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Business Aims and Objectives

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Business Studies

People with goals succeed because they know where they are going...It's as simple as that."

- Earl Nightingale

As with people, successful businesses also have clearly defined aims and objectives. Let's take a look at what these are exactly and why it is essential for businesses to have them.

Business aims are the long-term goals a company sets for itself.

It sets the direction for the company and guides employees in their tasks. It is a short statement that explains why the business exists and what it is planning to achieve.

Setting business aims and objectives

Business objectives are steps taken by a company to achieve its business aims. Objectives guide the next step to be taken to move closer to the company aim. Objectives are also measured to make sure that all the right steps are orderly executed to achieve the aims. To help managers and employees develop, manage and track objectives the right way, they create SMART objectives. This is a smarter way of creating objectives as it helps to put together an action plan, increase productivity, and track progress. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, Time-oriented.

Business Aims and Objectives, SMART objectives, StudySmarterSMART Objectives for Businesses, StudySmarter

Examples of aims and objectives

Financial aim - make a profit of £24,000 by the next financial year.

The objective for this aim would be: make profits of £2,000 for the next 12 months.

Financial aim - increase revenue in the next five years.

Objectives for this aim would be as follows:

  • Increase product awareness

  • Acquire new customer

  • Create or improve digital platform

  • Increase conversion rate

  • Reduce overhead costs

Non-financial aim - Become the most sustainable company in the industry.

Objectives for this aim would be as follows:

  • Use recycled raw materials

  • Use production methods that reduce CO2 emissions

Some common aims and objectives

Some of the common financial aims and objectives are:

  • Increase revenue

  • Increase profit margins

  • Earn a return on investment

  • Attain financial stability

Some of the common non-financial aims and objectives are:

  • Employee satisfaction

  • Customer satisfaction

  • Social responsibility

  • Relation with suppliers

Advantages of setting aims and objectives

Setting aims and objectives are very important for a company, as it is a key component in ensuring success. It guides the course of action and helps to keep employees focused and act responsibly. It ensures clarity within the whole organisation. It also has many other advantages.

Providing direction

A set aim guides a company and its employees in making the right decisions. It directs the company in the right manner.

Business planning

A goal or aim helps to understand what the right next step is. It helps in planning every step of the business.

Employee motivation

Having a goal to reach can improve employee motivation. It can be further improved by having an incentive system in place for the first employee to reach an objective.

Less stress

Having set objectives gives employees a means to measure how much they have done and keep track of their performance. This helps to avoid unnecessary stress which employees face when they are unaware of their overall performance rate.

Less wastage of time

Setting steps (objectives) to accomplish an aim helps to achieve the aim faster. Setting objectives tells an employee exactly what is to be done next, and this saves a lot of time and prevents the employee from performing any unnecessary tasks.

Business Aims and Objectives - Key takeaways

  • Business aims are the long-term goals a company sets for itself.
  • Business objectives are steps taken by a company to achieve its business aims.
  • Objectives are measurable.
  • Aims and objectives can be financial or non-financial.
  • Setting aims and objectives guides a company’s course of action.

Business Aims and Objectives

Aims and objectives are business-specific and differ for different organisations. They are crucial components in helping a business grow. Aims and objectives can be financial or non-financial.


Aims in business is a short statement stating the long-term goal of a business that reflects what the organisation stands for. It sets the direction for the company and guides the employees in their daily operations.


Objectives are the statements explaining the steps that will be taken by the organisation to achieve the aim. Objectives are measurable and help to identify if the organisation is moving in the right direction.

Business objectives are steps taken by an organisation to achieve its set aim. It guides an organisation in making the right decisions and achieving the aims promptly. An objective is effective if it is SMART. SMART is an acronym that stands for:

  • Specific: A clearly stated aim-specific objective that outlines what is to be done and how it should be done.

  • Measurable: The outcome of an objective needs to be measurable as this helps track the objective’s progress. The outcome can be measurable in numbers, percentage, rate and so on.

  • Achievable: the agreed-upon objectives should be achievable by the organisation’s capacity.

  • Relevant: the objectives must be relevant to the aim the organisation is trying to achieve.

  • Time-oriented: a deadline should be set for accomplishing the objectives as this ensures achieving the aim in the decided time. It helps to organise tasks and also measure the objective outcome.

The aim is what a company strives to achieve over a long period. Objectives are the steps taken by the company to achieve the aim.


An aim is written in broad terms and is not specific. Objectives are very specific statements that have measurable outcomes. 

Final Business Aims and Objectives Quiz

Question

 List at least 4 advantages of setting aims and objectives.

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Answer

1) Provisioning direction

2) Employee motivation

3) Business planning

4) Less stress

5) Less wastage of time

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Question

 Which of the following means long-term target?

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Answer

Company mission

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Question

Which of the following is a financial aim?


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Answer

Increase revenue by 40% in the next 5 years.

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Question

Which of the following best describes an aim?

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Answer

Long-term goal, a short statement written in broad terms

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Question

What is marginal revenue and what is the formula to calculate it?

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Answer

Marginal Revenue (MR) is defined as the change (increase) in total revenue by producing one additional unit of output.

Marginal Revenue = Change in Revenue / Change in Quantity

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Question

What are the revenue taxes used for?

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Answer

Revenue taxes are spent on social security, medical aid, child nutrition programmes, house assistance, and several other welfare programmes.


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Question

What are non-tax revenues?


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Answer

Non-tax revenue is paid by the population to the Government for Government-offered services and is a mandatory tax.





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Question

Why are revenues also referred to as 'top line'?


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Answer

The revenue appears at the top of the income statement, as it is the amount before deducting the taxes, expenses, and costs. Therefore, it is known as the 'top line'.

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Question

Name the sources of tax and non-tax revenues.


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Answer

  • Sources of tax revenue - corporate tax, payroll taxes, individual income taxes, etc.
  • Sources of non-tax revenue - electricity, police and municipal services, etc.

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Question

What is tax revenue?

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Answer

Tax revenue is the revenue received through taxation. It is the primary source of income for the Government.


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Question

What is the highest source of income for the Government?


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Answer

Corporate tax is the government’s biggest source of income.

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Question

Under which level of profits does the operating profit fall?

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Answer

The second level of profit

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Question

How are profits used?

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Answer

Profits are either taken by the owners themselves or used towards the company’s growth. Generally, a mature company’s profits are distributed as dividends and that of a fairly new company is used for the company’s growth. 

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Question

Which level of profit is indicated by the gross profit?

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Answer

The first level of profit.

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Question

What is the definition of net profit and what is the formula to find it?

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Answer

The net profit reflects the residual income of the company after all the expenses and costs are deducted from the revenue. 

Net profit = Total revenue - Total expenses.

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Question

State the formula for calculating the operating profit.

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Answer

Operating profit = Gross profit - Operating expense - Depreciation - Amortisation.

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Question

Give an example of gross profit.

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Answer

When a company makes a total sale of €70,000 by selling 50 wooden tables which    cost them €20,000 for production, their gross profit is:

€70,000 (Sales) - €20,000 (Cost of goods sold) = €50,000 (Gross profit).

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Question

What is the formula for calculating gross profit?

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Answer

Gross profit = Sales - Cost of goods sold

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Question

Give an example of net profit.

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Answer

If a company has a total revenue of €500,000, and the total expenses of €240,000 ( Salary expense = €180,000, Operating expense = €52,000, Tax expense = €28,000), their net profit is:

€500,000 (Total revenue) - €240,000 (Total expense) = €260,000 (Net profit).

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Question

What is an example of operating profit?

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Answer

If a company has a gross profit of €300,000, operating expenses of €15,000, the amortisation is €20,000 and the depreciation of the required machinery is €10,000, then the operating profit is:

€300,000 (Gross profit) - €15,000 (Operating expense) - €20,000 (Amortisation) - €10,000 (Depreciation) = €255,000 (Operating profit).

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Question

Name the type of cost that has already occurred and can not be retrieved in the future.

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Answer

Sunk costs

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Question

Give an example of a semi-variable cost.

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Answer

Electricity - the base is a fixed cost, but later the cost varies as per consumption.


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Question

How is the direct cost different from the variable cost?

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Answer

Direct costs are only considered when the firm produces more than one product.


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Question

Revenue depends on the number of ___ an organisation sells and its selling price. 

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Answer

items/services 

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Question

It is the change (increase) in total revenue by producing one additional unit of output. What is it?

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Answer

Marginal Revenue

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Question

___ revenue includes the revenue that a company earns from its primary activities such as sales.

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Answer

Operating

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Question

Income is always higher than revenue.


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Answer

False

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Question

The tax that is levied on individuals or businesses by the Government is called...


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Answer

income tax.

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Question

This type of tax is the Government’s biggest source of income. What tax is it?

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Answer

corporate tax

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Question

A company sold 500 units of their product for £2 each. What is their revenue?


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Answer

£1,000

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Question

Income is the amount of money remaining from revenue after the subtraction of expenses. 


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Answer

True

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Question

Income and revenue are the same thing.

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Answer

False

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Question

___ the amount of revenue earned by the firm per unit of good/service sold.

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Answer

Average revenue

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Question

This type of revenue includes the revenue that a company earns from its primary activities such as sales. What type of revenue is it?

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Answer

Operating revenue

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Question

Operating revenue is revenue that a company earns from activities other than its primary activities.

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Answer

False

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Question

What does GST stand for?

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Answer

Goods and Service Tax

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Question

GST in the UK is 20 percent. 


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Answer

True

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Question

If a product's price is £100, a GST of 20 percent is added, resulting in a calculated net price of...


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Answer

£120

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Question

___  is received by Government through non-tax related activities, like the profits of a Government-run organisation.

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Answer

Non-tax revenue

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Question

Corporate tax, payroll taxes, individual income taxes, etc. are sources of tax revenue.


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Answer

True

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Question

The higher the number of sales and selling price, the lower revenue.

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Answer

False

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Question

Cost is defined as the ___ value spent by a company for the production of products and operating the business.

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Answer

monetary

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Question

Administration cost and the cost of electricity in the office are direct costs.


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Answer

False

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Question

This represents the cost given up by the firm for choosing an alternate option. What type of cost is it?


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Answer

Opportunity cost

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Question

When it comes to electricity, the base is a fixed cost, but later the cost varies as per consumption. That is why electricity is a ___ cost.


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Answer

semi-variable

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Question

Which of these is a fixed cost?

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Answer

Rent

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Question

Which of these is a variable cost?

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Answer

Cost of packaging

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Question

The sum of the fixed, variable, and semi-variable cost for a particular level of output is called...

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Answer

total cost.

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Question

This is a cost that has already occurred and cannot be retrieved in the future.

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Answer

Sunk cost

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Question

When the output is zero, the total cost is equal to the fixed cost.


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Answer

True

Show question

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