1.1, 1.2, 1.3 Flashcards
4 reasons as to why businesses exist
- create employment
- create income
- create new products
- can enhance a county’s reputation
common business objectives
- profit
- growth
- survival
- cash flow
- social and ethical objectives
- diversification
what is a sole trader
an individual establishes and operates a business on their own, very popular, usually relatively small businesses such as plumbers or window cleaner, may employ other people
advantages of a sole trader
- easy to start up and mange this form of business
- no need to register the business, just that all profits have to be registered
- your own boss, freedom to make their own decisions
- profits don’t have to be shared
challenges of a sole trader
- pressure of holding responsibility
- hours may be demanding, may not be able to have many holidays
- may not be able to afford closing the business and risk losing customers
- difficulty in initial raise of finance, major sources of finance is own money or money from friends or family, usually quite limited
- possible to borrow from a bank but high interest rates as start up is risky
- unlimited liability
what is a company
- owned by shareholders, each share represents part of the company, the more shares the more the company belongs to them
- shareholders are only liable for their shares
how do shareholders benefit from owning shares
- if the value of the company increases then the shares increases, meaning the they could be sold for more at a later date, however this could also happen in reverse that if share price falls the shares are worth less
- shareholders can also be paid a proportion of profits relative to them amount of shares they own this is called dividends
difference between private limited company and public limited company
public limited companies are able to sell their shares to the public on the stock market, where’s private limited companies shares are only distributed to close relations of the business owner
what is a public sector organisation
a business that is owned by a national or local environment
what are the 3 major elements of the public sector
- public corporations- owned by the state but offering products for sale to the public or private sector businesses eg channel 4
- public services- services to the whole nation eg NHS
- municipal services- services offered by local governments and council eg libraries
what are Not-for-Profit businesses
- some businesses main goal is not to make a profit
- social enterprises try to help local communities by building local sport centres for example
- owners may have string belief and that’s why they run these organisations
what are the effects of ownership on missions
type of ownership will effect a businesses missions, thus a PLC is likely to have the mission of a financial reward for shareholders
what are the effects of ownership on objectives
a businesses mission naturally gives rise to the objectives that it follows, thus a business may set objectives to lead a business towards its missions
5 external environment factors
political, economic, social, technology, competition
positive factors for businesses about changing external environments
- product becomes popular raising demand
- a major competitor leaves the market
- amount of consumers in a country in rises
- interest rates fall, making it cheaper to borrow money
- consumers enjoy rising incomes, increase demand
