04 Explain limitation of using the number of employees to compare business size.

[Sir Afzal Shad]

04 Explain limitation of using the number of employees to compare business size. [3]
Hint: Misleading for capital-intensive firms > An automated factory may have few workers but be very large in value > This gives an inaccurate comparison.

[M huzaifa jillani]

(KN)
The number of employees shows how many workers a business has but it does not always reflect the true size of business.
(APP)
For example a modern car manufacturer may use advanced machinery and automation requiring fewer workers than a traditional furniture maker.
(AN)
Therefore using only the number of employees can be misleading a business with fewer employees could still be much larger in output , capital or sales value than one with more workers.
Moderator Comment:
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[Fatima ibtehaj]

[KN]It can be misleading because not all businesses need the same number of workers to operate effectively.
[APP]Some large businesses, like technology or capital-intensive firms, use advanced machinery or automation, so they can produce or sell a lot with fewer employees.
[AN]This shows that counting employees doesn’t always reflect the true scale, efficiency, or financial strength of a business making workers less needed and so they may lose their jobs which can lead towards a rise in poverty and unemployment levels which will lower their morale and effeciency to work.
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[Aarib Saad]

(KN)Certain businesses are more capital intensive and so will have less employees despite large size.
(APP)For instance, car manufacturers such as "Honda" employee barely any labor, however despite this Honda is one of the biggest car manufacturers in the world.
(AN)Thus, only measuring size through labor force size can lead to a misleading impression of the business size, this can make it so Capital intensive businesses will be subject to less investments by shareholders in industries that are mostly labor intensive, limiting certain business' ability to expand through means like adverts or launching new products.
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[Abdullah Baig]

Kn
Using the number of employees to compare business size can be misleading because not all industries rely heavily on labour
App
For example, a car manufacturing company may use automated machinery allowing it to produce thousands of vehicles with only a few workers while a small retail shop may have more staff to serve customers making it seem larger even though its output and value are much smaller
An
Therefore, comparing size only by employee numbers can give an inaccurate picture, especially for capital intensive firms.
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[Abdullah Altaf]

[KN] The business which is more capital intensive will have wrong information about business size.
[APP] For Instance, a large technology company might use robots and AI to produce its products, needing fewer employees than a small, labor-intensive bakery.
[AN] Therefore, solely relying on employee numbers provides an incomplete results, potentially misrepresenting a business's true scale, efficiency, and financial standing, especially for capital-intensive industries.
Moderator Comment:
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[Arham Qadri]

[KN] It can be misleading because not all business/industries require high number of employees.
[APP] For example a automatic car company like Honda uses machinery to produce cars while a small clothing shop may have more employees to serve customer which makes it seem larger even though the output value/cost would be less.
[AN] The number of employees does not show how profitable the business is, it ignores differences in capital intensity between industries, and it fails to reflect the value of technology that can replace human labor.
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[Sir is ka AN ni samajh araha]

[shamaim shakeel]

Using the number of employees to compare business size has limits because it doesn’t always show how large or successful a business really is. (Knowledge)
For example, a company like Apple uses a lot of technology and machines, so it can earn huge profits with fewer workers than a factorybased business. (Application) This is because some businesses use more technology instead of workers this lets them produce more with fewer staff so the number of employees doesn’t always show the true size or success of a business. Analysis
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[Muaz Aamir]

KN:
The number of employees means how many people a business hires to run its operations.

AP:
For example, a car manufacturer might have thousands of workers on factory floors, while a tech company like Microsoft could earn far more with fewer staff using advanced technology.

AN:
This makes it a weak measure for comparing size because some industries rely more on machines or automation, so they need fewer workers even if they’re huge. Part-time or temporary workers can also make figures unreliable, and firms using new technology might appear small even though they generate high output or profits.
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[Haiderabbas]

KN: This is misleading for firms that are capital intensive.
APP: e.g Airlines may have very few employees (cabin crew, bag packers) but the scale of investment in an airline is still very large due to airplanes.
AN: So by using this metric to measure business size, a restaurant chain with 500 employees may be larger than the airline which gives an inaccurate representation of these businesses.
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[Uqbah hadeed kayani]

[kn] Using the number of employees to compare business size can be misleading since not all industries need the same labour.
[app] For example, a tech company may earn billions with few workers, while a factory needs hundreds for similar output.
[an] This makes comparisons unfair, ignores automation and productivity levels, and doesn’t reflect the true scale or efficiency of the business.
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[Abdullah Mohsin]

[KN] A larger business could be capital intensive.
[APP] For instance, a large scale agricultural business would have more tractors, which would reduce the amount of employees required as a job that required 5 people now only requires one, decreasing the number of employees which would be less than a small scale agricultural business which would be labour intensive.
[AN] This makes it difficult to compare the size of the business as it ignores capital employed and dosent show the true size of a capital intensive business.
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[Shuraim Arif]

(KN) It shows how many workers a business employs but doesn't show the true size of the business.
(APP) For example, Business A employs 100 workers but is less efficient whereas Business B employs 70 workers and is more efficient. This means, despite business A having more workers, Business B manages to produce an equal amount of units, if not more.
(AN) Therefore, using the number of employees to compare business size may not be the way to compare as it can lead to false assumptions and inaccurate statistics. Analyzing businesses' accounting records may be a far more accurate way of knowing the business size, and further comparing with others.

[Abdur Rehman khan]

[KN] This measure can be misleading because it only considers the number of workers a business employs neglecting others factors.
[APP] For example, some large capital-intensive firms use expensive machinery and automation instead of many employees.
[AN] This means the business might appear smaller when compared by staff numbers but it could actually have high output and revenue leading to unfair or inaccurate conclusions about its real size which can mislead investors, Banks, or analysts when making business decisions.
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[Naveen fatima]

[KN] The number of employees measures how many people work in a business.
[APP]For example, a factory may have 500 workers, while a software company has only 50.
[AN]This method is limited because some firms use more machines and need fewer workers, making comparisons unfair. It also ignores how productive or profitable each worker is. Different industries require different labour levels, so employee numbers alone do not accurately show business size.
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