business AOS 2

Question 1

sole traders

Answer 1

• a sole trader business has one person who owns and runs the business.
• the owner and the business are regarded as the same

Question 2

partnership

Answer 2

• between 2 and 20 people
• each partner is jointly liable for all debts incurred by the business

Question 3

company (proprietary/private)

Answer 3

• restricted to a maximum of 50 shareholders
• shares can only be traded with the permission of the other share holders
• PTY LTD (propriety limited)
• often but not always family companies

Question 4

company public (listed)

Answer 4

• unlimited number of shareholders
• shares are freely traded on the stock exchange
• LTD (limited)

Question 5

online businesses (advantages and disadvantages)

Answer 5

• business that are strictly online
• advantages - able to reach customers across the globe
• disadvantages - risk of credit card theft

Question 6

direct to consumer business

Answer 6

• sell their products directly to consumers without any retailers or wholesalers
• advantages -lower costs
• disadvantages - online selling is exposed to cybersecurity and data protection

Question 7

bricks and mortar business

Answer 7

businesses that have a physical location (store)
- advantages - offer face to face customer interaction
- disadvantages - far more expensive to establish and maintain

Question 8

franchise

Answer 8

• a person buys the rights to use a business name and distribute the goods
• advantages - the owner receives the benefits
• disadvantages - little scope for making independent decisions

Question 9

importer and exporter

Answer 9

businesses getting sales by trading good internationally
advantages - export brings money into Australia and import allows people to buy products for a cheaper price
disadvantages - shipping and quarantine issues

Question 10

recourse needs (natural)

Answer 10

• used in the production of goods: crops, services
  example: rainforests, climatic conditions, oceans and forests

Question 11

recourse needs (labour)

Answer 11

needed to produce particular goods and services
example: skills and knowledge of doctors, builders and business people

Question 12

recourse needs (capital)

Answer 12

used by businesses in the production of many goods and services(machinery made by people to then be used to produce the goods for the business)
example: electricity grid system, highways, schools, dams and ports

Question 13

business locations (shopping centres)

Answer 13

• have one or more supermarket and a number of small specialist stores. parking centres and access to transport.
  advantages - a new business in an establishing area is likely to be successful if there is no existing competitors

Question 14

business locations (retail shopping strips)

Answer 14

shopping strips are developed along major roads
advantages - high visibility for passing traffic
- cheaper to locate in a shopping strip
disadvantages - lack of parking
- limited protection from weather

Question 15

business locations (online presence)

Answer 15

businesses can have an online only presence therefore not needing a physical store
advantages - don’t need to pay for a physical store
- increased access to new customers
disadvantages - costs of planning, designing and maintaining an online presence
- business owners need to be careful to protect personal information

Question 16

business locations (home based businesses)

Answer 16

many tradespeople and other service providers traditionally run their businesses from home
advantages - businesses from home provide flexibility of when the owner chooses to work
disadvantages - can be difficult for owner to keep work and home life separate

Question 17

the four factors affecting choice of location

Answer 17

visibility, cost, proximity to customers and suppliers, proximity to competitors and complementary businesses

Question 18

sources of finance (loans)

Answer 18

loan intended for business purposes. the owner may use the business loan to start their business
advantages - help to pay for emergency expenses without draining your savings
disadvantages - you could be paying interest on funds you are not using

Question 19

sources of finance (sources of equity)

Answer 19

refers to the funds contributed by the owner/s of a business to start and build the business

Question 20

sources of equity (self funding)

Answer 20

owner uses personal finance to fund the business advantages - owner does not need to share ownership with anyone else
disadvantages - risk of owner losing all investments if business fails

Question 21

sources of equity (family or friends)

Answer 21

family or friends can provide funds for the business. they may expect a share of the profit in return
advantages - easy and quick to obtain extra finance
disadvantages - danger that relationships could be adversely affected

Question 22

sources of equity (private investors)

Answer 22

the investors may contribute funds to the business in return for a share in the business profit and equity
advantages - they provide support and advice to the business owner, as well as a return on their investment
disadvantages - owner will lose complete control of business

Question 23

sources of equity (shares)

Answer 23

only companies can make use of this source of finance. involves listing on the stock exchange so members of the public can freely trade the shares
advantages - the business can raise funds from the public
disadvantages - it can be expensive and complex

Question 24

sources of equity (crowdfunding)

Answer 24

a method of raising finance through appeals for donations via social media and the internet
advantages - quick way to raise finance with few fees
disadvantages - requires a lot of work

Question 25

sources of external (bank overdraft)

Answer 25

a bank allows a business to overdraw its account to an agreed limit. they assist businesses with short term liquidity problems advantages - costs are minimal and interest rates are lower than on other forms of borrowing disadvantages - if you have to extend your overdraft you usually have to pay an arrangement fee. - your bank could charge you if you exceed your overdraft limit without authorisation

Question 26

what is a SWOT analysis

Answer 26

a SWOT analysis is a planning tool that identifies the business internal strengths and weakness, as well as any opportunities and threats from the external environment

Question 27

Strengths (internal) (positive)

Answer 27

what is the business good at? is our product popular? are our customers loyal?

Question 28

weaknesses (internal) (negative)

Answer 28

have we experienced past failures? is our computer system obsolete?

Question 29

opportunities (external) (positive)

Answer 29

what are our possible new markets? what will it bring for us?

Question 30

threats (external) (negative)

Answer 30

what threats have been evident in our market? are there new competitors?

Question 31

business plan

Answer 31

a business plan is a written statement of the goals and objectives for the business, and the steps to be taken to achieve them. in other words it is a summary and evaluation of the business concept