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Business A292 > Business Ownership/Growth and Location > Flashcards

Business Ownership/Growth and Location Flashcards

1
Q

What is unlimited liability?

Pg. 1.12

A

Unlimited liability is where you are responsible for the business and its debts

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2
Q

What is a sole proprietor?

Pg. 1.12

A

A sole proprietor is owned by one person

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3
Q

What liability does a sole proprietor have (two)?

Pg. 1.12

A
  • Unlimited liability

- Finance, including, savings, bank loans, loans from others

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4
Q

What are the advantages of a sole proprietor (three)?

Pg. 1.12

A
  • Own boss - own decisions, independent
  • More money if successful
  • Timings - choose when you work
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5
Q

What are the disadvantages of a sole proprietor (four)?

Pg. 1.12

A
  • Financial struggles
  • Time consuming
  • Pressurizing/stressful
  • Something goes wrong, own fault as boss
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6
Q

What is a partnership?

Pg. 1.12

A

This is a business ran by two or more people where partners are jointly responsible for the running of a business

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7
Q

What liability does a partnership have (four)?

Pg. 1.12

A
  • Unlimited liability, jointly responsible but if one has money in the bank and the other, fixed assets, the bank will take money
  • Limited liability, if business fails, don’t risk own money
  • Sleeping partner, puts in money but no involvement
  • Finance, partner savings, bank loans, loans from others
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8
Q

What are the advantages of a partnership (three)?

Pg. 1.12

A
  • Shared responsibility - reduced pressure
  • Balanced work time
  • Less likely to fall into debt
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9
Q

What are the disadvantages of a partnership (three)?

Pg. 1.12

A
  • Financial issues, investing more/less
  • Disputes - more/less effort
  • Both in charge - fights
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10
Q

What is a Deed of Partnership?

Pg. 1.14

A

A Deed of Partnership is a legally binding document which gives information on the way in which the business operates and how it will be ran

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11
Q

What would be on a Deed of Partnership (three)?

Pg. 1.14

A
  • Responsibility, running/failure of the business
  • Profit split
  • Start up capital
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12
Q

What does a Deed of Partnership allow (four)?

Pg. 1.14

A
  • Amount of profit/loss equal
  • Prevents disagreeing
  • Running of business to be more effective
  • Back up plan in case of a falling out
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13
Q

What is a Private Limited Company (Ltd)?

Pg. 1.16

A

A Private Limited Company (Ltd) is an incorporated company owned by shareholders and has a board of directors. Limited liability where shares cannot be sold to the general public

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14
Q

How is a Private Limited Company (Ltd) set up (four)?

Pg. 1.16

A
  • Process of incorporation
  • Time consuming and costly legal process
  • Legal documents need to be completed
  • Registrar of Companies will issue a Certificate Of Incorporation once all requirements are met
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15
Q

How is capital raised in a Private Limited Company (Ltd)(four)?
Pg. 1.16

A
  • Shares issued to investors for money, not to general public (chosen shareholders)
  • Bank loan in business name - asset secured
  • Existing shareholders for money
  • Retained profit, saved from previous year
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16
Q

What is the liability of a Private Limited Company (Ltd)?

Pg. 1.17

A

Limited liability - shareholders not personally responsible for debts, only lose what has been invested

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17
Q

What are the advantages of a Private Limited Company (Ltd) (five)?
Pg. 1.17

A
  • Shares issued to investors to raise capital
  • Legal identity, business separated from owners
  • Continuity, individual shareholders can sell shares to other businesses
  • Limited liability, shareholders don’t lose personal money
  • Shareholders specifically chosen
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18
Q

What are the disadvantages of a Private Limited Company (Ltd) (five)?
Pg. 1.17

A
  • Some financial information available to general public/competitors
  • Registrar of Companies time consuming/costly
  • Shares cannot be sold to the general public
  • Lack of capital means new shares needed, hard to find
  • Shareholders expect dividends, draining company assets
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19
Q

What is a Public Limited Company (Plc)?

Pg. 1.19

A

A company that can sell and trade shares freely on the stock exchange and ran by a board of directors on behalf of shareholders

20
Q

How is a Public Limited Company (Plc) set up?

Pg. 1.19

A

Register with Companies House and must have issued share capital more than £50,000

21
Q

What are shareholders?

Pg. 1.19

A

Minority - private individuals own a small percent

Majority - banks/investment companies

22
Q

Why do share prices change (four)?

Pg. 1.19

A
  • Supply and demand (more buy or sell shares)
  • Prospects for the company look good/bad
  • Possibility of a takeover bid
  • Economy is doing well
23
Q

What are the advantages of a Public Limited Company (Plc) (four)?
Pg. 1.20

A
  • Limited liability, shareholders don’t lose personal money
  • Capital raised, raise money selling shares increase capital
  • Relative ease to raise funds, raised from lots of sources
  • Continuity, shareholders can sell shares for business to function
24
Q

What are the disadvantages of a Public Limited Company(Plc) (four)?
Pg. 1.20

A
  • Complicated/costly process to set up
  • Annual reports of finance has to be published
  • Shareholders expect a share of profits in dividends
  • Takeover, shares easily sold to other companies buying large quantities of the business
25
Q

What is a franchise?

Pg. 1.21

A

A franchise is where a business sells a sole proprietor the right to set up a business using their name

26
Q

What is a franchisor?

Pg. 1.21

A

A franchisor is the business whose sells its rights to another business to operate a franchise

27
Q

What is a franchisee?

Pg. 1.21

A

A franchise is bought by a franchisee, once purchased the franchise, they have to pay a proportion of profits to the franchisor, whom may even provide training, management expertise and national marketing campaigns

28
Q

What are the advantages of a franchisor (two)?

Pg. 1.21

A
  • Rapid expansion, with the franchisee providing most of the finance
  • Large profits can be made from selling franchises, royalty payments and selling raw materials/equiment
29
Q

What are the disadvantages of a franchisor (two)?

Pg. 1.22

A
  • Successful franchises are heavily reliant on franchisees

- Original brand damaged if franchisees do not follow rules properly, so check ups are required

30
Q

What are the advantages of a franchisee (four)?

Pg. 1.21

A
  • Franchisee given support, so business requires less expertise, tried and tested business model
  • More popular if well-known/established brand/ product
  • Less investment at the start-up stage with business established
  • Franchise allows people to start/run a business with less risk, secure place in the market
31
Q

What are the disadvantages of a franchisee (three)?

Pg. 1.22

A
  • Cost to buy the franchise - can be very expensive
  • Percentage of revenue (profit) paid to the franchisor
  • Have to follow the franchise model, less flexible
32
Q

What is a cooperative?

Pg. 1.23

A

A cooperative is a company owned by a group of people whom produce and distribute goods and services, benefiting the owners

33
Q

What is a producer cooperative?

Pg. 1.23

A

A consumer cooperative are producer owned companies whom serve their members through cooperative marketing by supporting/purchasing

34
Q

What is a consumer cooperative?

Pg. 1.23

A

Consumer cooperatives are businesses owned by the customers, with members voting on major decisions

35
Q

What is a worker cooperative?

Pg. 1.23

A

Worker cooperatives are businesses owned by its workers whom have shares in the business

36
Q

What is the aim of cooperatives?

Pg. 1.24

A

Cooperatives aim to provide goods and services to gain income, providing maximum economic benefits to members, allowing each member to be paid equally

37
Q

What are the advantages of cooperatives (five)?

Pg. 1.24-25

A
  • Registration of cooperative society is simple and easy
  • Available to everyone
  • Limited liability, shareholders don’t lose personal money
  • Democratic management, equal rights
  • Members given better goods with reasonable prices
38
Q

What are the disadvantages of cooperatives (three)?

Pg. 1.25

A
  • Lack of secrecy, annual reports are submitted
  • Corruption, lack of profit motivate fraud
  • Lack of mutual interest
39
Q

How is a business big or small (four)?

Pg. 1.26

A
  • Value of the business, if everything sold, how much
  • Sales revenue, measure of all goods sold in a year
  • Market Share, value of sales compared to all sales of product
  • Employees, <200 small, >3000 big
40
Q

Why do firms want to grow (four)?

Pg. 1.26

A
  • Lower costs, economics of scale so higher profits
  • Wider range of products, secure business with variety
  • Ensures suppliers/outlets, control over availability
  • Advantage over competitors, more control of market
41
Q

What are the types of growth (three)?

Pg. 1.26

A
  • Horizontal Integration (e.g. Flour miller buys another flourmill)
  • Vertical Integration
    Backwards (e.g. Flour miller buys farm)
    Forward (e.g. Flour miller buys bakery)
  • Diversification (e.g. Flour miller buys perfume factory)
  • Lateral Integration - Business similar
42
Q

How can firms grow (three)?

Pg. 1.27

A
  • Internal expansion, more workers/shops
  • Mergers, two businesses join
  • Takeovers, business buys at least 51% of another
43
Q

Benefits of Growth (four)?

Pg. 1.27

A
  • Lower costs, through economics of scale so more money saved
  • Marketing, advertise whole brand, not only one product
  • Financial, better bank loan as less risk
  • Purchasing, better equipment, more money
44
Q

Problems with growth (three)?

Pg. 1.27

A
  • Diseconomies of scale, longer communication
  • Separation of managers and workers, work less
  • Less flexible, production slower to change
45
Q

What are the factors which affect location (eight)?

Pg. 1.30-32

A
  • Population, target market/population wealth
  • Competitors, gap in market/ existing competitors
  • Geographical, safety, waste disposal, water supplies
  • Cost, rent/purchase, developed, expansion
  • Infrastructure, adequate transport/communication
  • Labour, adequate workers/training facilities
  • Nature of product
  • External influences, Government, unemployment

Business A292 (4 decks)

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