Year 11 Flash Cards > Commerce - EOY Exam > Flashcards

Commerce - EOY Exam Flashcards

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1
Q

What is tax

A

a compulsory financial charge imposed by a government on individuals, businesses or goods and services to generate revenue for public expenditures

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2
Q

Purposes of tax

A

provide revenue for the government
discourage consumption
redistribute wealth from the rich to poor
make foreign goods more expensive
protect the environment

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3
Q

What is an indirect tax

A

An indirect tax is a tax levied on goods and services rather than directly on the income or profit of an individual or business. eg GST, tariffs. shifts the supply curve to the left

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4
Q

What is a direct tax

A

The person who pays the tax is the person who feels the financial burden directly. eg income, corporate tax. direct tax causes demand to shift to the left

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5
Q

Subsidy

A

a payment from government to suppliers to encourage consumption. reduces the cost of production and shifts supply curve to the right

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6
Q

Inelastic demand curves in tax incidences

A

where producers pays a higher tax than consumers

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7
Q

Elastic demand curves in tax incidences

A

where consumers pays a higher tax than producers.

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8
Q

How to calculate consumer spending (revenue)

A

Price x quantity

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9
Q

What is market equilibrium

A

where the total quantity supplied and quantity demanded meet

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10
Q

What is a surplus

A

Where prices are too high and above equilibrium

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11
Q

How to resolve a surplus

A

Producers must decrease their prices due to excess stock, so it returns to market equilibrium

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12
Q

Aggregate demand

A

the total demand for all finished goods and services in an economy

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13
Q

How to calculate AD

A

C + I + G + (X-M)

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14
Q

Gross Domestic Product

A

the total value of all goods and services produced in a country in a year

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15
Q

Shifting the AD curve

A

AD will shift to the right due to an increase in C+I+G+(X-M), will shift to left if decreased

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16
Q

Aggregate supply

A

the total supply of all goods and services produced in an economy at a given price level within a certain period

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17
Q

Caues for a increase in AS

A

lower production costs
new technology
improved productivity
discovering new resources
lower business tax

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18
Q

Causes for a decrease in AS

A

natural disaster
increased business tax
resource depletion
higher input costs
stricter government rules

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19
Q

Fiscal policy

A

involve increasing or decreasing government expenditure and tax revenue to influence economic activity

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20
Q

Monetary policy

A

the use of interest rates to influence economic activity

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21
Q

Expansionary policy

A

used to grow the economy and is commonly used when inflation is over 3% target

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22
Q

Real values

A

adjusted for inflation so they reflect the true purchasing power of money

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23
Q

Nominal values

A

measured in current prices, they don’t account for inflation

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24
Q

Inflation

A

an increase in the general level of prices over a period of time

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25
Disinflation
when the rate of inflation is falling
26
Deflation
a decrease in the general price level over a period of time. although prices decrease, consumer spending can still decrease because consumers hope the prices will drop further
27
Hyperinflation
when the rate of inflation is over 100% per year
28
Consumer price index
The measure of inflation for NZ households
29
How does CSR measure inflation,
they gather 100,000 prices from a basket of goods and service, capture info through the household economic survey, make adjustments when items change
30
Demand-pull inflation
when demand for goods and services increase faster than the economy can produce, the rising demand pulls prices up
31
Cost-push inflation
caused by higher prices in factors of production which are then passed onto the consumer as producers protect their profit margin
32
Inported inflation
when the price of goods and services we import from other countries increase causing overall prices to rise
33
Unemployment
when you are 15 years or older, have no paid employment, avaliable to start work, looking for a job or starting one in the next 4 weeks, you are unemployed
34
Economic costs of unemployment
lower output, lower government tax, higher government spending on the benefit
35
Social costs of unemployment
more crime and poverty less self-esteem substance abuse
36
How is unemployment measured
Through the household labour force survey, census, and work and income for those receiving a benefit
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Voluntary unemployment
a concious decision made by an individual to not work, whether having enough savings to support themselves or relying on the government benefit
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Frictional unemployment
an individual who is between jobs or starting one soon, it is short-term and normal
39
Structural unemployment
a mismatch between an individual's skills and those demanded by the labour market. usually long-term
40
Cyclical unemployment
a worker is unemployed because jobs are scarce, due to poor economic decisions
41
Production
the process of combining inputs to make goods and services
42
Adding value
the process of increasing the difference between the cost of resources and the selling price of finished goods and services
43
Added value
the difference between the selling price and the cost of resources
44
Market gap
an unmet consumer need or undeserved market. Successful businesses add value by filling marker gaos, entrepreneurs find market gaps through research
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How can value be added
Branding Quality More efficient production Delivering excellent service Improve design Offering convenience
46
The benefits of added value
charging a higher price to contribute to more profit creating a point difference from competition to create brand loyalty focusing a business more closely on its target market segment
47
Enterprenuer
someone who organises, coordinates and takes risks in financial process for a business
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What do entreprenuers do
Transform innovative ideas into products Take advantage of business opportunities Take risks
49
Characteristics of an entreprenuer
Curiosity Willingness to experiment Self-aware Decisiveness Risk tolerance Comfort with failure Innovative thinking Persistance
50
Sole trader
A business owned and controlled by one person who makes all decisions and keeps all profit. They are responsible for all debts (unlimited liability)
51
Advantages of a sole trader
easy to set up low start-up costs owner keeps all profits
52
Disadvantages of a sole trader
unlimited liability responsible for all debts or losses
53
Unlimited liability
when the owner of the business is responsible for all debts. if the business cannot pay the owner may have to use their own savings or personal belongings
54
Partnership
A business owned by two or more people who share the responsibility for running the business and to split the profits. Each partner has unlimited liability
55
Advantages of partnership
shared responsibility more capital avaliable from owners wider range of skills and enterprise
56
Disadvantages of partnership
profits must be shared decisions can take longer unlimited liability
57
Companies
a type of business owned by shareholders and run by directors. It has a separate legal identity from its owners and the shareholders have limited liability
58
Limited liability
the owners of a business are only responsible for the business debts up to the amount they have invested. Their personal assets are protected
59
Separate legal identity
A company is a separate legal identity from its owners which means it is a person. Therefre a company has limited liability and the shares can be sold from one shareholder to another giving the company permanent existence
60
Private listed company
Not listed on the stock exchange
61
Advantages of private listed company
shareholders have limited liability easier to raise finance as shares can be sold original owners can keep control over the business by deciding who to sell shares to
62
Disadvantages of private listed company
costly to set up as it must be registered with the companies office shares aren't sold to the public on the stock exchange must submit annual return to the companies office
63
Public listed company
Listed on the stock exchange
64
Advantages of public listed company
can sell shares on the stock exchange raises a larger amount of finance making growth and expansion easier shareholders have limited liability
65
Disadvantages of public listed company
Legal documents are required as shares are issued to the public Financial statements must be published and made avaliable to the public Original owners may lose control of the business if they sell majority of shares
66
Corporate social responsibility
when a business goes beyond making a profit to consider its impact on society and the environment. It means acting ethically and responsibly towards workers, community and the planet
67
Components of CSR
People - impact on staff, community Profit - financial performance Planet - environmental responsibility
68
Advantages of CSR
builds brand reputation improves investor appeal reduces costs and risks creates competitive advantage
69
Disadvantages of CSR
High costs and reduced profit Risk of greenwashing Conflicting expectations or stakeholders
70
Stakeholder
any group or person with an interest in the activities of a business
71
Internal stakeholders
People or groups within the business organisation who are interested in its activities, owners, employees
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External stakeholders
People or groups outside the business who have an interest in its activities, customers, suppliers, government, local community
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Accountability
Being responsible and answerable to shareholders
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Why is accountability important
Maintains trust Builds reputation Avoids legal issues Encourages ethical behaviour
75
What is finance
capital a business uses to support its operations, meet short-term obligations, or invest in long-term growth.
76
Internal finance
Money from within the business (e.g. retained profit).
77
External finance
Money from outside the business (e.g. loans, investors).
78
Internal sources of finance
Retained Profit Sale of Assets Owner’s Capital Share Capital
79
External Sources of Finance
Bank Loan Bank Overdraft Trade Credit Hire Purchase Leasing Share Capital Government Grants
80
Break-even
the point where a business's total revenue equals its total costs, the business neither makes a profit or loss
81
Fixed costs
stays the same regardless of output
82
Variable costs
change in proportion with output
83
Contribution
The amount each unit sold adds towards covering fixed costs
84
Contribution per unit formula
Selling price per unit - Variable cost per unit
85
Break-even formula
Fixed cost divided by contribution
86
Margin of safety
the amount by which a business's actual or expected level of output exceeds the break-even level of output. If output falls by the MoS a loss will be made
87
Margin of safety formula
Actual output - break-even
88
Budget variance
A budget variance is the difference between the actual and budgeted figures in a budget.
89
Positive or favourable variances
If income is greater than budget or if an expenses is less than budget The variance if favourable.
90
Negative or Unfavourable Variances
If income is less than budget Or If an expenses is greater than budget The variance if unfavourable.
91
How to calculate gross profit
Sales - cost of goods sold
92
How to calculate net profit
Total revenue - total expenses
93
How to calculate working capital
Current assets - current liabilities
94
Liquidity
the business's ability to meet short-term financial obligations
95
Gross profit percentage formula
Gross profit divided by sales x 100
96
Operating profit percentage formula
Operating profit divided by sales x 100
97
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