Edexcel Business A Level Revision

Production - A process of workers combining various material inputs and know-how in order to make something for consumption by the customer, known as the output. Production can also be defined as the total amount of output produced in a time period. The more that can be produced in a specific period of time, the more efficient the business becomes in using its resources. There are 9 factors that have to be considered when assessing a country as a production location; Costs of production Skills and availability of labour force Infrastructure Location in trade bloc Government incentives Ease of doing business Political stability Natural resources Likely return on investment COSTS OF PRODUCTION In highly competitive mass markes, having low costs of production will be a significant advantage. This means low wage cost will see FDI to the country in order to take advantage of the labour force and its low wage costs. This allows businesses to drive costs down, allowing the...

Growth - A common corporate objective which means expanding the sales revenue of a business, probably in the hope that profits will increase too. Increasing profitability and providing a better return for investors and shareholders are particularly important for companies quoted on the stock exchange as shareholders may have purchased shares with an expectation that they will receive a certain annual return on their shares, known as dividends. This is normally achieved by increasing revenue and lowering cost per unit, resulting in increased profit margins. A benefit of increasing profits as a growth objective is that besides the fact the business is making more money, it is more likely to encourage further investors and insulate the business from competition from current or new rivals However, increasing profits may not be possible for a number of reasons, including an already saturated market and fierce competition from rivals who have either better products or a better br...

Investment Appraisal -  The use of numerical techniques to predict the financial outcomes of potential capital investments. Average Rate of Return (ARR) -   looks at the  total accounting return for a project  to see if it meets the target return Business investment projects need to earn a satisfactory rate of return if they are to justify their allocation of scarce capital. FORMULA  - AVERAGE RATE OF RETURN (TOTAL NET CASH FLOW / NUMBER OF YEARS) / INITIAL INVESTMENT X 100 = ARR% Interpretation of ARR revolves around comparison with other projects and should take into account the level of risk and the period of time over which the return is forecast to take place. If the investment was funded by outside investments they would compare the ARR with potential returns on other investments as well as the potential risks. For example the least risky investment may be to place the money in a bank deposit account, but the ARR on such an investment might only...