1.4 Flashcards
What are the 2 types of ownerships?
Sole trader, partnership.
What are the advantages and disadvantages of being a sole trader?
Adv: Easy set up, be your own boss, keep profit
Disadv: unlimited liability, difficult to raise finance, harder to retain good employees
What are the advantages and disadvantages of a partnership?
Adv: more experience and ideas, easier to raise finance, good employees can be promoted so it is easier to retain good employees
Disadv: shared profits, disagreement on business decisions, each partner is liable for the actions of other partners.
What is a limited company?
A company with limited liability (owned by shareholders)
What is a Ltd?
Private limited company
Advantages and disadvantages of Ltds?
Adv: limited liability, owners keep a lot of control over how the business is managed, easier to be financed
Disadv: expensive,
What is a PLC?
Public limited company
Advantages and disadvantages of a PLC?
Adv: limited liability, selling shores on a stock exchange to raise money for investment, easier raise capital
Disadv: owners have little say over how the business is run, con be taken over, accounts are public
What is flotation?
When firms become PLCs to raise finance by selling shares on the stock exchange
What is franchising?
When an established company gives someone the right to sell its products and use its trademarks
Advantages and disadvantages to franchising?
Adv: less risky than setting up a new business, increases brand awareness
Disadv: don’t have complete control over now the business is run, don’t get keep all the profit.
What influences business location?
Availability of raw materials, labour nationally, labour internationally, competition, rent, location of the market.
What is the marketing mix?
Ways for the business to be more competitive
Product
Place
Price
Promotion
Why do businesses create business plans?
Gives the business an understanding on how to achieve its aims and objectives
Why are business plans important?
- Banks and investors use them to decide wether the business is liable for a loan and wether their money will be repaid.
- sets objectives
- keeps the business organised and provides a safety net
Advantages and disadvantages of a business plan?
Adv: provide parameters for setting targets, can compare competitors, benchmark for cash flow, checks staffing income product range etc
Disadv: businesses need to be flexible, can be costly and time consuming, forecasts of revenue and profit may be misleading and cause bad business decisions
What is e-commerce?
Buying and selling online
Allows businesses to sell to larger markets
Increases competition
How does technology change business activity?
Lower costs
Easily sell products an over the world
Reduce production costs due to no labour costs and new automated machinery
What does the employment law consist of?
National minimum wage/ living wage
Equality act 2010 - protects from discrimination in the workplace
Health and safety law
What does the health and safety law consist of?
Risk assessments
Health and safety conditions
High costs are involved with meeting health and safely laws
What does the consumer law consist of?
Fit for purpose
Trade descriptions - how a business describes a product and its benefits
Satisfactory quality
Consumer law (legislation)
What is the impact of legislation on businesses?
- A business may have to introduce new practices or change their operations in response to new legislation
- A business may experience increased costs due to new legislation
What is meant by economy?
The economy is the state of a countries production and consumption of goods and services
What are 2 factors that indicate the state of the economy?
Unemployment - less disposable income to spend so customers will choose lower prices endless less luxury goods.
Consumer spending - more saving less spending
How do changes in income affect businesses?
Fall in income = less spending on luxuries, more saving
Increase in income = more spending on luxuries
What are interest rates?
The percentage of the loan that is charged as the price for borrowing
What does a higher interest rate mean?
High interest rates = more expensive to borrow so consumers save
What does a lower interest rate mean?
Low interest rates = more borrowing because its cheaper, more spending
What is the business environment characterised by?
Technology
The economy
Legislation
Environmental expectations
