Business In The Real World Flashcards
What is an Entrepreneur?
Someone who is willing to take the risks involved in starting a new business.
What is an enterprise?
Another word for business. Also refers to the skills of the people to identify business opportunities.
What are the Characteristics of Entrepreneurs?
Innovative
Risk taker
Hardworking
Organised
What is the primary sector?
Made up of organisations that are at the first stage of production and use raw materials.
What is the secondary sector?
Made up of organisations that are at the second stage of production. Converting primary resources and converting these into products.
What is the tertiary sector?
The final stage of production and is made up of Organisations which provide a service.
What is a sole trader?
Is someone who sets up in business on his or her own and has unlimited liability.
What are the advantages of being a sole trader?
It is quick and easy to set up.
Make all the decision yourself so you do not need to consult lots of other people which can make decision making faster.
Keep all the profits yourself.
What are the disadvantages of being a sole trader?
- stressful making all decisions yourself
- you can lose everything as you have unlimited liability.
- have to handle all aspects of the business eg marketing and finances
- difficult to raise monet
What is unlimited liability?
Means that the personal possesions of the owners of a business are at risk if there are any problems.
What is a partnership?
Whne two or more people join together in a business enterprise to pursue profit.
What is the deeds of partnership?
An agreement between partners that sets outthe rules of the parntership such as how profit will be divided.
What are the advantages of a partnership?
- share workload
- more sources of finances
- share skils
What are the disadvantages of a partnership?
- may disagree with the other partners
- unlimited liability
- liable for the actions of the other partners and have to share profits
What is a private limited company(ltd)?
Cannot publicly advertise its shares for sale. They can choise who shares can be sold to.
What is a public limited company(plc)?
Can advertise its shares and can be listed on the stock exchange. Must have a share capital of over £50,000. Not possible to place restrictions on who shares are sold to.
What are the factors of production?
Enterprise-people who take risks and create a business
Capital-equipment,factories and offices
Labour - people that contribute to the process
Land - natural resources available for production
What is opportunity cost?
Opportunity cost is when business spends time or money doing something when they could have spent the time or money doing something else.
What are the advantages of being an LTD?
- limited liability
- ownership is restricted means that all shareholders must agree to sell shares which means owners retain a lot of control over how the business is managed.
- easier to get a loan
What are the disadvantages of LTDs?
- finance is needed to incorporate a business. There is an upfront fee as well as costs associated with paperwork.
- legally obliged to publish their accounts each year and competitors may use these to be more competitive.
What are the advantages of a PLC?
- Selling shares on a stock exchange allows companies to raise money for investment.
- limited liability
What are the disadvantages of a PLC?
- owners have very little to say over how the business is run.
- anybody can take over the company if they are able to buy enough shares. When shareholders own more than half the shares.
- company’s accounts must be made public
What are Not-For-Profit organisations?
Any profit made by not for profit organisations is reinvested in the business.
What are unincorporated associations?
Companies with unlimited liability?
What are social enterprises?
Similar to for-profit businesses but profit is reinvested to support the social enterprises aim
What is an aim?
An ultimate purpose
What is an objective?
A goal that is sought in order to achieve an aim
Why might companies have different objectives?
- the size of a business
- level of competition
- type of business
Why might business objectives change over time?
- stage of business life
- new legislation
- changes in the economy
- changes in society
- changes in technology
What is a stakeholder?
Any individual, group or organisation that is affected by a business and its operations.
What are the 5 main stake holders of a business?
- owner
- suppliers
- customers
- local community
- employee
What factor affect where a firm should choose to locate?
The availability of raw materials Labour Competition Rent Proximity to suppliers and customers
What are fixed costs?
Don’t vary with the companies output
What are variable costs?
Costs that change directly with output.
Why is it important for a business to create plans?
- important for a new business to have a plan for the owner to clarify their thoughts and for a potential investor.
- raising finance as banks need in depth finance
- a plan lets a business clearly set out what the business objectives are and how they are going to go about achieving them
- keep organised
What are the main parts of a business plan?
Executive summary - conicse overview of the entire business plan
Mission statement - what the company wants to achieve
Products or services - describe the product or service the company sells and why customers will beenfit from this(usp)
market anaylsis- in depth analysis of different aspects of the business environment.
Organisation and management team
Production details
Finance
What are the advantages of a business plan?
- provide parameters for setting targets
- can be used as a benchmark against outcomes
- can be compared to past business performance and competitors
What are the disadvantages of a business plan?
- need to be flexible and able to adapt to a changing environment.
- costly and time consuming
What is economies of scale?
Describes a business benefiting from a reduction in the average unit cost because of increasing production.
