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business > 3.1.2 Different forms of business > Flashcards

3.1.2 Different forms of business Flashcards

1
Q

what is a Mission statement

A
  • A written description of the main corporate aims and purpose
  • The purpose of the business includes values, strategy and standards.
  • Ethics of the business
  • Gives staff shared purpose to improve productivity
  • Gives clues about its beliefs such as ethics over profits
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2
Q

What are the different levels of business objectives?

A
  1. Mission statements and corporate aims
  2. Corporate objectives
  3. Functional objectives
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3
Q

What is a corporate objective

A

Goals of the business

goals depend on the size of the business

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4
Q

what are functional/departmental objectives?

A
  • Specific to each departments
  • More detailed than corporate
  • Functional objectives help achieve corporate objectives
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5
Q

What are the different business objectives and what are they?

A
  • Profit objectives
  • Growth objectives
  • Survival objectives
    • Continue trading and not run out of money
  • Cashflow objectives
    • Improve cash flow to have enough money to cover costs.
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6
Q

What are the non-profit and for-profit business objectives?

A
  • Non-Proft are set up for social and ethical objectives
  • Forprofit - focus on normal business objectives but may incorporate Social and ethical objectives as it improves the company’s reputation and image.
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7
Q

What are the social and ethical objectives?

A
  • Social objectives
    • benefit society
  • Ethical objectives
    • how the company operates such as fair trade and environment
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8
Q

Acronyms of Private and public limited companies

A

LTD PLC

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9
Q

What is a public sector company?

A
  • Run and owned by government
  • Aim to provide a service rather than make a profit
  • Funded by tax
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10
Q

What is a private sector company

A
  • Owned by private individuals
  • Most aim to make a profit except Non profit organisation
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11
Q

Aims
and objectives of a non-profit company?

A
  • To benefit society rather than make a profit
  • Money generated is invested back into the business
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12
Q

Different types of Non-profit organisations?

A
  • Charities -
  • Social enterprises -
  • Mutual Organisation
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13
Q

what are characteristics of a charity

A
  • Make money through donations and business activities
  • Money made is used to fund charitable donations
  • They have rewarded tax reductions for their charitable status
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14
Q

what are the characteristics of a social enterprise

A
  • They have a social objective
  • Trades and makes a profit like a normal business but profits go towards social activities/causes
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15
Q

what are characteristics of a mutual organisation

A
  • They try to offer customers the best value for their money
  • No shareholders so profits can be reinvested into the business resulting in reduced prices for the customer.
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16
Q

What is unlimited liability?

A
  • Business and owner are one under the same law
  • Business debts become personal debts
  • May have to sell off personal assets
  • Huge finical risk
17
Q

what is limited liability

A
  • Owners aren’t personally responsible for the debt
  • Shareholders and owners have a separate legal identity from the business
  • Shareholders can only lose money they have invested
18
Q

Advnatages of a soletrader

A
  • Freedom - Own boss has full controll over decions
  • Profit - erans all the proft
  • Simplicity - less fomr filling and book keeping less complex, ONly has to register with HMRC
  • Saving on fees - No legal costs for drwaing up an owenrship agreement
19
Q

Disadvnatges of a soletrader

A
  • Risk - no one to share responsibilities with
  • Time - working long hours
  • Expertise - Soletrader may have limited skills
  • Finance - responsible for running costs and can only raise money through capital requirements or loans
  • Vulnerability - If you get ill no cover
  • Unlimited liability
  • Likely to remain small
20
Q

Characteristics of a limited libaility company?

A
  • Privtae limited LTD
  • Public limited PLC
  • Owned by sharholders and run by direcotrs
  • Capital vlaue of company divided by shares - can be brought or sold
  • Companies act 2006 - memorandum of association and artile of association must be written up
    • Documants sent to the companies house which then issue a certifacte of incorporation, then business needs to do annual reports of finaicnal activites
21
Q

Advantages of a private limited company LTD

A
  • Limited liability
  • No minimum share capital
  • Can raise money through ordinary share capital - if other shareholders agree
22
Q

Disadvantages of private limited company LTD

A
  • Profits shared with shareholders through dividends
  • Corporate tax
  • Legal requirements
  • Less finance secrecy
  • Shares not on stock exchange limits investment
23
Q

Advantages of Public limited companies PLC

A
  • Limited liability
  • Can raise large amounts of shares through selling shares on the stock exchange
  • Shares are freely transferable
  • Easier to raise finances
    *
24
Q

Disadvantages of a public limited company

A
  • Need over £50k of share capital to sell on the stock exchange, with 25% available for the public.
  • Less control
  • Corporate tax
  • Profits shared with shareholders
25
Q

How are limited companies run?

A
  • Small LTD - shareholders are directors
  • Large LTD - directors elected by the board by shareholders
  • PLC -company controlled by directors, Divorce of ownership and control
26
Q

What is ordinary share capital?

A

Shares sold by companies to raise money are called ordinary share capital - usually used for long term investing

27
Q

What are dividends and how are they split?

A

The proportion of profits earned by the company and given to shareholders as a return for their investment.

Given by a fixed amount per share so more shares = more dividends

28
Q

What is the market capitalisation and how is it calculated?

A

The total value of ordinary shares issued by a company

=Number of issued shares X current share price

29
Q

Why might some business change their structure

A
  • If they want to raise capital to expand
    • Sole trader to LTD to PLC
  • If PLC is taken over through a buy out of shareholders, it can become an LTD
30
Q

Why might some business change their structure?

A
  • If they want to raise capital to expand
    • Sole trader to LTD to PLC
  • If PLC is taken over through a buy out of shareholders, it can become an LTD
31
Q

What are the likely missions and objectives of a non-profit?

A
  • Mission - to benefit society
  • Objectives - generate enough profit to achieve the mission.
32
Q

How might the objectives and mission of the public sector differ from the private sector?

A
  • Public sector
    • Mission - to benefit society
    • Objective - social benefits over costs
  • Private sector
    • Objectives - Profit maximisation
      • May include social benefits for brand image
33
Q

Decision making, objectives and mission for a sole trader and small LTD

A
  • Decision making quick
  • Control over objectives and mission
34
Q

Decision making, mission and objectives for large LTD

A
  • Shareholders might not share the same values causing different objectives and difficult to make decisions
  • Orignal owner might loose control causing change to mission and objectives
35
Q

Decision making, objectives and mission for PLC

A
  • Conflict of interests between directors and shareholders
    • Directors want long term gains and profit retainment
    • Shareholders want increased dividends
    • Directors have to listen to shareholders to gain from investments.

business (9 decks)

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