Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

business > 3.1 What Is Business? > Flashcards

3.1 What Is Business? Flashcards

1
Q

Define a corporation

A

A business which has a legal identity separate from that of its owner. The owners have limited liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Define the features of a corporate business

A
  • legal difference between the business and the owners
  • owners have limited liability
  • corporations operate as PLC’s
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define the features of a non-corporate organisation

A
  • owner is the business (no legal difference)
  • owner has unlimited liability for business actions
  • operate as sole traders/partnership
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is unlimited liability ?

A

When the owners of the business are liable for all the debts that the business may incur

Could result in them loosing their personal possessions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is limited liability ?

A

When the owners of the business can only lose up to the value of the money they have invested in the business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Who falls under the category of the private sector ?

A
  • sole traders
  • partnerships
  • private limited companies
  • public limited companies
  • non-profit organisations

Owned by private individuals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Who falls under the public sector ?

A
  • central government services e.g hospitals
  • local government e.g libraries
  • public corporations e.g BBC

Any business owned, controlled and financed by local or national government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Who falls under the public sector ?

A
  • central government services e.g hospitals
  • local government e.g libraries
  • public corporations e.g BBC

Any business owned, controlled and financed by local or national government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a sole trader ?

A

A business owned, controlled and financed by one person

The owner is responsible for setting up the business but can employ other people

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Advantages of sole trader?

A
  • easier to setup as few legal formalities
  • able to respond quickly to change
  • owner gets to keep all the profit
  • makes all decisions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Disadvantages of sole trader?

A
  • unincorporated = unlimited liability
  • limited skills and resources
  • limited capital for investment and expansion
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a partnership ?

A

A type of business organisation owned by two or more people (no maximum)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Advantages of partnership ?

A
  • spreads risk across more people
  • partner may bring money and resources
  • partner may bring other skills + ideas to the business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Disadvantages of partnership ?

A
  • profit will have to be shared
  • less control of the business for the individual
  • unlimited liability
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Define features of private limited companies ?

A
  • small to medium sized business
  • shares can only be sold to friends, family or employees
  • shares cannot be bought or sold without the agreement of other directors
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Advantages of private limited companies ?

A
  • business has a separate legal identity = limited liability
  • can raise money through share capital = access to more money
  • more privacy than plc as only limited financial records published
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Disadvantages of private limited companies ?

A
  • more legal formalities than an unincorporated business
  • not as easy to raise capital as quickly in relation to plc
  • shares cannot be traded on the stock exchange
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Define a public limited company

A
  • must have share capital of at least £50,000
  • PLC is owned by shareholders and anyone can buy shares on the stock exchange
  • have limited liability
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Advantages of PublicLC?

A
  • business has a separate legal identity = limited liability
  • easier to raise money through its stock exchange listing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Disadvantages of PublicLC?

A
  • must publish a great deal of their financial info
  • more pressure from investors and potential for short- termism
  • have to pay shareholders dividends
  • can lose control of the business (hostile takeover)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

what are not-for-profit organisations?

A

business organisations that do not exist to maximise profits, but instead focus on social or ethical objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

define share issue

A

act of selling new shares to the public

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

define share

A

an individual part of the issued share capital of a company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

define share capital

A

the money invested in a company by the shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what is flotation?

A

where a share is issued on stock exchange for the first time

opportunity for existing shareholders to realise profits on their investment

costly + timely process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

define rights issue

A

fresh issue of new shares to existing shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

how can shareholders get their rewards?

A

dividends or capital growth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

what are dividends?

A

payments made to shareholders by the company from earned profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

what is capital growth?

A
  • arises from an increase in the value of the business
  • reflected in an increase in a share price
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

benefits of share issues?

A
  • able to raise substantial funds if the business has good prospects
  • broader base of shareholders
  • equity rather than debt = lower risk of financial structure
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

drawbacks of share issues?

A
  • can be costly and time-consuming
  • existing shareholders’ holdings may be diluted
  • need to pay dividends
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

define market capitalisation

A

represents the total market value of the issued share capital of the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

formula for market capitalisation?

A

current share price x number of shares in issue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

what factors are key influences on share price?

A
  • the economic climate
  • company performance
  • future expectations
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

how does the economic climate influence share price?

A

positive economic news generates confidence and investment pushing up share prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

how does company performance influence share price?

A

strong profits generate investor confidence and push up share prices

37
Q

how do future expectations influence share price?

A

chances of a takeover/rumours of a new strategic direction or change of CEO can all have impacts upon the share price of a company

38
Q

what are financial objectives?

A

they refer to the monetary goals/targets a business will set itself during a certain period of time

provide a target to work towards as well as a mechanism to measure performance

39
Q

what is the value of setting financial objectives?

A
  • act as a measure of performance
  • provide targets that can motivate
  • potential investors/creditors may be able to asses the viability of the business
40
Q

define cost minimisation

A

the process by which businesses attempt to maximise profits by keeping costs low

41
Q

define cash flow targets

A

a financial objective focused on maintaining a healthy cash flow position.
May form part of an overall corporate objective of survival in tough economic times.

42
Q

define revenue targets

A

this involves setting minimum levels of revenue
any objective set would have to be co-ordinated with other functional areas

43
Q

define profit targets

A

involves setting a satisfactory level of profit that the company would be happy achieving. profit maximisation can be used but difficult to judge if not a specific target.

44
Q

define return on investment

A

a business might set itself an objective in terms of the return on an investment

45
Q

how to calculate return on investment?

A

return on investment (profit) / capital invested x 100

46
Q

what is capital structure?

A

refers to the long term finance of the business made up of equity (share capital) and borrowing (loan capital)

47
Q

internal influences on capital structure?

A
  • owners + their motives
  • industry sector + current financial position of the business
48
Q

external influences on capital structure?

A
  • economic factors
  • political/government policy
  • competition
  • technological change
49
Q

why do businesses need finance?

A
  1. start-up funds
  2. running costs e.g marketing
  3. growth + expansion
50
Q

internal sources of finance?

A
  1. owners savings
  2. retained profit
  3. reducing levels of stock
  4. sale of existing assets
51
Q

external sources of finance?
(short term)

A
  • overdraft
  • trade credit
  • debt factoring
52
Q

external sources of finance?
(long term)

A
  • share capital
  • government grants
  • loans
  • crowdfunding
53
Q

what is an overdraft?

A

a service that lets you have money even if there is none available in your current account

for an agreed amount of money and an agreed period of time

54
Q

what is trade credit?

A

where a business will allow customers a period of time to pay for their goods or services

buy now pay later

55
Q

what is debt factoring?

A

where a business sells its customers outstanding debts in return for a short term payment from a third party company

56
Q

what is a bank loan?

A

a loan for an agreed period of time at a fixed rate of interest to be repaid in monthly instalments

57
Q

what is venture capitalist?

A

a business that invests in new start-up companies in return for some ownership of the company

they can provide advice in addition to funding

58
Q

define equity (share capital)

A

raised when a business sells shares in return for a % of the business

the business will need to pay dividends to shareholders

59
Q

what is crowdfunding?

A

alternative method of raising equity finance for a business, project or idea

entrepreneur/business can attract a ‘crowd’ of investors - each of whom takes a small stake by contributing towards an online fundraising target

60
Q

advantage & disadvantage:
bank loan

A

adv = can spread large amounts over smaller more manageable payments

disadv:
- interest
- often a number of terms & conditions to follow
- fees for late payments

61
Q

advantage & disadvantage:
overdraft

A

adv:
- flexible
- no interest if paid on time

disadvantage:
- interest
- high charges if you miss payment deadlines

62
Q

advantage & disadvantage:
venture capitalist

A

adv:
- large amounts
- no debt repayments
- no interest

disadvantage:
- can lose control of ownership
- dividends

63
Q

advantage & disadvantage:
share capital

A

adv:
- large amounts
- no debt repayments
- no interest

disadvantage:
- can lose control of ownership
- dividends

64
Q

advantage & disadvantage:
trade credit

A

advantage:
- flexible
- no interest if paid on time

disadvantage:
- high costs if not paid on time
- fees attached

65
Q

advantage & disadvantage:
debt factoring

A

adv:
- large amounts upfront
- all the money can be accessed straight away

disadvantage:
- high discounts expected
- could potentially have a negative image on the business if 3rd party not ethical in collecting debt

66
Q

advantage & disadvantage:
crowdfunding

A

adv:
- no debt repayments
- good PR for the business

disadvantage:
- can lose some equity depending on terms of deal
- might be limited

67
Q

advantage & disadvantage:
government grants

A

adv:
- does not need to be repaid
- no interest or repayment

disadvantage:
- limited availability

68
Q

what factors will influence the choice of finance?

A
  • time; short term/long term
  • finance available in the business
  • cost of debt + amount of money required
69
Q

define budgets

A

a forward financial plan that covers all the aspects of a businesses costs and revenues

70
Q

why prepare a budget?

A
  • to exercise financial control
  • it can provide direction + co-ordination
  • to ensure that no department has an overspend
  • sets targets which can motivate workers
71
Q

define variances

A

the variance is the difference between actual and the budget

72
Q

what is favourable variance?

A

better than expected:
- costs = lower than expected
- revenue = higher than expected

73
Q

what is adverse variance?

A

worse than expected:
- costs = higher than expected
- revenue = lower than expected

74
Q

budget allocation:
what does the level of expenditure depend on?

A
  • amount available
  • inflation
  • external factors
  • customer/revenue figures
75
Q

what are the two types of budgets?

A

zero budgeting and historical budgeting

76
Q

define zero budgeting

A
  • budgeted costs + revenues are set to zero
  • budget is based on new proposals for cost + sales

time consuming but starting from scratch can ensure that funds are allocated in the right way

77
Q

define historical budgeting

A
  • use last years figures and add a little for inflation
  • much quicker + simpler but may not focus on problem areas of the business

does not encourage efficiency

78
Q

what is a business objective?

A

a goal/target to help the business achieve its mission

79
Q

types of objectives?

A
  • profit
  • image
  • growth
  • cash flow
  • ethical
80
Q

what does the SMART acronym stand for?

A

Specific
Measurable
Agreed
Realistic
Time limited

81
Q

why does a business set objectives?

A
  • gives specific targets by which business performance can be measured
  • can be used to motivate workers to achieve
  • clarifies business direction and aids decision making
82
Q

define corporate objectives

A

a target that is set for a business to help meet its goals - covers the whole business

83
Q

define functional objectives

A

sets targets for the department to help the business achieve the overall corporate objective

84
Q

internal influences on business objectives?

A
  • amount of finance available
  • skills of workforce
  • target audience
85
Q

external influences on business objectives?

A
  • political
  • environmental/ethical
  • social
  • technology
  • legal
  • economy
  • competition

PESTLE - C

86
Q

why do businesses exist?

A

to fulfil the needs + wants of customers
sell their products and services to customers/ other businesses for a profit

  • create wealth
  • create employment
  • pay taxes
  • drive innovation and develop ideas
87
Q

what is a mission statement?

A

a broad statement of the business’ aims and values. focuses on what the business wants to achieve at present and guides everyday operations

defines the core values and direction of the business + helps to direct strategic decision-making across the business

88
Q

benefits of mission statements

A
  • give the business a clear identity + ethos
  • helps set objectives and support business strategy
  • focus senior mangers on tasks to achieve the vision
  • communicates to employees how they can contribute = may improve employee engagement

business (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions