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Business As > 3.1.2 Buisness Forms > Flashcards

3.1.2 Buisness Forms Flashcards

1
Q

What is capital

A

Money raised to start or develop a business

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2
Q

What is unlimited liability

A

Where responsibility of all debts of business rests on owner

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3
Q

What is limited liability

A

Where responsibility of all debts is limited to the amount invested by a sharesholder

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4
Q

What is a dividend

A

Money paid to shareholder from profits if a limited company

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5
Q

What is a sole trader

A

A business owned by one Person

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6
Q

Positives of being a sole trader

A

Easy and cheap to set up
Owner has control
Keep all profits
Financial info not shared

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7
Q

What are the negatives of being a sole trader

A

Unlimited liability
Long work hours
Continuity
Shortage of capital

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8
Q

What is a private limited company (Ltd)

A

A business owned by at least two share holders

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9
Q

What are the positives of being a private limited company

A

Limited liability
Continuity
Control over share

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10
Q

What are the negatives of being a private limited company

A

Some financial info available
Admin
Dividends

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11
Q

What is a public limited company (plc)

A

A business pended by shareholders. Shares in business can be bought and sold on stock exchange

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12
Q

What are the positives of being a public limited company

A

Ability to raise large capital
Easier to borrow
Limited liability

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13
Q

What are the negatives of being a plc

A

Possibility of takeover
Costs
Financial info available

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14
Q

What are the factors that influence a PLCs share price (within company control)

A

Dividend policy
Relationship with investors

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15
Q

What are the factors that influence a PLCs share price (outside company control)

A

State of economy

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16
Q

What is limited liability

A

unlimited (sole trader)
limited (private limited company and public limited company

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17
Q

What is a public sector organisation

A

organisations that provide goods and services which are owned and funded by the government

eg NHS, highways agency

18
Q

What is an unincorporated business

A

-The owner is the business- no legal difference
-owner has unlimited liability (including debts)
-most unincorporated business operate as sole traders

19
Q

What is an incorporated buisness

A

-legal difference between the business (company) and the owners
-owners (shareholders( have limited liability
- most incorporated business operate as private limited companies

20
Q

What is a social enterprise

A

Businesses that trade in order to benefit the community.

These businesses have social aims as well as trying to make money for the business

Eg- Man V fat football
social bite-giving people who just left prison jobs

21
Q

What is annual general meeting

A

a yearly meeting in which company directors invite all shareholders to come to quiz the board and vote on new resolutions

A legal requirement for plc’s

22
Q

What is dividend cover

A

measures how well a firms dividends are covered by its profits for the year

23
Q

What is external constraint

A

somethings outside of the firm’s control that can prevent it achieving its objectives

24
Q

How do shareholders get their rewards

A

dividends
capital growth (capital gain)

25
Q

What are dividends

A

payments made to shareholders from profits
amount paid is “per share”
normally no requirement to pay dividends

26
Q

What is capital growth

A

-Arises from an increase in the value of the business
-reflected in an increase in share price
-only received when a share is sold
-no guarantee

27
Q

What is a share

A

an individual part of the issued share capital of a company

more shares you have the more voting rights based on number of shares held

28
Q

What is share price determined by

A

by the interaction of supply and demand

more buyers than sellers = share price would rise

a falling share price indicates excess supply (more sellers than buyers)

29
Q

What is the share price for a private company

A

Initially set when shareholders “subscribe for their shares

Thereafter only determined when shares are bought and sold

30
Q

Share price of a public company

A

highly transparent- displayed publicly, in real-time

all trades are disclosed (how many bought/sold and for what price)

share prices widely published and tracked

31
Q

What is market capitalisation and what is the calculation

A

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

current share price
X
number of outstanding shares

32
Q

Factors that influence a PLC’s share price - Within a company’s control

A

Financial performance
Dividend policy
Relationship with key investors
Management reputation

33
Q

Factors that influence a PLC’s share price - Outsdie a company’s control

A

State of economy
Whether company is takeover target
Alternative investment in company’s sector

34
Q

What is the share price of a public company significantly influenced by

A

market expectations of business performance

unexpected warnings indicating that market expectations will not be met almost always result in a significant fall in share price

35
Q

What is share capital

A

-Known as equity finance
-Returns : dividends and capital growth
-Part of the ownership of a company
-Long-term source of finance
-Returns tend to be higher given higher risk
-Can be repaid

36
Q

What is debt

A

Most commonly in the form of loans or overdrafts
Return: intrest on amount loaned and outstanding
Repaid over an agreed period
Can be short or long term
no participation in ownership of the company
Often secured against the assets of the company

37
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 finance structure

38
Q

Drawbacks of share issues

A

Can be costly and time-consuming

Existing shareholders’ holdings may be diluted

Equity has a cost of capital that is higher than debt

39
Q

Two main methods of issuing shares for a public company

A

Floatation
Rights issues

40
Q

What is floatation (method of issuing shares for a public company

A

Shares issued on stock exchange for the first time

Opportunity for existing shareholders to get a return on investment

Costly + time consuming

Aims to raise at least £25-50 million + new capital

41
Q

What is rights issues (method of issuing shares for a public company

A

fresh issue of new shares to existing shareholders

helps generate funds to expand

Business As (18 decks)

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