Profit Loss statement displays a companys income, costs and expenditure for a particular accomplishment of time. Normally this statement is issues quarterly or yearly depending on the companys size and directors preference. The purpose of this statement is to show investors whether the company has made or lost money during the specific period indicated in the statement. The Profit Loss statement gives a good account of the companys capabilities to increase profits and reduce costs.(Profit Loss Statement, n.d.)Answer 4The following is an bunco from the regulations of the Malta Financial Services AuthorityA private company is a company that must, by its memorandum or articlesrestrict the right to transfer its shares annul any invitation to the public to subscribe for any shares or debentures of the companyThe minimum authorised share capital is 1,164.69.The maximum number of shareholders is fiftyMust have at least one directorA public company is a company which does not qualify as a private company. A public company may offer shares or debentures to the public but it may not issue any form of application for its shares or debentures unless(prenominal) the company is registered and the issue is accompanied by a prospectus. The minimum authorised share capital of a public company is EUR 46,587.47.There is no maximum number of shareholders in the case of a public company. Must have at least 2 directorsIn the case of a public company not less than 25%, and in the case of a private company not less than 20%, of the nominal value of each share taken up shall be paid up on the signing of the memorandum. Every Company must have a company secretary and hold an Annual worldwide Meeting.(A Guide to the Registration of Companies, n.d.)Task BAnswer 1.The acronyms of pest and SWOT analysis are as followsPEST analysis Political, sparing, Social and Technological analysis.SWOT analysis Strengths, Weaknesses, Opportunities and Threats analysis.Answer 2PEST is a business measuring tool to understand the business environment growth or decline onwards setting up a new business or expanding an established business. It is an investigation for reviewing the external environment factors for political, economic, social and technological influences. Political Environment These are all those factors related to and executed by a g all overnment. A change in government shag bring a change in laws, regulations, policies and taxes which can have an impact on the business environment. Since Malta is part of the European Union, EU regulations and new member states can have an impact on the business environment.Economic Environment This is mainly the financial system fluctuations that occur from time to time with general booms and slumps in the economy activity. A change in unemployment, interest pass judgment and customer purchasing power can cause these fluctuations.Social Environment This is the influence on the business environment which its effects depend on religious, ethnic and social trends. These effects can be either positive or negative. Education, lifestyles, career trends and demographics have influence on the social environment. If a decision from a business company have a huge impact which goes against the societal norms, it may face negative publicity and protests.Technological Environment This gathers all the technical aspects of the business environment such as automation, techn ology awareness, progress, research and development. Technical environment aspects can have an impact on the cost and quality of the business production.(External Environment Theory PEST Analysis, n.d.)SWOT analysis is a matrix analysis of the internal strengths and weaknesses of a company against identification of external opportunities and threats. It helps a company to uncover and exploit opportunities while understanding the weaknesses to eliminate threats. Workshop sessions and brainstorming sessions are two useful ways of completing the SWOT analysis while involving personnel from your own company. A sample table of the SWOT Matrix is shown in figure 1 below.Figure 1 SWOT DiagramStrengths are the resources and capabilities of a business or a project within a company which are used to gain a competitive advantage over other competitors. Examples of strengths areReputation,Superior product performance,Unique selling points,Strong brand names.Weaknesses are the absence of certa in strengths on which your competitor may take an advantage. Examples of weaknesses areWeak brand name,Limited budget,Limited personnel,Opportunities are external elements that can uncover new opportunities where a company can exploit its advantages for profit and growth. Examples of opportunities areChanges in technology,Change in government policies on a particular area,Unfulfilled customer needs,Local events.Threats are changes in external environment and opportunities taken by other companies which can have a competitive advantage over your business. Examples of threats areAppearance of alternative products,New legislations,Retention of primordial staff,Negative publicity.(SWOT Analysis, n.d.)Answer 3SWOT analysis for Bank of Valletta plc.Task CReferencesA Guide to the Registration of Companies. (n.d.). Retrieved 01 15, 2014, from MFSA https//registry.mfsa.com.mt/otherPDFs/ROCGuide.pdfAdvantages and disadvantages of double entry book-keeping. (n.d.). Retrieved 01 12, 2012, from Figurate Ltd leased Management Accounts http//www.figurate.co.uk/2007/07/03/advantages-and-disadvantages-of-double-entry-bookkeeping/Averkamp, H. (n.d.). Accounting Basics (Explanation). Retrieved 1 12, 2014, from Accounting Coach http//www.accountingcoach.com/accounting-basics/explanation/5Balance Sheet. (n.d.). Retrieved 01 14, 2014, from Investopedia http//www.investopedia.com/terms/b/balancesheet.aspExternal Environment Theory PEST Analysis. (n.d.). Retrieved 01 16, 2014, from The Times 100 Business Case Studies http//businesscasestudies.co.uk/business-theory/external-environment/pest-analysis.htmlaxzz2qb3hjMJwHenderson, D. R. (n.d.). Library of Economics and Liberty. Retrieved January 10, 2014, from http//www.econlib.org/library/Enc/OpportunityCost.htmlProfit Loss Statement. (n.d.). Retrieved 01 14, 2014, from Investopedia http//www.investopedia.com/terms/p/plstatement.aspSWOT Analysis. (n.d.). Retrieved 01 18, 2014, from Businessballs http//www.businessballs.com/swotanalys isfreetemplate.htmWhat is a Cash Flow Statement. (n.d.). Retrieved 01 14, 2014, from Investopedia www.investopedia.com/articles/04/033104.asp