Functions of a Business. 1. Production Production is the making of a good and or service. The term...
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Transcript of Functions of a Business. 1. Production Production is the making of a good and or service. The term...
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
Capital: The money/equipment/machinery used for production
Information: the information and tracking necessary for production
Costs of production
For this project your production costs will include:
1. Bill of materials costs (provided)
2. Equipment list (researched)
1. Production
Land
Labour
Capital
Information
Explain below how you will use each of these factors of production for your project:
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
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?
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?
Costs of marketingYour 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
Costs of marketingName for business:
Cost for poster (include link in box to the right)
Cost for business cards (include link in box to the right)
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
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)
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:
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
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
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
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
Financing advtanges and disadvantages Complete the chart to analyze the two options for
financing
Option Advantage Disadvantage
Debt financing from the bank
Equity financing from a friend