Determining the size of the firm

Business studies study module

The following are some of the ways/factors which the size of a firm may be determined:

  • Level of output/volume of output

A firm’s size may be judged by the level of output. A large firm will produce on large scale, while a small firm will produce on small scale.

  • Number of employs in the firm

A small firm is likely to employ only a few employees, while a large firm will most often employ many workers.

  • Floor area covered by the premises

A firm with large floor area covered by premises may be said to be large.

  • Size of the market controlled by the firm

Large firms control large proportions of the total market of a particular product. Small firms may only control a small size of the market.

  • Capital invested

The larger the capital of the firm in terms of assets the larger the firm and vice versa.

  • Methods of production adopted

A large firm will most often adopt capital intensive methods of technology, where operations will be highly mechanized while small firms use more labour then machinery.

  • Sales of volume

Small firms have low levels of sales with a given period while large firms have huge levels of sales.

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