3.1

Question 1

Why do businesses exist?

Answer 1

They are formed by entrepreneurs and they are formed to give a return to the business owners.

Question 2

What is the common business objectives?

Answer 2

Survival, Growth, Profit, Good service, Ethics and Innovation

Question 3

Formula for Profit

Answer 3

Total Revenue - Total Costs (TR-TC)

Question 4

Benefits of being a sole trader

Answer 4

Quick and easy to set up.
Simple to run and operate.
Minimal paperwork.
Easy to end.
Fully responsible has all the control.

Question 5

Negatives of a sole trader.

Answer 5

They are unincorporated so the owner is the business. Meaning there is no legal difference so there is unlimited liability.

Question 6

Benefits of a private limited company (LTD).

Answer 6

There is a legal difference between the company and the business. Limited liability.
Has investors so access to capital.
Could be more tax efficient.
Shared responsibility.
Friends and family are they investors.

Question 7

Disadvantages of private limited companies (LTD).

Answer 7

Have to share profits with investors. (Dividends).
Not your own boss.
Can’t make all the decisions.
Losing simplicity.

Question 8

Benefits of a public limited company (PLC).

Answer 8

Separate legal entities. Limited liability.
Access to capital.
Access to experience and contacts.
Growth and expansion opportunities.

Question 9

Disadvantages of being a public limited company (Plc).

Answer 9

Must pay £50,000 to become a plc.
Must have plc in their name.
The company’s “memorandum of association” must comply with the format in table f of the companies regulations (1985).
The company shares financial information.
Not shared responsibility.

Question 10

Difference between public and private sector organisations.

Answer 10

Private sector businesses are operated and owned by private individuals and companies.

Public sector businesses are operated and owned by the government itself.

Question 11

Examples of the public sector.

Answer 11

NHS
Train tracks and stations
Fire stations and fire trucks
Schools

Question 12

Examples of the private sector.

Answer 12

Tesco
Amazon
Nike
Sainsbury’s

Question 13

Examples of Non profit organisations

Answer 13

Charities

Question 14

What is unlimited liability.

Answer 14

The owners are responsible for whole debts or a certain %of debt. The owner and business are not separate legal entities.

Question 15

What is limited liability?

Answer 15

The owners are not directly responsible and don’t pay the debt. The business is responsible and the owner and business are separate legal entities.

Question 16

What is ordinary share capital?

Answer 16

Share capital is money raised by shareholders through the sale of ordinary shares. Buying ordinary shares gives the buyer part ownership of the business.

Question 17

What is market capitalisation and how is it calculated?

Answer 17

The total value of a company( if it’s listed).

Share price x number of shares issued.

Question 18

What is dividends?

Answer 18

Money paid to investors from profit.