1.5 Entrepreneurs and Leaders

Question 1

How many owners are there within a sole trader and what do they do with the profit?

Answer 1

One owner
They keep the profit

Question 2

What is in the dead of partnerships?

Answer 2

Set out the terms of a partnership, states how much capital each partner has invested and what role each partner will have

Question 3

Factors of a partnership agreement

Answer 3

• Profit sharing
• Entitlement to receive salaries and other benefits
• Capital invested in the partnership
• Arrangements for the introduction of new partners
• Arrangements for retiring partners
• What happens when the partnership is dissolved

Question 4

What is a limited partner?

Answer 4

A partner who is limited to the amount of investment they have made in the partnership

Question 5

What is a nominal partner?

Answer 5

People who allow their names to be used for the benefit of a partnership, usually for remuneration, but they don’t get a share of the partnerships profits

Question 6

What is included in a memorandum of association?

Answer 6

Names of all the people who were there at the founding points of the company and the articles of association (set of rules that govern how the company is run)

Question 7

What is included in the articles of association?

Answer 7

• Outline for managerial and administrative structure
• Responsibilities of a business
• Information on the rights of shareholders

Question 8

What is the divorce of ownership from control?

Answer 8

It happens when an owner of a business doesn’t control or get involved in the day-to-day decisions of the business

Question 9

What are royalties?

Answer 9

Amount paid by a third-party to an owner of a product or patent for the use of a product

Question 10

Advantages of a sole trader

Answer 10

• easy and inexpensive to set up
• The owner has complete control over the business
• All profits belong to the owner
• Simple tax arrangements

Question 11

Disadvantages of sole traders

Answer 11

• Unlimited liability, meaning the owner is personally responsible for any debts, the business gains
• Limited access to finance and capital
• Limited skill sets

Question 12

Partnership advantages

Answer 12

• Easy to set up an inexpensive
• Shared responsibilities and decision, making
• More skills and knowledge are available
• Increase access to finance and capital

Question 13

Disadvantages of a partnership

Answer 13

• Unlimited liability
• Potential for disputes between partners
• Profits off and shared equally, regardless of a contribution
• Difficult to transfer ownership

Question 14

LTD advantages

Answer 14

• Limited liability, owners aren’t responsible for the company debt
• Access to greater finance and capital
• Easier to transfer ownership
• Protection of a company name
• New shareholders and investors can be easily introduced
  -Lower taxation

Question 15

LTD disadvantages

Answer 15

• More expensive and time-consuming to set up
• More complex legal requirements and regulations then sole traders
• Annual financial reporting and auditing are required
• Shareholders have a little control over the company as the founder usually imposes their agenda

Question 16

What is franchising?

Answer 16

A franchisee buys the rights to operate a business from a larger company (franchiser) in exchange for some plus ongoing fees. The franchisee received training and marketing support.

Question 17

What is a social enterprise?

Answer 17

Businesses that primary purpose is to create social/environmental impacts (and profit). Profits are usually reinvested back into the business or to create positive social change.

Question 18

What is a lifestyle business?

Answer 18

Businesses that prioritise a specific lifestyle or personal interest or the owner over profits/growth

Question 19

Advantages of a plc

Answer 19

• access to capital
• Shared risk - spread among a group of shareholders
• Increased liquidity, public stock exchange
• Extended decision-making (board of directors)
• Greater public profile- increases its visibility

Question 20

disadvantages of a plc

Answer 20

• expensive to set up
• takeover
• publish financial records

Question 21

what is an entrepreneur

Answer 21

a person who is willing and able to create a new business idea or invention and takes risks in pursuing success

Question 22

what is intrapreneurship

Answer 22

refers to the practice of promoting entrepreneurial thinking and behaviour within an existing business

Question 23

+ve of intrapreneurship

Answer 23

• tap into creative potential -> competitive advantage
• culture generates engagement which increases motivation
• provide incentives for successful projects

Question 24

barriers to entrepreneurship

Answer 24

• entrepreneurial capacity
• access to finance
• lack of training
• fear of failure/ lack of confidence

Question 25

what is the difference between risk and uncertainty

Answer 25

risk can be calculated and prepared for. uncertainties are unexpected events, outside of the entrepreneur's control

Question 26

characteristics of entrepreneurs

Answer 26

- hard working - taking initiative - risk taker - creativity - resilience

Question 27

skills of entrepreneurs

Answer 27

- communication - teamwork - problem-solving - organisation

Question 28

purpose of setting up a business financial incentives

Answer 28

- profit maximisaiton - profit satisfaction - achieving a satisfactory level of profits

Question 29

purpose of setting up a business non-financial incentives

Answer 29

- ethical stance - social entrepreneurship - independence - homeworking

Question 30

business objectives

Answer 30

- survival - profit maximisation - sales maximisation - market share - cost efficiency - if operating in a highly competitive market

Question 31

survival as a business objective

Answer 31

to survive the initial entry into the market and to generate enough cash flow to remain in business

Question 32

sales maximisation as a business objective

Answer 32

generate maximum revenue as possible - raise prices if products are price-inelastic - lower prices is products are price-elastic

Question 33

what is a franchise

Answer 33

business model where an individual (franchisee) buys the rights to operate the business from a firm (franchisor) in exchange for a sum + ongoing fees

Question 34

what does the franchisee receive from the franchisor

Answer 34

- training - marketing support - ongoing assistance

Question 35

definition of an opportunity cost

Answer 35

loss of the next best alternative when making a decision

Question 36

trade-off definition

Answer 36

occurs when two things can not be fully achieved

Question 37

features of a leader

Answer 37

- brilliant strategists - inspiring figurehead - able to reassure large groups - prioritises ideas

Question 38

difficulties faced by the transition of an entrepreneur to a leader

Answer 38

- delegate tasks - trust and verify - learning to listen - developing emotional intelligence - open-minded - being less reactive