Ways used to measure the size of a business- Updated 2023
A business may be measured the number of employees it has. Image credit chronicle.co.zw
ZIMSEC O Level Business Studies Notes: Ways used to measure the size of a business
Some businesses are small others are large. We can consider the following factors when trying to determine the size of a business:
The number of employees: The business with the most employees is usually considered to be the larger of the two businesses being compared but business which use more machinery and technology i.e. capital intensive may have few employees but they still might be big. For example Alphabet has less employees that say a typical tobacco farm in Zimbabwe but still it is one of the biggest businesses on earth.
The amount of capital invested: The more capital a business has the larger it is deemed to be. However,a business which might not use a lot of investment in machinery but and involves less investment may still be big. Take the example of software companies and consultancy firms like Google (Alphabet).
The sales turnover: The larger a business’s turnover the bigger it is. A business may be going through a bad phase and may not have huge sales does it make the business small?
Market capitalization: Market capitalization is the company’s value based on current share prices on the stock exchange. The bigger the market capitalization the bigger the business. However there are a lot of companies do not trade on the Stock Exchange and it will be difficult/impossible to determine their market capitalization. Also markets are very volatile and share prices change every day does it alter the size of the business every day?
Market share: Is the total proportion of the market that a business controls. The bigger it is the market share the bigger the business. However a business may not be a market leader but still may be huge whereas if the market is itself very small, a major market share won’t make a business big.
So while deciding the size of business as big or small a combination of factors needs to be considered.