3.1.2 Different business forms Flashcards
5 what is an unincorporated business
there is no distinction in law between the individual owner and the business itself
There identity of the business and owner is the same
5 what is an incorporated business
the business has a legal identity that is separate from the individuals owners
organisations can own assets, owe money and enter into contracts in their own right
5 what is limited liability
a situation in which the liability of the owners of a business is limited to the fully paid up value of the share capital
5 what is unlimited liability
a situation in which the owners of a business are liable for all debts that the business may incur
5 what is business ownership
owned by private individuals
individuals risk their own money
owners reward is the profit made
5 what is a privatised business
sold to private individuals
5 what is a nationalised business
brought under national government
5 what are the private sectors for for-profit businesses
private sector = incorporated & unincorporated
incorporated = private limited & public limited
unincorporated=sole trader & partnership
5 what is a franchise
small business trading with agreement of a large firm
5 what are cooperatives
collectively owned by workers/customers
company pays cooperation tax
operates until formally wound up or liquidation
5 what are annual general meetings AGMs
a legal requirement for plcs to hold a yearly meeting when company directors invite all of shareholders to come quiz the board and vote on new resolutions
5 what is a sole trader
1 owner
5 benefits of a sole trader
easy to set up
owner is independent
minimum paperwork
respond quickly to changes
know customers
more privacy
5 drawbacks of a sole trader
unlimited liability
long hours with no cover
capital is savings
limited collateral
ends on death
limited skills
5 what is a partnership
2 people or more entering into a business agreement
5 advantages of a partnership
easier to raise capital
problems can be discussed
greater range of skills
cover for holiday or sickness
5 disadvantages of partnerships
unlimited liability
profits shared
disagreements
decisions are legally binding on all
death means their share to be repaid
5 what is an LTD
private limited company
small to medium, family run
limited liability
5 advantages of LTD
limited liability
1 director, 1 shareholder
easy to set up, raise capital
share transfers need all agreed
more privacy
death of shareholder has no effect
5 disadvantages of LTD
shares are less attractive as not sold on stock market
less flexible if expansion needed
more regulations to comply with
accounting procedures may be costly
5 what is a plc
public limited companies
limited liability
large organisations, shares sold on stock market
5 advantages of plc
limited liability
easier to raise finance from public
2 directors, 2 shareholders, different people
share value increase if success
economies of scale
positive publicity because of stock market
suppliers more willing to offer credit
5 disadvantages of plc
lots of regulations
accounts are public accessible
shareholders can sell shares
OG owner can lose control if 51% shares bought
stock exchange allows pressure from investors
5 what is a not-for-profit organisation
run according to business principles, but don’t aim to make a profit
public sector, cooperatives, pressure groups, social enterprises
5 what is the public sector
part of the economy owned and controlled by the government
5 what is a public sector organisation
provide goods and services to the public nationally and locally
owner and controlled by the government
5 why do NFPs exists
essential services not fully provided by private sector
prevent exploitation of customers
protect jobs and maintain key industries
5 what is privatisation
sales of public sector orgs to private individuals
some state run business are inefficient, with no incentive to cut cost or provide high quality
financial burden on government
selling them off raises money for government
5 what are the disadvantages of privatisation
may increase prices
cut jobs and reduce services
5 what are co-operatives
any organisation jointly run and owned by members who have equal voting rights
voluntary membership
democratic
educational facilities
5 what are pressure groups
people that attempt to influence decisions makers in politics business and society
5 what are social enterprises
a business with primarily social objectives
profits re-invested in the business or community
not driven by need to maximise profits
can be public or private
6 what is a stakeholder
groups or individuals that have an interest in a business
may be affected by or affect the business decisions or organisations
6 what are some internal stakeholders
shareholders
managers
employees
6 what are some external stakeholders
suppliers
government
pressure groups
pressure groups
local community
competitors
customers
financiers
6 what is a pro-cyclical system
continues the trend when market is up and down
you buy when stocks are high
sell when stocks are low
6 what is a counter-cyclical system
cycling against the market
buy when stocks are low
sell when stocks are high
6 what are shareholders
own part of a business
dont get involved with day-to-day running
right to vote of the companies AGM
receive a share of profit, called a dividend
6 what are shareholders interests
customers want lower prices, good value for money, regular food source
shareholders want to make profit, good reputation, earnings per share, assets, dividends yield, more efficiency
6 what are shareholders main rewards
annual dividends of payments
rise in share value
6 what is shareholder concept
shareholders are most important
employee, managers to run orgs on their behalf
6 what is corporate social responsibility
all responsibilities of an organisations to stakeholders in eluding the communities and society at large
considers financial and non-financial performance of orgs
7 what is share price
the price of a single share of a company
usually determined by a supply and demand for shares
7 what is market capitalisation
value placed on the business by the stock market
calculated as ‘share price x number shares issues’.
7 what is the significance of share prices
changes in share prices can have significant effects on a business over a long timescale
rising share prices
falling share prices
7 influences on share prices
state of the economy
company performance
competition in market
proposed take overs
investor expectation/rumour response
7 influences on share prices; state of the economy
if the economic conditions are good and expected to continue, investors feel confident, demand rise so price increase. opposite is true
7 influences on share prices; company performance
if a company performs well and is expected to continue if share price will rise
7 influences on share prices; competition in market
how well the company responds to the threat of competition in it’s market will influence how it performs overall
7 influences on share prices; proposed take overs
influence other prices of shares and will reflect whether investors think the takeover will succeed
7 influences on share prices; investor expectation/rumour response
when people see others selling shares they follow & sell causes an increase in supply of shares with litre demand so prices of share fall
7 what is a takeover
a company offers to take control of another company by buying enough shares to ensure it has the power to influence policy, make decisions and elect directors
7 if share prices fall…
consumers don’t think about it
investors may sell
business will buy a load of share to do in a hostile takeover and buy them out
7 general changes in share prices
difficulties
consumers and orgs as may cut spending
reduces sales made by a wide range of business
provoke an economic recession
OPPOSITE IS TRUE
8 what is a sole trader
someone who holds ownership
unlimited liability
8 what is the stock market
where shares can be sold, bought and traded
only from PLC
8 what is a partnership
when two or more people can enter into a business agreement
unlimited liability
8 what are taxes
percentage profit paid to government
based on income to provide public seniors
8 what is capital
money into the business to start with
8 what is a franchisor
a business that buys one business
sells the franchise to the franchisee
costa = franchisor
holt = franchise
8 what are dividends
paid to shareholders in quarterly instalments
profit
8 what is LTD
private limited company
limited liability
friends or family invite to make a deal
8 what is the public sector
business paid and owned by the government
8 what is unlimited liability
if a business goes into debt the owner is liable to pay all of what owed
8 what are common objectives
maximise profit
cashflow
diversity
increase market share
growth
social and ethical
8 what are social goals
long term improvement for people and the environment in the supply chain
H&M
8 what determines objectives
corporate outline
size and legal form of the business
age of the business
8 why do objectives change
achieve original objectives
business has grown
competitive environment changes
market changes
technology changes
8 purpose of aims and objectives
provide direction for the orgs
forms a basis for allocating resources
motivational
monitor performance
measure success
8 what are some conflicting objectives
profit and growth, expansion can increase costs
providing a service and growth, smaller firms know customers better
business must decide who is its priority stakeholder
8 stakeholder; shareholders
objective
influence
maximise profit to get high dividends
low influence unless high shares
8 stakeholder; managers
objective
influence
promotions good high salaries
middle influence
8 stakeholder; customers
objective
influence
good quality low price, value money
can vary in influence
8 stakeholder; employees
objective
influence
better pay, stay employed good work
low influence
8 stakeholder; government
objective
influence
high tax revenue
job creation
can be high influence
8 stakeholder; creditors
objective
influence
healthy cashflow, increased sales
varies in influence
8 stakeholder; suppliers
objective
influence
regular orders, increased sales
vary due to market in influence
8 stakeholder; pressure groups
objective
influence
business meets their demands
low influence
8 why do the objectives of shareholders conflict
shareholders want high dividends = high profit
works want high wages = low profit
8 why can business objectives conflict
short term will conflict with long term
short term is survival, risk it maybe avoided
long term is growth, risk shouldn’t be taken
8 how can business avoid conflict
if business is adaptable it will overcome conflict
objectives may change if circumstances change
