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Business (year 1) > 1.2 business forms > Flashcards

1.2 business forms Flashcards

1
Q

what are the 2 categories of business forms?

A
  1. public sector

2. private sector

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2
Q

what is a public sector?

A

businesses that are owned and sometimes funded by the government

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3
Q

what are the 3 types of public sectors?

A
  1. Public corporations: enterprises (Channel 4, BBC, Bank of England)
  2. Public services: offers service to the nation (NHS, Schools,
    Fire service)
  3. Municipal services: basic services expected to be provided by local council (Bin collection, library, leisure centre)
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4
Q

what is privatisation?

A

when the government sells businesses that they have owned and managed to private individuals and businesses
e.g. royal mail, railways, social housing

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5
Q

why would the government privatise?

A
  • raises finance for them

- privately run businesses are more efficient

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6
Q

what is a sole trader?

A
  • businesses that are owned and managed by 1 person- may employ others
  • unlimited liability (responsibility)
  • no distinction between the business + the individual –> So if the business was declared bankrupt personal belongings can be taken to pay off any debts.
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7
Q

characteristics of a sole trader:

A
  • Easy + cheap to set up
  • Unlimited liability
  • Sources of finance are limited
  • Long hours
  • Be their own boss
  • Make all decisions
  • Keep all the profits
  • No continuity
  • No specialist skills
  • Stressful
  • Financial information kept private
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8
Q

what is a partnership?

A

Business owned by minimum 2 people

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9
Q

characteristics of a partnership:

A
  • Easy and cheap to start
  • Unlimited liability
  • No continuity
  • Profits are shared
  • Specialist skills
  • Additional sources of finance
  • Must respect partner’s decisions
  • Financial info kept private
  • Shared workload
  • Sleeping partner
  • Partners may not agree
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10
Q

Unlimited liability is not ideal. How do we get rid of it?

A
  • Become a company
  • Through the incorporation process (registers as a limited company)
  • 3 important documents: (memorandum of association, articles of association, registering with companies house)
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11
Q

what is a company?

A

an organisation that has its own legal identity and limited liability

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12
Q

what is an incorporation?

A

process of establishing a business as a separate legal entity and limited liability

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13
Q

what is a shareholder?

A

an investor + an owner

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14
Q

what are dividends?

A

share of profit that is distributed to shareholders

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15
Q

companies are split into 2 types:

A
  1. Private limited company (Ltd)

2. Public limited company (PLC)

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16
Q

what is a private limited company (Ltd)?

A

A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public.

17
Q

what is a public limited company (PLC)?

A

An incorporated business organisation that allows the general public to buy + sell shares in the company via a stock exchange.

18
Q

what is market capitalisation? (and formula)

A
  • Measures the size of PLC
  • Total value of issued shares

MARKET CAPITALISATION = share price x number of shares

19
Q

what is a not for profit organization? (aka social enterprises)

A

a business that aims to do something other than to make profit such as providing a public service or helping people.

side note:
mutual business: run for the benefit of their members (cooperatives or building societies)

20
Q

characteristics of not for profit organisations:

A
  • help others
  • reputation
  • encourage others into the profession
  • give people opportunities that may not get otherwise
21
Q

why buy shares?

A
  • primarily financial reasons
  • investment
  • dividends from profits
  • Annual general meeting with shareholders, voicing opinion and getting a vote (Not always the case!)
22
Q

what are risks of buying shares?

A
  • external factors reducing share price
  • profits falling
  • less dividends
  • might not be able to sell shares for = to what you paid for
23
Q

what factors could influence share price?

A
  • company’s performance
  • economy
  • competitors
  • trends
  • natural disasters
24
Q

features of rising shares:

A
  • reflect well on management
  • happier shareholders
  • easier to raise capital
25
Q

features of falling shares:

A
  • reflects poor management
  • difficult to raise capital
  • vulnerable to takeover

Business (year 1) (25 decks)

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