Business Studies
Higher Level
Junior Certificate
Theory Related Notes
by Sryan Bruen
Banking
Reasons why to save money
• To pay for something you can't afford right now (e.g. A car)
• To provide an income for the future (e.g. Pension)
• In case of unforeseen events (e.g. Illness)
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Investing refers to where you put your savings to work to earn an income called
interest. People invest to make a profit.
Simple Interest
Formula: Principal (Sum saved) x Time (years) x Rate of interest ÷ 100
Compound Interest
• With compound interest, the interest is added to the principal so that you get
interest on the interest. This means you get more interest in the long run.
• The CAR (Compound Annual Rate) is the rate you get when taking this into
account. It is higher than the simple interest rate.
DIRT
• DIRT (Deposit Interest Retention Tax) is a tax paid on the interest that you
receive on your savings.
Methods of investing
1. Commercial banks
2. Building societies
3. Credit unions
4. Insurance companies
5. An Post
6. Prize bonds
7. Stock markets
Commercial banks
• A commercial bank consists of two different types of accounts where the
person can invest in.
Deposit account (also known as a Savings account)
• Money is deposited and can be withdrawn on demand
• Interest is paid
• You pay DIRT
Current account
• Chequebook
• Debit (Laser) card
• Overdraft (i.e. borrowing money) (You will pay interest on this)
Building societies
Deposit account
• Limit on how much you can withdraw on demand
Credit unions
Savings account
• When you save money, you become a member.
• You get a share of any profit the Credit Union makes.
• You do not pay DIRT on interest received.
• If a member dies, insurance will double the value of the deposit.
Lending
• Loans up to three times the value of shares held (i.e. savings).
• If a member dies, insurance pays off the loan.
• The interest rate may be lower than the commercial banks.
Insurance companies
Endowment policy
• Fixed regular payments are made.
• After an agreed period, a tax free lump sum is paid out.
• Used to save for a pension or to pay off a mortgage.
An Post
Deposit account
National Instalment Savings Scheme (NISS)
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Prize
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Save a fixed sum each month for a year.
The money is left on deposit for one to five years.
The longer you leave the money in the account, the higher the interest rate
paid.
The interest is tax free.
bonds
Sold in units of 10 euro.
No interest is paid.
Each bond is entered in a weekly prize draw.
Can be cashed in at any time for the original cost.
Stock markets (Buy shares in a company)
• If you sell the shares, you may make a capital gains profit.
• The company may pay a dividend.
• Capital Gains Tax (CGT) is payable on any profit you earn.
• Income Tax is payable on dividends.
How to open a current account
1. Fill in an application form
In the application form, you must show the following:
• Photo identification
• Proof of address
• Specimen signature
Operating a current account
• Current accounts are used to make day-to-day payments.
• Paypath gives the account holder the advantage to have their money directly
lodged into their account.
• The employer does not need to have large amounts of cash on the premises and
does not need to take time to fill in cheques for each employee. Plus he / she
does not have to take time off work to go to the bank.
Making payments from a current account can be done by:
• Cheque
• Credit transfer
• Bank draft
• Standing order
• Direct debit
Difference between Standing Order and Direct Debit
• Standing order is an instruction to pay a FIXED sum into a bank account at
regular intervals.
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Direct debit is the permission given to a company to take money directly from
the customer's account and the sum VARIES.
Methods of making payments (those ones above are only current account
methods)
• Cash
• Credit card
• Charge card
• Debit card
• Store card
• Postal money order
• Traveller's cheques
Factors to consider when choosing a method of payment
• The cost to you and the recipient
• Security: Will your payment be safe from theft until the right person cashes
it?
• Convenience to you and to the payee
Terms
• Payee - The person receiving payment. Their name follows the word 'Pay' on
the cheque.
• Drawer - The person writing the cheque.
• Drawee - The bank on which the cheque is drawn.
• Negotiating a cheque - Bringing the cheque to a bank to get money for it.
• Stale cheque - A cheque presented to the bank more than six months after it
was written. The bank will not accept it.
• Blank cheque - A signed cheque which has at least one piece of information
left out.
• Endorsed cheque - The payee has signed the back of the cheque so someone
else can negotiate it.
• Post-dated cheque - A cheque with a date in the future on it. It cannot be
negotiated before that date.
• Receipt cheque - A cheque that must be signed by the payee before it can be
negotiated.
• Dishonoured cheque - The drawee bank has refused to pay out on the cheque.
Perhaps the drawer doesn't have enough money in their account.
• Stopped cheque - The drawer has instructed the bank to dishonour the
cheque.
• Crossed cheque - Two parallel lines on the face of the cheque means the
cheque must be paid into a bank account. Further instructions may be written
between the lines. A cheque is crossed to make it as safe as possible (A/C
Payee only must be written in between these parallel lines to make it as safe as
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possible).
Open cheque - A cheque that is not crossed.
Money
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Money is anything of value that is widely accepted as payment for goods and
services. There are many different currencies, money is divided into.
*Tip: Always for definitions, include at least TWO sentences. One sentence will NOT
get you full marks.
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Bartering meant swapping goods or services one person has for goods or
services another person has. Bartering very rarely exists in modern times
except between friends.
Disadvantages of bartering:
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Both people involved in the barter must have a good or service that the other
person needs and wants.
Both items involved in the barter would have to be of equal value.
The goods have to be carried around, which would be difficult if they are
bulky.
Ireland along with 16 other European countries that use the currency, Euro is part of
an Economic and Monetary Union (EMU).
Advantages of a single currency to Ireland:
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Firms that import or export goods between eurozone (EMU) don't have to
worry about exchange rate changes.
Irish firms that trade with other eurozone countries save money as they no
longer have to pay commission for changing currency.
Ireland has lower interest rates than it had in the past.
Ireland can expect to have lower inflation rates than it had in the past.
Insurance
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Insurance is protection against a loss you hope will not happen.
Assurance is protection against a loss you know will happen.
Reasons for Adequate Insurance
• You must cover all possible risks.
• You must insure enough to cover full amount of loss.
Terms
• Exclusion clause is situations that cannot be insured.
• Policy excess/excess clause is that the insured person may have to pay the
first €100 of the compensation themselves.
• Compensation is the money you get when you make a claim.
Principles of Insurance
• Insurable interest is when in order to insure something you must benefit from
its existence and suffer from its loss.
• Utmost good faith is when you must tell all relevant information when filling
out an application for insurance.
• Indemnity is when you cannot make a profit from insurance.
• Contribution is if a risk is insured with two insurance companies, each will pay
half of the compensation.
• Subrogation passes the legal right of the insured over to the insurer to claim
from a third party who caused the loss.
Average Clause
• If you only insure an item for a fraction of the value, you only get the same
fraction compensation.
• Formula: Sum insured X claim = compensation
Documents
• Proposal form: Application form for insurance
• Policy: Contract of insurance
• Cover note: Temporary policy
• Certificate of insurance: Proof of insurance
• Claim form: A form you fill out when a loss occurs and you want compensation
People in Insurance
• Broker: Gives advice on insurance and sells insurance on behalf of lots of
companies
• Agent: Sells insurance for only one company
• Actuary: Calculates insurance premiums
• Loss adjuster: Calculates the value of the loss and works for the insurance
company
• Loss assessor: Calculates the value of the loss and represents the insured
Steps Involved in Taking Out Insurance
1. Decide what risks you want covered.
2. Fill out proposal form.
3. Pay your premium.
4. File your policy in a safe place.
Steps Involved in Making a Claim
1. Contact guards and insurance company.
2. Obtain estimates of lost/stolen items.
3. Fill out claim form.
4. Talk to assessor and agree on compensation.
Premium Calculation Terms
• Premium is the cost of insurance.
• Risk effects are things that cause premiums to be high or low.
• Loading is extra premium for a higher risk.
• Discount is money taken off premium for a lower risk.
• No claims bonus is when you get a discount if you did not claim for any
accidents the previous year.
• Renewal date is the date you must have your premium paid by.
• Days of grace may be given to you. They are a few extra days to pay your
premium.
Types of Personal Insurance
• PRSI (Pay Related Social Insurance) is the statutory deduction from your
salary.
• Medical insurance is used in case you get sick or need an operation
immediately.
• Personal accident insurance covers people who are injured due to an accident.
• Salary protection provides an income in case you can’t work due to illness.
• Pension plan provides you with lump sum and income for your retirement.
• Holiday insurance provides you with health care if you get sick on holidays.
Types of Business Insurance
• Theft insurance: Theft of equipment and stock
• Fire insurance: Damage to premises, equipment and stock
• Consequential loss: Covers the firm for loss of profits while a business is
closed as a result of fire or flood
• Fidelity guarantee: Compensates an employer for loss of cash arising from
dishonest workers
• Cash in transit: Covers theft of cash while in transit between the business and
back
• Goods in transit: Covers theft or damage to goods while been transported
• Motor insurance: Compulsory covers damage or injury caused by motor vehicles
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Employers liability: Employees injured at work
Public liability: Customers injured while visiting the business
Product liability: Injury to customers using the product
Bad debts: Loss due to customers not paying their debts
Reasons for Business Insurance
• Protection of assets against fire and theft
• Protection against legal action as a result of accidents to the public or staff
• Legal reasons – motor insurance
Economics
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Economics is the study of how people and businesses with limited income make
decisions about what they spend their money on.
Factors of Production
• Land is the natural resources available in a country that can be used to produce
goods and services. The payment for land is rent.
• Labour is a human effort that helps to produce goods and services. The
payment for labour is wages.
• Capital is anything that is made by humans that is then used to help to produce
other goods and services. The payment for capital is interest.
• Enterprise is using all the factors of production and taking a risk to set up a
business. People who supply enterprise are called entrepreneurs. The payment
for enterprise is profit.
Types of Economic Systems
• Centrally planned economy – Here the government of the economy makes all
the decisions about the production of goods and services. E.g. Cuba.
• Free enterprise economy – Here the citizens of the country are free to make
all the decisions about the production of goods and services with little
interference from the government. E.g. USA.
• Mixed economy – This is a combination of the two other economies and sees a
sharing approach to the production of goods and services. E.g. Ireland.
Terms
• Opportunity cost is the item we do without when we have to make a choice
between two or more actions. It is impossible to satisfy everybody’s needs and
wants.
• Inflation is the increase in the general level of the price of goods and services
over a period of time.
• Deflation is the decrease in the general level of the price of goods and
services over a period of time.
Rate of Inflation
(The increase in prices in year 2) / (The level of prices in year 1) X 100
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The official measurement of inflation is called the consumer price index (CPI).
Causes of Inflation
• An increase in the cost of producing goods is passed onto the consumer so that
the manufacturer can maintain profits.
• The demand for goods is greater than the supply of goods. Consumers will
compete with each other, thus pushing up the prices.
• The cost of importing goods increases.
• Increases in indirect taxes.
Effects of Inflation
• Increases the cost of living.
• It causes demands for wage increases to compensate for the inflation.
• It discourages saving because people decide to spend their money before its
value decreases any further.
Terms
• Economic growth occurs when more goods are produced in a country one year
than were produced the previous year. It creates employment and improves
standard of living.
• Gross domestic product is a total amount of goods and services produced in an
economy in one period.
• Gross national product is the GDP – profits sent out of the country by foreign
owned companies located in the country, plus profits returned to the local
firms based abroad. i.e. it is the amount of money left in the country for
spending or saving.
• Recession is if less goods and services are produced in two consecutive
quarters then the national economy is officially in a recession.
The National Budget
Why does the Government get involved in the economy?
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To provide merit goods
To provide sociably desirable goods or services
To provide income for people who can’t work
To make regulations for the running of the country
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To provide services that are too important to be controlled by the private
sector
What is the National Budget?
• The national budget is the government’s estimate of its income and
expenditure for the coming year.
• It takes place in November or December each year.
• The Minister for Finance is Michael Noonan.
Budget Divided into Two Sections
1. Government current expenditure is spending by the government on the
provision of goods and services that will be totally consumed in that year.
2. Government capital expenditure is spending by the government on assets that
will benefit the country for some year into the future.
Sources of Expenditure
• Current expenditure (Social welfare, salaries, teachers, health services)
• Capital expenditure (Building new schools, roads, hospitals)
Sources of Income
• Current income (PAYE, VAT, stamp duty, custom duty, DIRT)
• Capital income (Income from semi-state bodies and EU grants)
Types of Current Budgets
• A balanced current budget (Income = expenditure)
• A surplus budget (Income > expenditure)
• A deficit budget (Income < expenditure)
The Exchequer Balance
The difference between total government revenue and total government expenditure
in any one year.
National Debt
• National debt is if a government has to borrow money to pay for its spending
then the amount borrowed is added to the national debt. Total amount of
money owed by the government at any given time.
• Debt servicing is the interest payment on the national debt that the
government pays to its lenders.
Foreign Trade
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Foreign trade is the sale of products and services from one country to
another.
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Importing is the purchase of goods and services from other countries for sale
in Ireland.
Exporting is when Irish goods and services are sold to other countries.
Invisible and Visible Trade
• Visible trade is the import or export of physical goods.
• Invisible trade is the import or export of services.
Reasons for Importing Goods
• Ireland does not have natural resources that are necessary for everyday living.
• Ireland’s climate is not suitable for growing certain products.
• Skills and traditions that are needed to produce some goods are only available
in certain countries.
• Certain goods are not produced in Ireland, so if we want to have them, we must
import them.
Reasons for Exporting Goods
• Some courtiers are not able to produce large quantities of food products
because their land or climate is unsuitable.
• Some goods can only be manufactured in a certain country because the skills
and traditions are only available here.
• Countries do this to increase their sales and profits.
The Balance of Trade
• The balance of trade is the difference between the visible exports and the
visible imports of a country.
• The formula is: Visible exports – visible imports.
The Balance of Payments
• The balance of payments is the difference between the total exports and the
total imports of a country.
• The formula is: Visible exports + invisible exports; visible imports + invisible
imports; total exports – total imports.
Exchange Rate
• An exchange rate is the quantity of a foreign currency that can be bought or
sold for one euro.
• Foreign currencies can be bought or sold in banks.
Import Substitution
• Trying to reduce imports by encouraging Irish people and firms to buy Irish
goods instead of imported goods.
The European Union
• Ireland joined the EU in 1973.
• There were 9 countries in it at that time.
• Today there are 28 members.
• The business of the EU is carried out by EU and the European Commission.
• Croatia is the newest member.
Benefits of EU Membership
• Irish firms can sell their products/services in a huge market and this has
increased their sales and profits.
• Irish people are allowed to live or work in any of the other member states.
• Ireland has received large amounts of money in the form of grants from the
EU.
• Many firms have located in Ireland because we are a member of the EU.
Enterprise Ireland
• Enterprise Ireland is the state agency that offers advice, information and
support to firms that are or wish to get involved in foreign trade.
Forms of Business
Sole Trader
• A person that owns and runs their own business.
Characteristics:
• One person provides all the money
• Makes all the decisions
• Keeps all the profit.
Advantages:
• Easy to set up
• Keep all the profits
• Make all the decisions
• Personal contact with customers.
Disadvantages:
• Unlimited liability (if your business fails you could lose all your own personal
wealth)
• Business ends when the owner dies.
Private Limited Company (Ltd.)
• A business that is owned by 1-99 people.
Characteristics:
• 1-99 owners called shareholders
• Shares cannot be bought by the general public
• Shareholders receive a vote for every share they own
• Must have ltd. after its name
• Shareholders receive a share of the profits called a dividend
• Usually owned by solicitors and accountants.
Advantages:
• Limited liability (If the business fails, you can only lose the money that you
invested in the company. Your own personal wealth cannot be touched)
• Business continues even when an owner dies
• Easier to raise finance as you have up to 99 shareholders.
Disadvantages:
• Legal documents are needed to set up a company
• More costly to set up
• Decision making and profits are shared.
Co-Operative
• A business owned and run by its members.
• Each member has an equal say in the running of the business.
Characteristics:
• Each member must buy at least one share
• Each member has only one vote.
Advantages:
• Democratic as each member has an equal say
• The members of the co-operatives have limited liability.
Disadvantages:
• For members who own a lot of shares
• They only get one vote
• Profits are shared in the form of dividends.
Types of Co-Operatives
• Producer co-op - Owned and run by the customers of the co-op.
• Retail co-ops - A group of retails join together.
• Worker co-ops - Owned by the workers in the business.
State Owned Business
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A business which is set up, financed and controlled by the government.
Another name for this is a semi-state body.
Characteristics:
• A government minister is responsible for each state company
• They appoint a board of directors
• The government keeps the profits or re-invests it in the company.
Advantages:
• Ensure that essential services are provided for all people in the country
• Provide employment to a large number of people.
Disadvantages:
• Some are in a monopoly position which means that they have no competition and
this can lead to in-efficiency and higher prices and some make losses which are
covered by the tax payer.
Business Finance
Short-term sources of finance
1. Bank overdraft: Extra money into your current account. The bank must be
repaid the same amount.
2. Trade creditors: A person/firm to whom a business owes money. There is no
interest charge. The firm may lose out on cash discounts given for early
payment.
3. Expenses due: Pay bills at end of the month.
Medium-term sources of finance
1. Term loan: A loan which is repaid over a fixed period of time between 1 and 5
years. Both loan and interest are repaid in equal instalments.
2. Leasing: A firm agrees with a financial institution to pay an agreed sum of
money each month in return for the use of an asset. The firm never owns the
asset and the firm may end up paying more in the long term than the asset is
worth.
3. Hire purchase: The hire purchase agreement involves three parties – the
buyer, the seller and the finance company. The finance company pays the seller
in full for the asset and then collects the money in instalments from the buyer
over an agreed period of time.
Long-term sources of finance
1. Equity capital (Issue of ordinary shares): The company sells shares in the
business to raise money. Dividends may be paid to the shareholders out of the
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profits each year. No interest has to be paid on the money raised. Each new
shareholder has a say in the running of the company.
Retained earnings (Reserves): Here, some of the profits made are kept in the
business to pay for future expansion. There is no cost to this type of finance.
Sale and leaseback: Here, fixed assets are sold to raise finance for the firm
and then leased back over a long period of time. The firm gets to keep full use
of the asset and also receives a much needed cash injection. The firm no longer
owns the asset and so will not benefit from any increase in value.
Long-term loan: The loan and interest is paid back in equal instalments over
the length of the loan.
Grants: A non-repayable source of finance from the Government or EU.
Communications
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Communication is the transfer of data from one person to another.
Types of Communication
• Internal – With people inside the organisation.
• External – Between the organisation and people outside.
Factors to Consider When Choosing A Method of Communication
• Cost – Is the method cheap or dear?
• Speed – How long will it take to reach its destination?
• Secrecy – Is the method confidential?
• Record – Will a copy of the information exist?
• Destination – How far is it going?
Methods of Communication
1. Oral/Verbal
Sending a verbal message
Internal: intercom, face-to-face meeting
External: radio, telephone
Advantages: Quick, instant feedback
Disadvantages: No record, may be hard to remember
2. Written
Some record is kept
Internal: notice board, memo
External: letter, e-mail, fax
Advantages: Record kept, don’t have to remember anything
Disadvantages: No instant feedback, may not be confidential
3. Visual
Using charts, graphs, videos, powerpoints and TV to give messages internally
and externally.
Advantages: Easy to understand, shows trends and comparisons
Disadvantages: Some people may not understand, takes time to prepare
Memo
• A short note used within a business.
Layout of a Memo
To:
From:
Date:
Re/Subject:
Message:
Signed:
A Notice of a Meeting
• Info. about a meeting
• Sent by the secretary
An Agenda
• A list of topics that will be discussed at a meeting.
Types of Meetings
• AGM: Annual General Meeting
• EGM: Extraordinary General Meeting
• Ad-hoc: Informal meeting on the spur of the moment
Chairperson
• Calls the meeting to order
• Ensures that meetings run smoothly
Secretary
• Sends out notices of meetings
• Writes up the Agenda
• Keeps minutes
Treasurer
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Keeps a record of all finances
Prepares final accounts
Prepares financial reports
Rules
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for preparing graphs/charts
Give it a title
Label the Y axis
Label the X axis
Bar Chart
• Is a series of bars
• Used for comparing quantities
Line/Trend Graph
• Is a chart that uses lines
• Used for showing changes over time
Pie Charts
• Is a circle divided into segments
• Used to show percentages or proportions
• Find out by using the formula below
(The value of the item you're trynna figure out) / (The total of the values) X
360
Chain of Production
Chain of Production
• The various production or processing stages that a good or service goes
through before it is sold to the consumer.
Sectors involved in manufacturing and distribution of products
• The primary sector - These industries can take material from the land or sea.
• The secondary sector - This is the manufacturing and construction sector of
the economy.
• The tertiary sector - Made up of firms that provide services to all other
sectors of the economy.
Channels of Distribution
• Are the methods used to transfer finished goods from manufacturers to
consumers.
Types of Channels of Distribution
1. Manufacturer > Consumer
2. Manufacturer > Retailer > Consumer
3. Manufacturer > Wholesaler > Retailer > Consumer
4. Manufacturer > Wholesaler > Jobber > Retailer > Consumer
Wholesaler & Jobber
• A wholesaler is a company or person that buys large quantities of goods from
many manufacturers and sells them in smaller quantities to retailers.
• A jobber is a special type of wholesaler and only sells one type of item.
Cash
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and Carry Wholesalers
Located in most large towns.
Differ from traditional wholesalers in the following ways:
They do not give credit.
They do not deliver goods.
They operate on a self service basis.
Their prices tend to be lower than traditional wholesalers because
They are paid cash for goods.
They do not have to invest in delivery trucks.
Less staff is required due to self service.
Franchise
• A franchise exists when the owners of a business give permission to another
person to set up a branch and their business in another location in return for a
fee. E.g. McDonald's.
Retailing
• A retailer is somebody who sells finished goods to consumers.
• They buy goods in bulk and sell them in single units or small quantities to
consumers.
Types of Retailers
Retailer
Unit or independent retailers
Voluntary groups
Supermarkets
Chain stores
Multiple stores
Department stores
Discount stores
Vending machines
Description
Examples
Small privately owned shops
Toys 'r' Us
Group of retailers who agree to
Centra, Spar,
buy their stock from one particular Mace
wholesaler only
Large shops
Tesco, Dunnes Stores
Many branches worldwide
Walmart
Specialise in one good
Waltons
A number of shops under one roof
Arnotts
Sells a limited range of products
Power City
at low prices
Automated retail devices that sell chocolate,
drinks and crisps
Functions of Retailers
1. Provide a wide range of goods to consumers.
2. Sells goods to consumers in small quantities.
3. Offer advice to consumers on certain products.
4. Offer advice to wholesalers and manufacturers on changes in consumer trends.
5. Create demand for goods through their own advertising.
Recent Trends in Retailing in Ireland
• The arrival of International discount stores in the grocery and related
industry.
• Major growth in the number of shopping centres and retail outlets.
• Greater use of e-commerce i.e. selling goods and services over the internet.
• Growth of farmers market - big demand for organic goods.
People At Work
Terms
• Work - is when a person does something productive. You work when you do
homework, study or help at home. Therefore, you get nothing in return as in
payment.
• Employment - is when a person gets paid to work. If you have a job in a shop,
you are employed.
• Unemployment - if a person is looking for employment but cannot find a job,
they are said to be unemployed. To be counted as unemployed, you must be
between the ages of 16 and 66, available for work and not in full-time
education. A person must be looking for work to be counted as unemployed.
• The Labour Force - consists of everybody who is available to work. This
includes the employed, unemployed and self-employed.
Types of employees
• Unskilled - work which does not require any special training. It often involves
physical labour and the rate of pay tends to be low, e.g. bin collector.
• Semi-skilled - work which requires some training. Most semi-skilled workers
are trained to use one machine or do one job, e.g. a person trained to use a
sewing machine.
• Skilled - work which requires specialist training to do a particular job. E.g.
carpenters and hairdressers are skilled.
• Professional - workers that have a professional qualification(s), usually from a
university. They need this particular qualification to do particular work. E.g.
teachers, solicitors and doctors are professional.
Natures of work
• Manual - involves physical work, e.g. gardening.
• Clerical - involves typing, filing etc, e.g. receptionist.
• Creative - requires imagination, e.g. writer.
• Administrative - involves supervising or managing the work of others, e.g.
manager.
The employee's rights and responsibilities
Rights
• Fair day's pay
• To be treated equally to other employees
• Fair number of paid holidays per year
• To join a union
• To work in a healthy, safe environment
Responsibilities
• Good punctuation (be on time)
• Obey all rules and regulations
• Not to give away company secrets
• Co-operate with other workers
• To look after your employer's property
Rewards & risks of self-employment
Rewards
• You are your own boss
• You make all the decisions
• You keep all the profits
• Your own suitable working times
• Decide what product or service to sell
Risks
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Unlimited liability - If the business fails, you risked losing everything
May have to work long hours
Have to provide the capital to set up and run the business
You make all the decisions
Organisational Structure
Typical organisational chart (comes up nearly every year):
Shareholders
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Board of directors
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Managing director
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Department managers
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Supervisors
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Staff workers
The Employer
Rights & responsibilities of the employer
Rights
• To hire suitable staff
• To expect employees to be loyal to the business
• To decide the objectives of the business
• To fire staff if there is a legitimate reason (e.g. stealing)
Responsibilities
• Equal pay for equal work
• To give employees contracts
• To allow staff their annual paid holidays
• To keep appropriate records for tax purposes
• To maintain a safe and healthy workplace
• To ensure there is no discrimination in the workplace
Steps involved in hiring staff
1. Job description - what needs to be done?
2. Advertise - where?
3. Letter of application - a CV, an application form from candidates
4. Short listing - pick the best candidates
5. Interview the candidates
6. Selection - Select the most suitable candidate
7. Candidate is notified
8. Contract - terms and conditions of work, e.g. hours, pay etc
9. Training - of the new employee
10. Employer and employee inform local tax offices - arrangements are made to
make the correct PAYE and PRSI deductions
11. Probationary period - before being permanently employed
How to make a job advertisement
1. Name the employer
2. Position to be filled
3. Qualifications and experience of the candidate
4. Personality of the candidate
5. How to apply
6. Closing date
7. State that the company is an equal opportunities employer
8. Plan where to advertise the advert
Calculating rates of pay
• Time rate - You are paid a rate per hour for a normal working week. Extra
work is paid with overtime, usually at a higher rate.
• Piece rate - You are paid for each item produced.
• Commission - You get paid a certain % of the value of goods that you sell. A
bonus may be paid as well if certain targets are met.
• Salary - You get paid a fixed sum per month to do a job.
• Flexitime - Employees are free to choose their own working hours.
• Subsidised - An employers pays some of the cost of something so the
employees get cheaper food.
Income tax forms
• P60 - Given to the employee by the employer at the end of the year. It shows
the total pay, PAYE (pay as you earn) and PRSI (pay related social insurance)
for the year.
• P45 Cessation Certificate - Given to an employee when he/she leaves a firm.
• Payslip - Given to the employee by the employer at the end of the week which
shows their gross pay, all the deductions and their net pay. Sometimes a
payslip is known as a wage slip.
• Wages book - Employers need to record their wages and salaries paid. This is
done in the wages book. The total cost of wages and employer's PRSI is
calculated. The information for the payslip is extracted from the wages book.
Payment of wages and salaries
• Wages and salaries can be paid by cash, by cheque or by credit transfer. Cash
payment is unusual nowadays.
Coin/Note analysis
• If wages are paid in cash, the employer needs to do a coin/note analysis. This
gives a breakdown of how many of each coin/note will be required.
Industrial Relations
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Industrial relations - refers to the relationship that exists between
employers and employees in the workplace.
Good industrial relations lead to:
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Higher productivity
A happier workforce
A more motivated workforce
Increasing sales
Bad industrial relations lead to:
• Strikes
• Unhealthy working conditions
• Decreasing sales
Trade Unions
• A trade union is a group of workers who come together to protect their
interests.
• Everyone can join a trade union except the army and the Garda.
Functions of a Trade Union
• Get better pay and working conditions.
• Collect subscriptions.
• Represent workers in talks with the employers.
• Training and education courses.
• Give advice.
Types of Trade Unions
• Craft unions: Oldest trade unions. Do an apprenticeship in this industry, e.g.
Irish Masters Butchers.
• Industrial unions: All unions and workers work in the same industry, e.g. Banks.
• General union: Different types of unions, e.g. SIPTU - Service Industrial
Professional Technical Union.
• White collar union: Professional workers, e.g. Teachers - ASTI.
Shop
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Steward
A shop steward is the union representative in the workplace.
He/she is elected by his/her co-workers.
Collects subscriptions.
Recruits new members.
Solves problems before a dispute arises.
Negotiates agreements.
ICTU
• Irish Congress of Trade Union.
• Governing body of trade unions in Ireland.
• It provides once voice for trade unions.
Represents trade unions in talks with the government.
Gives advice and training to members.
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IBEC
• Irish Business Employers Confederation.
• Represents employers in talks with the government.
• Gives its members advice on industrial relations problems.
Industrial Disputes
• An industrial dispute is where a disagreement occurs between management and
unions in the workplace. E.g. ASTI in dispute with government over the new
Junior Cert.
The main causes of industrial disputes include:
• Rates of pay.
• Conditions of work.
• Dismissal / suspension of an employee.
• Management not recognising a trade union.
• Unfair treatment of a worker.
Third party organisations that help solve a dispute
1. The Labour Relations Commission (LRC)
• It was set up to help solve disputes.
• It provides trained people who will bring an employee and employer together to
try solve the dispute.
• An agreement is called conciliation.
2. The Labour Court
• There are three people on the Labour Court Committee who listen to both
sides and make a decision about what they think should happen.
• This time, you must accept the decision and this is process is known as
arbitration.
3. Equality Officer
• The equality officer listens to both sides and makes a decision.
• E.g. A more senior person has been passed over for promotion.
Marketing
Terms
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A market is all the people and places involved in the buying and selling of a
product / service.
Marketing means identifying customers' requirements and making a profit.
Marketing mix
• The marketing mix is a combination of marketing techniques that can be used
to successfully satisfy consumers' requirements profitably. This includes the 4
p's:
1. Place
2. Product
3. Price
4. Promotion
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Product development means create a new product or update or change a
current product. It is in other words the process of creating a new product or
altering an existing one.
USP = Unique Selling Point
Promotion involves a range of activities by which the firm tries to influence the
target market to purchases its product. Examples of promotion include:
1. Sales promotion
2. Public relations
3. Advertising
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Sales promotion: All activities other than direct advertising, that firms use to
promote their products and increase their sales. For example, free samples,
sponsorship, discounts, competitions and joint selling.
Public relations means establishing and maintaining a good company image in
the mind of the public. For example, Donations and sponsorship.
A good advertising campaign should have:
1. Attention - Get the attention of the customer.
2. Interest - Create an interest in the product.
3. Desire - Should create a desire to have the product.
4. Action - You should go out then and buy the product.
Price
• When choosing a price, you have to consider the cost of production and then
making a profit from it. You also have to know what your competitors are
charging.
Place
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When considering where to sell the product(s), you have to think of a suitable
channel of distribution.
Terms
• Target market - Group of consumers identified as being the people most likely
to buy the product.
• Market segmentation - Means subdividing the market into specific groups of
people who have common characteristics.
• Market research is the collecting, recording and analysing of information
about a product and the market for the product.
Aims
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of market research
To find out what products customers want.
To get a name for your product.
To see what type of advertising you can use.
To see what would be a good price.
To see what type of competition there is in the market.
Types of market research
• Desk research: Use info that has already been collected or published. E.g.
statistics, internet and reports.
• Field research: Gathering new info by going out into the market. E.g.
questionnaires, observation, consumer panels.
Delivery & Transport Systems
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Delivery systems are facilities used to transport people and goods from one
place to another.
Factors to consider when choosing a delivery system:
1. Cost
2. Reliability
3. Convenience
4. Speed
5. Types of goods
6. Destination
Road Transport
Advantages:
• Fast over short distances
• Relatively cheap
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Not subject to timetables
Disadvantages:
• Subject to traffic congestion
• Bad weather
• Slow over long distances
• Not suitable for bulky goods
Rail Transport
Advantages:
• Fast over long distances
• Suitable and cheap for bulky goods
• Not subject to traffic congestion
• Reliable and safe
Disadvantages:
• Usually subject to timetable
• Fixed routes only
• Must be used in conjunction with another means of transport
• Expensive over short distances
Sea Transport
Advantages:
• Suitable for bulky goods
• Cheap over long distances
• Suitable for containers
Disadvantages:
• Slow over long distances
• Must be used in conjunction with another means of transport
• Subject to weather conditions
• Usually subject to timetable
Air Transport
Advantages:
• Fast over long distances
• Suitable for small expensive goods
• Safe
Disadvantages:
• Expensive for short distances
• Subject to weather conditions
• Not suitable for bulky goods
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Must be used in conjunction with another means of transport
Fixed routes only
Pipelines
Advantages:
• Cheap to operate
• Very good safety record
Disadvantages:
• Expensive to set up
• Suitable only for gases and liquids
Courier
• A person or company used to deliver documents and small, value packages by
hand.
Pallets and forklifts
• A pallet is a platform, usually wooden, onto which goods are loaded to make it
easy to move them.
• A forklift is an easy manoeuvrable transport device used to load pallets on and
off trucks.
Transport developments in Ireland
• The Dublin Port Tunnel
• Terminal 2 at Dublin Airport
• An Luas
State involvement in transport
• Iarnród Éireann
• Bus Éireann
• Dublin Bus
Business Documents
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Letter of enquiry (Buyer to seller)
Quotation (Seller to buyer)
Order (Buyer to seller)
Delivery docket (Seller to buyer)
Invoice (Seller to buyer)
Credit note (Seller to buyer)
Debit note (Seller to buyer)
Statement (Seller to buyer)
Cheque (Buyer to seller)
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Receipt (Seller to buyer)
NOTE: There is very little theory related learning in Business Documents.