Introduction to Business and Economics:
● Business Studies: The study of economics and management.
● Economic Problem:
● Needs: Essential for living (e.g., water, food, shelter).
● Wants: Desires, not essential for survival (e.g., cars, movies).
● Scarcity: Unlimited wants, limited resources.
● Opportunity Cost: The next best alternative given up when a choice is made due to
scarcity.
Factors of Production:
● Resources needed for production:
● Land: Natural resources (e.g., minerals, forests).
● Labour: Workers' physical and mental efforts.
● Capital: Finance, machinery, and equipment.
● Enterprise: Risk-taking ability to bring resources together.
● Rewards:
● Land: Rent
● Labour: Wage/salary
● Capital: Interest
● Enterprise: Profit
Specialization:
● Concentrating on tasks individuals or organizations excel in.
● Advantages:
● Increased efficiency.
● Time and energy savings.
● Quick labor training.
● Skill development.
● Disadvantages:
● Monotony for workers.
● Higher labor turnover.
● Over-dependency on specialized workers.
Purpose of Business Activity:
● Businesses use factors of production to create goods and services to satisfy human
wants and needs.
● Businesses address the problem of scarcity by producing and selling desired products.
,Added Value:
● Added Value: The difference between the cost of materials and the selling price of a
product.
● It represents the value added to raw materials by transforming them into finished
products.
● Increasing added value:
● Reducing production costs.
● Raising prices.
● Practical ways to add value:
● Branding.
● Adding special features.
● Providing premium services.
Example of Adding Value to a Jewelry Store:
● Design attractive packaging for jewelry items.
● Create an appealing shop window display.
● Employ well-dressed and knowledgeable shop assistants to enhance customer
experience.
,Finance:
● Definition: Finance refers to the money required in a business for various purposes such
as setting up the business, expanding it, and covering day-to-day running expenses.
Start-up Capital:
● Definition: Initial capital used to buy fixed and current assets before a business starts
trading.
Working Capital:
● Definition: Finance needed to pay day-to-day running expenses.
Capital Expenditure:
● Definition: Money spent on long-term assets like vehicles, machinery, and buildings.
Revenue Expenditure:
● Definition: Money spent on short-term expenses like wages and rent.
Sources of Finance:
Internal Finance:
● Retained Profit:
● Definition: Profits kept in the business after owner payouts, reinvested in
the business.
● Sale of Existing Assets:
● Definition: Selling unused buildings or equipment for funds.
● Sale of Inventories:
● Definition: Selling finished goods or unused inventory components.
● Owner’s Savings:
● Definition: Direct investment from the owner’s savings.
External Finance:
● Issue of Shares:
● Definition: Limited companies selling shares to raise capital.
● Bank Loans:
● Definition: Money borrowed from banks, repaid with interest.
● Debenture Issues:
● Definition: Long-term loan certificates issued by companies, repaid with
interest.
, ● Debt Factoring:
● Definition: Specialist agents collecting debts from debtors for immediate
cash.
● Grants and Subsidies:
● Definition: Funds given by government agencies or external sources
without repayment.
● Micro-finance:
● Definition: Small sums provided to financially-lacking individuals in
underdeveloped countries.
● Crowdfunding:
● Definition: Raising capital by gathering small funds from a large pool of
people.
Short-term Finance:
● Overdrafts:
● Definition: Bank allows spending more than the account balance, with interest on
the overdrafted amount.
● Trade Credits:
● Definition: Delaying supplier payments to improve cash position.
● Debt Factoring:
● Definition: Specialist agents collecting debts from debtors for immediate cash.
Long-term Finance:
● Loans:
● Definition: Money borrowed from banks or private individuals, repaid with
interest.
● Debentures:
● Definition: Long-term loan certificates issued by companies, repaid with interest.
● Issue of Shares:
● Definition: Limited companies selling shares to raise long-term capital.
● Hire Purchase:
● Definition: Buying assets in monthly installments with interest charges.
● Leasing:
● Definition: Using an asset without purchasing, making monthly payments to the
owner.
Factors Affecting Choice of Finance:
● Purpose:
● Choose finance based on whether it’s for fixed assets or day-to-day expenses.
● Business Studies: The study of economics and management.
● Economic Problem:
● Needs: Essential for living (e.g., water, food, shelter).
● Wants: Desires, not essential for survival (e.g., cars, movies).
● Scarcity: Unlimited wants, limited resources.
● Opportunity Cost: The next best alternative given up when a choice is made due to
scarcity.
Factors of Production:
● Resources needed for production:
● Land: Natural resources (e.g., minerals, forests).
● Labour: Workers' physical and mental efforts.
● Capital: Finance, machinery, and equipment.
● Enterprise: Risk-taking ability to bring resources together.
● Rewards:
● Land: Rent
● Labour: Wage/salary
● Capital: Interest
● Enterprise: Profit
Specialization:
● Concentrating on tasks individuals or organizations excel in.
● Advantages:
● Increased efficiency.
● Time and energy savings.
● Quick labor training.
● Skill development.
● Disadvantages:
● Monotony for workers.
● Higher labor turnover.
● Over-dependency on specialized workers.
Purpose of Business Activity:
● Businesses use factors of production to create goods and services to satisfy human
wants and needs.
● Businesses address the problem of scarcity by producing and selling desired products.
,Added Value:
● Added Value: The difference between the cost of materials and the selling price of a
product.
● It represents the value added to raw materials by transforming them into finished
products.
● Increasing added value:
● Reducing production costs.
● Raising prices.
● Practical ways to add value:
● Branding.
● Adding special features.
● Providing premium services.
Example of Adding Value to a Jewelry Store:
● Design attractive packaging for jewelry items.
● Create an appealing shop window display.
● Employ well-dressed and knowledgeable shop assistants to enhance customer
experience.
,Finance:
● Definition: Finance refers to the money required in a business for various purposes such
as setting up the business, expanding it, and covering day-to-day running expenses.
Start-up Capital:
● Definition: Initial capital used to buy fixed and current assets before a business starts
trading.
Working Capital:
● Definition: Finance needed to pay day-to-day running expenses.
Capital Expenditure:
● Definition: Money spent on long-term assets like vehicles, machinery, and buildings.
Revenue Expenditure:
● Definition: Money spent on short-term expenses like wages and rent.
Sources of Finance:
Internal Finance:
● Retained Profit:
● Definition: Profits kept in the business after owner payouts, reinvested in
the business.
● Sale of Existing Assets:
● Definition: Selling unused buildings or equipment for funds.
● Sale of Inventories:
● Definition: Selling finished goods or unused inventory components.
● Owner’s Savings:
● Definition: Direct investment from the owner’s savings.
External Finance:
● Issue of Shares:
● Definition: Limited companies selling shares to raise capital.
● Bank Loans:
● Definition: Money borrowed from banks, repaid with interest.
● Debenture Issues:
● Definition: Long-term loan certificates issued by companies, repaid with
interest.
, ● Debt Factoring:
● Definition: Specialist agents collecting debts from debtors for immediate
cash.
● Grants and Subsidies:
● Definition: Funds given by government agencies or external sources
without repayment.
● Micro-finance:
● Definition: Small sums provided to financially-lacking individuals in
underdeveloped countries.
● Crowdfunding:
● Definition: Raising capital by gathering small funds from a large pool of
people.
Short-term Finance:
● Overdrafts:
● Definition: Bank allows spending more than the account balance, with interest on
the overdrafted amount.
● Trade Credits:
● Definition: Delaying supplier payments to improve cash position.
● Debt Factoring:
● Definition: Specialist agents collecting debts from debtors for immediate cash.
Long-term Finance:
● Loans:
● Definition: Money borrowed from banks or private individuals, repaid with
interest.
● Debentures:
● Definition: Long-term loan certificates issued by companies, repaid with interest.
● Issue of Shares:
● Definition: Limited companies selling shares to raise long-term capital.
● Hire Purchase:
● Definition: Buying assets in monthly installments with interest charges.
● Leasing:
● Definition: Using an asset without purchasing, making monthly payments to the
owner.
Factors Affecting Choice of Finance:
● Purpose:
● Choose finance based on whether it’s for fixed assets or day-to-day expenses.
