1.5 Flashcards

1
Q

What entrepreneurs do

A

Set up a business take on risks for financial reward

Innovate/invent: Create new ideas/products/services
Take risks: Risk career/financial security for their idea
Organise: Put together resources

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2
Q

Barriers to entrepreneurship

A
  • Inability to access finance
  • Lack of human capital
  • Lack of social capital
  • Discrimination
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3
Q

Financial/non-financial motivators for being an entrepreneur

A

Financial: Profit maximisation and profit satisfying
Non-financial: Ethical stance, social entrepreneurship, independence and home working

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4
Q

Objectives

A

Gives business a clearly defined target

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5
Q

Types of objectives

A
  • Sales maximisation
  • Marketshare
  • Cost efficiency
  • Employee welfare
  • Customer satisfaction
  • Social objectives
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6
Q

Opportunity cost

A

Opportunity cost = Opportunity lost

It is missing out on the next best thing. It represents the benefits they could have been gained by making a different decision

Measures the cost of a choice made in terms of the next best alternative foregone or sacrificed

Examples:
- Work-leisure choices
- Government spending priorities
- Use scarce forming land

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7
Q

Trade-offs

A

Often involve the loss or compromise of another opinion or factor

The higher the cost the lower the profit
But higher cost = better quality
Lower cost = higher profit

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8
Q

Sole trader

A
  • Unlimited liability
  • Self-employed, runs their own business
  • They can employ others
  • Easy to set up, no legislation needed
  • Full control, gets to keep all profits
  • Financial information is private
  • Flexible working hours/holidays
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9
Q

Partnership

A
  • Unlimited liability
  • Between 2 and 20 owners
  • Agree on rules (‘deeds of partnership’)
  • Owners pay tax on their earnings
  • Quick and easy to set up
  • Could cause conflict between owners
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10
Q

Limited and unlimited liability

A

Limited:
- Liability of owners is detached from company
- Only assets within the business can be lost

Unlimited:
- No distinction in law between the individual and the business
- If the business goes under, personal assets can be lost

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11
Q

Private and public limited companies

A

Private:
- Up to 50 shareholders who all know each other
- Shares can’t be bought by the public
- Higher status than sole traders
- Wider access to growth/development
- Profits are shared (Dividends)
- 51% shares, owners keep control

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12
Q

Stock market floatation

A

Money raised when a business becomes a PLC (public limited company) by offering shares to the public to buy

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13
Q

Financial and non-financial objectives

A

Financial:
- Survival, keep business running
- Profitability
- Growth - expand business
- Sales maximisation - Gaining purchases
- Market share %
- Shareholder value

Non-financial:
- Employee welfare - staff treatment
- Sustainability
- Social - society awareness

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14
Q

Soletrader pros and cons

A

Advantages of being a sole trader:
- You’re the boss.
- You keep all the profits.
- Start-up costs are low.
Disadvantages of being a sole trader:
- You have unlimited liability
- All the responsibility for making day-to-day business decisions is yours.
- Retaining high-caliber employees can be difficult

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15
Q

Franchising

A

Franchise: Limited company that licences the right for individuals/groups to set up an identical operation in a new region. Given the right to use an established name/brand.

Franchisee: Small business owner who buys the right to use the franchisor’s business
Franchisor: Large business who are selling the right for the franchisee to use their business

+ Effective way to expand a business
+ Receive set up fee royalty payment and they get a share in the profits made
+ Products/methods already proved to be successful
+ Franchisor provides support/training
- Risk that the franchisee will damage the brand if the business is not can effectively
- Set up fees are expensive fr franchisees
- Franchisees have little freedom to change format

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16
Q

Entrepreneur characteristics

A

Creativity, risk-taking, initiative, self-confidence, hard-working, resilience

17
Q

Costs involved in stock market floatation

A

Fee to investment bank, yearly fee to stock market

18
Q

Difficulties entrepreneurs may face when becoming a leader

A

Need to delegate, need staff management skills, increased complexity