3.1.2 Flashcards
What are private businesses
- owned by shareholders and private individuals
- most businesses in the UK
- driven by profit motive (most)
determined by market forces
example of private and public
NHS
What are public businesses
are owned and funded by national or local government
* are driven by public interest
* are made up of public corporations, public services and municipal services
What is limited liability
Where the liability of the owners is detached from the company. Shareholders can lose their investment in the event of financial difficulties, but their personal belongings are safe, unlike with unlimited liability where there is no distinction in law between the individual and the business.
What are sole traders
- easy to start up - no registration
- requires wide range of skills and flexibility
- own boss but long hours
- keep all profits
- unlimited liability
- owned by individuals self-employed
What are private limited companies
must go through process of incorporation
* limited liability
* customers may trust a limited company more than sole trader
* wider access to capital - easier to borrow money as a limited company
private limited company owned by shareholders separate legal entity company.
What are public limited companies
- can raise capital through selling shares to the public
- size measured by market capitalisation
- ability to take over other businesses
- can lose control of the business
- pressure to pay dividends to its shareholders.
large publicly owned companies
What are non-profit organisations
A charity may be exempt from tax on most forms of income. Alternatively, a business may take the form of a mutual. A mutual can take any legal form, but it is distinguished by the fact that it is run for the benefit of its members (employees, customers or community).
Aims and objectives of plc
a public limited company has external shareholders due to stock market floatation. As a result, the aims and objectives of the business are likely to relate to increasing shareholder value. Private limited companies and sole traders do not have this pressure to satisfy external shareholders. As a Plc is more likely to operate in international markets, its objectives may also refer to how it intends to operate in these markets.
Private limited companies aims and objectives
many businesses can be formed as a private limited company. Although the limited status does not necessarily influence aims and objectives, the business may have ambitions to become a Plc. Objectives are also likely to involve growth and expansion.
Aims and objectives of sole traders
If the business is newly formed the objectives are likely to focus on survival, establishing a loyal customer base or building reputation. Objectives may only extend to providing the owner with a comfortable income.
Aims and objectives of a charity
a charity is a not-for-profit organisation so obviously its aims and objectives will not focus on the incentive of profit. A charity may set a unique way to measure its success, such as the number of donors, the number of people it has supported or the awareness of the cause it promotes.
What is a shareholder
an individual or an institution that owns a percentage of a company. Shareholders invest in companies to make a profit (return) on their investment. Shareholders can influence the decision making in companies and often have a vote in key company policy.
Share prices are affected by
by the company’s performance and the business environment in which it trades. A company’s share price could fall even if it is performing well if there are fears for its future.
When shares prices rise what happens
Managers may receive a bonus.
The company finds it easier to raise capital.
Consumers with shares feel more confident to spend.
The business may receive positive publicity.
