3.1.2 Understanding the different forms of business

Question 1

Business forms

Answer 1

-Sole Trader
-Private Limited Company (Ltds)
-Public Limited Company (PLC)

Question 2

Reasons for changing business forms

Answer 2

-get more profit
-growth
-limited liability->reduces risk of losing personal possessions
-stock exchange

Question 3

Effects of ownership on business

Answer 3

Mission: PLC- dividends/profit for shareholders
Cooperative-working for community

Objectives: levels of sales
-impact on community

Question 4

Shareholders

Answer 4

buy shares to make a profit by receiving dividends and selling them for a higher price

Question 5

Impacts on share price

Answer 5

-company performance
-business environment

Question 6

Privatisation

Answer 6

paying for the service/private businesses

Question 7

Nationalisation

Answer 7

being run by the government, making it more affordable for people

Question 8

Mutual businesses

Answer 8

run for the benefit of their members (any money made goes back into the community)

Question 9

Mission Statement

Answer 9

-the overriding goal of the business
-the reason for its existence
-a strategic perspective
-a vision for the future

Question 10

What makes a good mission statement?

Answer 10

-contains a formulation of objectives
-differentiates the business from its competition
-is relevant to all major stakeholders
-defines the market or business the firm wants to operate within

Question 11

Criticism of mission statements

Answer 11

-often too vague
-often seen as a PR move
-not always supported by the actions of the business
-not a true reflection of reality
-sometimes regarded cynically by staff

Question 12

The relationship between mission statement and objectives

Answer 12

Mission statement –> corporate aims –> corporate objectives –> corporate strategy –> business tactics

Question 13

Calculating break even