The Methods And Problems Of Measuring Business Size:
Muhtasari
Is a corner shop with two staff a bigger business than a tech start-up with no employees but millions in machinery? The answer depends entirely on how you choose to measure size, and there is no single perfect method. Every measure tells a different story, and a clever analyst knows which one to trust.
In this lesson you will learn the main ways of measuring how big a business is, number of employees, value of output and capital employed, and, just as importantly, the limitations of each. You will be able to compare two businesses sensibly and explain why a single figure can mislead.
Malengo
- Methods of measuring business size, e.g. number of people employed, value of output, capital employed (profit is not a method of measuring business size)
- Limitations of methods of measuring business size
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- Which of these is NOT a method of measuring business size? A. number of employees B. value of output C. profit D. capital employed Answer: C
- A highly automated factory has few workers but high output. Measuring its size by number of employees would: A. be perfectly accurate B. understate its true size C. overstate its true size D. measure its profit Answer: B
- Capital employed measures: A. the number of workers B. the total value invested in the business's assets C. the firm's yearly profit D. the price of one product Answer: B
- Why might value of output mislead when comparing two firms? A. it ignores the number of shops B. firms in different industries have very different output values C. it always equals profit D. it cannot be measured Answer: B
- The most reliable conclusion about size is reached when: A. only profit is used B. only one measure is used C. several measures agree D. the firm is small Answer: C
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