1 Flashcards
What is a sole trader/proprietor
A business controlled by 1 owner
Advantages of a sole trade
- Full Control
- Receive all profits
Disadvantages of sole trader
- Unlimited liability
- Limited capacity to raise capital
What is a partnership
Business owned by 2 or more people
Advantages of a partnership
- Share ideas/offer different skills
- higher initial capital
Disadvantages of partnership
- Disagreements/conflict
- Have to share profit
What is unlimited liability
Being responsible for all the debts of the business
what is a Limited liability partnership
A legal partnership where all partners have limited liability
what is a Deed of partnership
A document containing an agreement that details the rights and obligations of each partner
What is sleeping partner
Someone who invests but does not take part in day to day activity (limited partner)
What is a private limited company
Business owned by shareholders who are family or friends, and ran by a board of directors
Advantages of Ltd
- Limited liability for shareholders
- Continuity
Disadvantages of Ltd
- Complicated to set up
- Accounts have to be public
What is a public limited company
Business that is owned by shareholders (public), and is ran by board of directors
Advantages of Plc
- Greater ability to raise finance
- More publicity
Disadvantages of Plc
- Pressure from shareholders
- Greater threat of takeover
What is a franchise
A firm that offers its brand, products, training etc for use in return for royalty payments
Advantages of a franchise
- Free brand exposure
- Training included
Disadvantages of franchise
- Royalty payments
- Lack of Control
What is meant by the public sector
Services that are provided by the national or local government, funded by tax
What is meant by the private sector
Services/goods provided by private firms, funded by the consumer
Positives of public sector
- Provide non-profitable services
- Available to everyone
Negatives of public sector
- No incentive to provide quality
- Funded by taxpayer (not fair)
What is meant by privatisation
When public sector enterprises are sold by government to private firms
Advantages of privatisation
- Government can raise capital
- Private firms increase quality
Disadvantages of privatisation
- Redundancies
- Increases in prices
What is nationalisation
When private sector firms are bought and taken over by the government
What is a mission statement
States overall purpose of firm
What is the purpose of a mission statement
- Motivates form to carry out main function
- Helps recruitment/detainment of staff
What is an aim
What a firm is targeting to achieve in the long term
What is an objective
A specified, short term target
What are the 2 forms of objectives
SMART
PIGSS
What does SMART objectives stand for
Specific Measurable Achievable Realistic Time bound
What does PIGSS objectives stand for
Profit Increases market share Growth Service/ethics Survival
Give examples of constraints on objectives
- Lack of capital
- Lack of demand
- Unavailability of premises
What are corporate social objectives
Environmental, ethical, sustainable and community focused objectives
Advantages of corporate social objectives
- Improve reputation
- In reader motivation for staff
Disadvantages of corporate social objectives
- High costs (maybe no return)
- Cynical accusations, bad publicity magnified more
Why may objectives for a business change
- Economic change
- Legal issues
- Political issues
- Social attitudes (demand)
Give an example of conflicts of objectives
Environmental + growth
What is a business plan
Statement that outlines how managers/owners intend to achieve objectives
What may a business plan include
- Finance
- Market research
- Objectives
- Potential strategies
Why may strategies fail
- Lack of market knowledge
- La k of capital
- Poor management
Why is a business plan important
- Set a budget
- Obtain bank loan
- Help achieve aims and objectives
Define a risk
Investment of resources when returns are not certain
Define reward
Returns achieved through taking risk/investment
What is a quantifiable risk
One that can be measures
What is a non-quantifiable risk
One that can’t be measured (eg if taking a risk leads to stress in business)
