AS Business Studies Size of a business

Why do we need to measure a business size? Government support might be required for “small” companies Investors – how do you compare to competitors for future investment? Customers – to see how stable you are – can you continue to supply them what they want? THERE IS NO CORRECT WAY FOR MEASUREMENT!

Measurement by Employees .... What are the problems with measuring business by the amount of employees it has? 2 similar companies 2 different ways of production Both employ different amounts of staff Same production output

Measurement by Sales Turnover Total value of sales made over a period of time Good for comparing similar companies in the same industry (Used to calculate market share of a busiess) Not good for different industries (eg diamonds and coal extraction!)

Measurement by Capital Employed “ALL long term finance invested in the business” A fair measurement? MUST be in the same industry for a fair comparison!

Measurement by Market Capitalisation Total value of shares issued ONLY for plc’s on stock exchange Calculated by: Current share price x total number of shares issued A stable method of measurement? Share price fluctuations? A drop in share price could perceive the Co. to be smaller!

Measurement by Market Share Sales of the business as a proportion of the total market sales A large market share DOES NOT necessarily mean it is a large business! The market could be a small one! Total Sales of the Business x 100 Total Sales of the Industry

Small and Micro Businesses ... How significant are they? What do they bring to the economy? 89% of New Zealand enterprises have five or fewer (full-time equivalent) employees. These enterprises contribute 29% of all employment in New Zealand. The number of people employed by these enterprises has increased 51.3% since 1987, which compares with an overall rise in employment of 6.9%.