Business Activity Flashcards
What are the three purposes of business enterprise and entrepreneurship?
Spotting an opportunity
Developing an idea
Satisfying customer needs
What is enterprise?
Spotting an opportunity to provide a product or service that people are willing to buy
What is an entrepreneur?
An individual who has the skills and knowledge to set up and run their own business, and is willing to take risks
What are the four characteristics of an entrepreneur?
Creative
Risk-taking
Determined
Confident
What are the risks of entrepreneurship?
If the business does not succeed, the risk of losing savings to pay off debts
Health - the strain of running a business can cause mental and physical illness
What are the rewards of entrepreneurship?
The potential to make a lot of money
Self satisfaction - feeling good because the business is a success
Independence - being in control of what you do; not being told what to do by others
What is the purpose of planning business activity?
Reduce the risk of failure - for example, it must think about the prices and goods competitors offer
Be as successful as possible - for example, decide the kind of people it needs to run the business and how to market its products as effectively as possible
What are the 4 roles of a business plan?
Identifying the market e.g. gender
Identifying the resources e.g. workers
Identify the finance needed to start up or grow the business e.g. obtaining a loan
Achieve the business’ aims and objectives e.g. making a profit
What are the 4 types of business ownership?
Sole trader
Partnership
Private limited company
Public limited company
What are the advantages of being a sole trader?
The owner makes all the decisions
Easy to set up - few forms to complete
No information about profits must be published
What is limited liability?
The owners of a business can only lose the money they have invested in a business if it fails
What is unlimited liability?
The owner of a business is responsible for repaying all the debts of a business
What are the disadvantages of being a sole trader?
The business stops when the owner dies
Banks may think they are risky to lend to
Owner has unlimited liability
What are the advantages of being a partnership?
Easy to set up - only needs a deed of partnership
No information about profits must be published
Workload is shared
Partners may have different skills to offer
What are the disadvantages of being a partnership?
The profits will have to be shared between all the owners
It’s possible that the partners may disagree which would lead to problems making decisions
The owners have unlimited liability
What is a private limited company (Ltd)?
Usually a smaller business, it can sell shares to invited people only
What is a public limited company (plc)?
It can sell shares to anyone who wants to buy
What are the advantages of being a private limited company (Ltd)?
Shareholders can restrict who can buy shares
The business continues even if shareholders sell their shares or die
Banks are willing to lend
The owners (shareholders) have and benefit from limited liability
What are the disadvantages of being a private limited company (Ltd)?
The Registrar of Companies requires legal documents, which take time to produce
The public can see information about the business
Managers are employed to make decisions
What are the advantages of being a public limited company (plc)?
The business continues even if shareholders sell their shares or die
Banks are willing to lend
The owners (shareholders) have and benefit from limited liability
What are the disadvantages of being a public limited company (plc)?
The Registrar of Companies requires legal documents, which take time to produce
Anybody can buy shares
The public can see information about the business
Managers are employed to make decisions
Being a Sole trader is suitable for…
Start-ups that:
Only need a small amount of finance
Usually have a low financial risk
Require limited or non-specialist skills
Being a Partnership is suitable for…
Start-ups or established businesses wanting to grow that:
Need larger amounts of finance (than sole traders)
Have a fairly low financial risk
Need a wider range of skills
Have owners who want to keep control of the business
Being a Private limited company (Ltd) is suitable for…
Start-ups and established businesses wanting to grow that:
Need larger amounts of finance
Have an increased or high financial risk
Have owners who wish to keep control of the business
