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Business Ctec - Mr Wiltshire > 1.1 > Flashcards

1.1 Flashcards

1
Q

What is the Economy?

A

A system for distributing scarce resources and is made up of different types of business activity and different sectors

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2
Q

How is the value of an economy measured?

A

Gross domestic product

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3
Q

What is primary activity?

A

When a firm whose business activity involves the extraction of natural resources.
E.g. farming, fishing, mining.

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4
Q

What are the key features of primary activity?

A
  • limited processing takes place
  • depends on external factors e.g. weather
  • may rely on finite resources
  • prices can fluctuate a lot
  • important in less developed economies e.g. Africa.
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5
Q

What is secondary activity?

A

This refers to firms that process and manufacture goods from natural resources and sell to either customers or business customer.
E.g. construction, manufacturing.

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6
Q

What are the key features of secondary activity?

A
  • adds value through the transformation process
  • can be capital-intensive e.g. use of machinery and robotics to produce cars
  • uses resources from a range of primary sector businesses e.g. energy and raw materials.
  • important in developing economies e.g. Mexico
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7
Q

What is tertiary activity?

A

When firms supply a service to consumers and other businesses.
E.g. barbers, restaurants, banks, transport, IT.

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8
Q

What are the key features of tertiary activity?

A
  • adds value through customer service
  • can be labour-intensive e.g. teaching and nursing
  • uses resources from a range of primary and secondary sector businesses e.g. energy and finished goods
  • important in developed economies e.g united kingdom
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9
Q

What is the chain of production?

A

It refers to the production and supply of goods to the final consumer which involves businesses undertaking primary, secondary and tertiary activities.

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10
Q

What’s a mixed economy?

A

An economy where the resources are owned and controlled by both the private and public sectors.

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11
Q

What is the spectrum of economic systems?

A

‘Free market economy’ - all resources are owned by the private sector .
‘Command economy’ - all resources are owned and controlled by the public sector.

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12
Q

What’s in the private sector?

A
  • private limited companies (Ltd)
  • public limited companies (Plc)
  • sole trader
  • partnerships
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13
Q

What’s in the public sector?

A
  • government departments
  • nationalised industries
  • public corporations
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14
Q

What’s in the third sector?

A
  • registered charities
  • community groups
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15
Q

What are the key features if the private sector?

A
  • owned by private individuals or groups
  • aim to maximise profit i.e. revenue being greater than costs
  • pay tax to the government
  • usually funded by debt or equity e.g. bank loans or share capital
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16
Q

What are the key features of the public sector?

A
  • owned and controlled by the local or national government
  • provide public goods & services e.g. education, healthcare, defence, parks
  • goods and services provides for free/less than markets value
  • government funded through tax and borrowing
17
Q

What are the key features of the third sector?

A
  • not-for-profit, this sector is made up of not-for-profit organisations. Any surplus goes back into the business
  • values driven i.e. aim to good for society as a whole or for a specific cause
  • no government funding
  • fully or partially run by volunteers
18
Q

What is the definition of a partnership?

A

A business that is formed by two or more people who will usually share responsibility for the day-to-day running of the business. Partners usually invest capital into the business and share profits.

19
Q

What is the definition on unlimited liability?

A

If an unincorporated business fails, then the owner might have to use their personal wealth to finance any business debts. The owners and the business are the same legal entity.

20
Q

What is a sole trader ?

A

A business that is owned and controlled by just one person who takes all of the risks and received all of the profits.

21
Q

What does unincorporated mean?

A

A business that does not have legal identity separate from its owners. The owners have unlimited liability for business debts.

22
Q

What is the definition of limited?

A

If a business fails, then the owners only risk losing the amount they have invested in the company and not their personal wealth. The owners and the business are separate legal entities.

23
Q

What are the key features of a sole trader?

A
  • Unlimited liability = personally responsible for all debts of the business, personal wealth is at risk if the business fails.
  • one owner = one individual who owns and runs the business, classed as self-employed by HMRC
  • can employ others e.g. office staff, sales assistant
  • income tax payed on profits = any profits made are classes as income and so charge income tax by HMRC
24
Q

What are the key features of a sole trader?

A
  • Unlimited liability = personally responsible for all debts of the business, personal wealth is at risk if the business fails.
  • one owner = one individual who owns and runs the business, classed as self-employed by HMRC
  • can employ others e.g. office staff, sales assistant
  • income tax payed on profits = any profits made are classes as income and so charge income tax by HMRC
25
Q

What are the key features of a partnership?

A
  • unlimited liability
  • two or more owners
  • profit share
  • sleeping partners
26
Q

What are the advantages of a sole trader?

A
  • easy to set up
  • own boss
  • keep all business/financial details private
    -keep all the profits
27
Q

What are the disadvantages of a sole trader?

A
  • all responsibility is on one person
  • no one to share the workload with
  • only have own skills
  • difficult to raise finance
  • unlimited liability
28
Q

What are the advantages of a partnership?

A
  • able to share workload
  • partners can specialise in certain areas of the business
    -more ideas available
  • more owners so more finance can be put into the business
  • keep all business/financial details private
29
Q

What are the disadvantages of a partnership?

A
  • partners share profit
  • partners share decision making
  • unlimited liability
    -difficult to raise finance
30
Q

What are the advantages of a public limited company?

A
  • protection from liabilities and debt
  • access to capital
  • limited liability
  • better access to credit
  • ability to raise funds by selling stock
31
Q

What are the disadvantages of a public limited company?

A
  • expensive to set up
  • more complex accounting
  • shareholders expect a percentage of the profit
  • greater risk of takeover

Business Ctec - Mr Wiltshire (4 decks)

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