Measuring the Size of a Business – AS Level Business (9609)

👉Measuring the Size of a Business – AS Level Business (9609)

✍ By AS & O Level Study Hub

As an AS Level Business student, I often find that textbooks give complex definitions without making things simple. So, I decided to write this blog post in my own words to better understand and remember the topic “Measuring the Size of a Business.” These notes are not only to help me revise but also to help other students who might be struggling with the same chapter. Let’s explore the topic with real examples and easy explanations!

• Number of Employees

Firms with more employees are often considered larger.

However, it's not always accurate — some tech firms can generate huge revenues with just a few skilled workers.

•  Revenue (or Sales Turnover)

High-value production businesses (like luxury car firms using advanced tech) earn more profit per unit but often have fewer sales overall.

In contrast, low-value production firms (like plastic toy manufacturers using cheap labor and materials) sell more units in bulk, which increases their total revenue.

Limitation: Revenue doesn’t show actual profit — a firm could have high sales but low profits due to high costs.

• Capital Employed

This refers to the total long-term finance invested in a business. A firm with more expensive machinery and assets is said to have a higher capital employed.

Example: An optical shop might need costly equipment compared to a hairdresser.

Limitation: High capital employed doesn’t always mean large-scale operations — a firm may just use more expensive equipment.

• Market Capitalization

This applies to public limited companies and is calculated as:

Share Price × Number of Shares Issued

Limitation: Share prices change daily and may not reflect the actual size or performance of the business.

•  Market Share

A company with a high percentage of total market sales is often seen as a large player in the industry.

Limitation: This measure depends heavily on how big or small the industry is overall.

Other Industry-Specific Measures

Depending on the industry, size can also be measured by:

1: Number of guest beds (hotels)

2: Number of shops (retail chains)

3: Floor space (malls)

4: Units sold (manufacturing)

Profit ≠ Business Size

Important Tip: Profit should never be used to measure business size. A small firm can have more profit than a larger one if it’s more efficient or has lower costs.

This chapter taught me that no single method can fully define how big or small a business is. Each measure has its own use and its own limitation. Understanding them helps me analyze real-world businesses more accurately.

I hope this blog post helps other students too! If you found it useful, feel free to comment or share. I’ll continue posting simplified notes from my AS Business course  — and I’m also planning to upload a short YouTube video summarizing this chapter. Stay connected!