MGTA01H3 Lecture Notes - Lecture 1: Profit Motive

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25 Jul 2016
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What is a Business?
Main points of todays lecture:
- Definition of business
- Characteristics of business
- Revenues and expenses
- Profit and Loss
- The profit motive
- Risk and return
Business Defined
- Business: an organised effort, to create or provide something, that people want and will
pay for, in order to make a profit
PROF: A business is things that people want and willing to pay for, Organization is an effort
of making a mental note, business is an organized effort to produce and supply. Certain
amount of time and though into something willing to pay for. Intention to make a profit
This is a business
- Business does not mean suit, he is actually doing work and putting in effort into his work
Business: Characteristics
- Customers need and want things and the will pay for them
PROF: Making items that people are willing to pay for. Customers, clients and consumers
are all the same
Business: Definition
- The $$$ that comes in: “revenues” or sales
Sales are not exactly the same thing. Revenues is the money that comes through the sales
Business: Characteristics
- Customers pay, get something in return. The business must provide a pizza
Customers pay to get services. Cost the business money, and time. Money that goes out is
known as expenses
Profit
- Profit- the difference between: $$$ in (revenues or sales) $$$ out (cost or expenses)
Selling the pizza and the cost or expenses is the ingredient. Profit= fundamental reason
people go into business. Wants to bring more money in than out. Profit= Revenues-
Expenses
Profit: Simple Example
- Business sells small, plain pizza Revenue (sale)- expenses(cost) = $1 Profit
Profit versus Loss
- Profit: when revenues more than costs
- Business owners become wealthier
- Loss: when revenues less than costs
- Business owners become poorer
Profit
- Key reason for a business to exist
- Not all organisations are businesses
- Hospitals, universities, churches: provide services but not intended for a profit
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