AOS 1

Question 1

Types of Businesses

Answer 1

• Sole trader
• Partnership
• GBE
• Social enterprise
• Private limited company
• Public listed company

Question 2

Sole Trader Advantages

Answer 2

• Low entry cost and less costly to operate
• Complete control leading to no disputes
• Owner keeps all profits

Question 3

Sole Trader Disadvantages

Answer 3

• Personal unlimited liability for debts
• Ends when owner dies
• Difficult to run if sick

Question 4

Partnership Advantages

Answer 4

• Low start up cost
• Less costly than business
• Shared responsibilities
• Pooled funds and talents

Question 5

Partnership Disadvantages

Answer 5

• Personal unlimited liability
• Liability for all debts, including partner’s debts
• Possibility of disputes
• Divided loyalty and authority

Question 6

GBE

Answer 6

Government owned business that operates by adopting a company model

Question 7

Social enterprise

Answer 7

A business that produces goods and services to sell for a profit - but the profit is re-directed to benefit the community and the environment.

Question 8

Private Limited Company Advantages

Answer 8

• Easier to attract finance
• Limited liability
• Experienced management - board of directors
• Greater spread of risk

Question 9

Private Limited Company Disadvantages

Answer 9

• Cost of formation
• Taxed on any profits or dividends
• Annual report of audited accounts
• Rapid growth may lead to inefficiencies

Question 10

Public Listed Company Advantages

Answer 10

• Easier to attract finance
• Limited liability
• Experienced management - board of directors
• Greater spread of risk
• Can attract extra capital by selling shares

Question 11

Public Listed Company Disadvantages

Answer 11

• Cost of formation
• Taxed on any profits or dividends
• Annual report of audited accounts
• Must abide by stringent compliance rules and disclose corporate financial information

Question 12

Common Businesses Objectives

Answer 12

• Make a profit
• Increase market share
• Fulfil a market need
• Fulfil a social need
• Meet shareholder expectations

Question 13

Stakeholders

Answer 13

• Owners/shareholders
• Directors
• Management
• Employees
• Customers
• Suppliers
• Competitor
• Interest Groups
• Government

Question 14

Shareholders - Stakeholders Interests

Answer 14

• Share holders want a return on their investment through capital gain and improved profits
• Shareholders may not be involved in the day-to-day operations of the business

Question 15

Owners/shareholders - Stakeholders CSR

Answer 15

• Managers need to be honest about financial reporting and about the business’s future prospects
• Some shareholders will only invest in businesses that are socially responsible

Question 16

Directors - Stakeholders Interests

Answer 16

Directors of a company also expect to be a fairly remunerated including earning director’s fees and receiving share options

Question 17

Directors - Stakeholders CSR

Answer 17

Managers need to make decisions that consider the social and environmental impact, not just economic impact

Question 18

Management - Stakeholders Interests

Answer 18

They expect to be involved in decision making and remunerated fairly.

Question 19

Management - Stakeholders CSR

Answer 19

• Management expect to work in a business that is ethical and socially responsible
• Make decisions that consider CSR

Question 20

Employees - Stakeholders Interests

Answer 20

Employees expect fair pay, good conditions, and ongoing employment

Question 21

Employees - Stakeholders CSR

Answer 21

• Employees should be paid fairly, have job security and career advancement
• They want to carry out work tasks that are ethical and socially responsible