Business Ownership/Growth and Location Flashcards
What is unlimited liability?
Pg. 1.12
Unlimited liability is where you are responsible for the business and its debts
What is a sole proprietor?
Pg. 1.12
A sole proprietor is owned by one person
What liability does a sole proprietor have (two)?
Pg. 1.12
- Unlimited liability
- Finance, including, savings, bank loans, loans from others
What are the advantages of a sole proprietor (three)?
Pg. 1.12
- Own boss - own decisions, independent
- More money if successful
- Timings - choose when you work
What are the disadvantages of a sole proprietor (four)?
Pg. 1.12
- Financial struggles
- Time consuming
- Pressurizing/stressful
- Something goes wrong, own fault as boss
What is a partnership?
Pg. 1.12
This is a business ran by two or more people where partners are jointly responsible for the running of a business
What liability does a partnership have (four)?
Pg. 1.12
- 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
What are the advantages of a partnership (three)?
Pg. 1.12
- Shared responsibility - reduced pressure
- Balanced work time
- Less likely to fall into debt
What are the disadvantages of a partnership (three)?
Pg. 1.12
- Financial issues, investing more/less
- Disputes - more/less effort
- Both in charge - fights
What is a Deed of Partnership?
Pg. 1.14
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
What would be on a Deed of Partnership (three)?
Pg. 1.14
- Responsibility, running/failure of the business
- Profit split
- Start up capital
What does a Deed of Partnership allow (four)?
Pg. 1.14
- Amount of profit/loss equal
- Prevents disagreeing
- Running of business to be more effective
- Back up plan in case of a falling out
What is a Private Limited Company (Ltd)?
Pg. 1.16
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
How is a Private Limited Company (Ltd) set up (four)?
Pg. 1.16
- 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
How is capital raised in a Private Limited Company (Ltd)(four)?
Pg. 1.16
- 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
What is the liability of a Private Limited Company (Ltd)?
Pg. 1.17
Limited liability - shareholders not personally responsible for debts, only lose what has been invested
What are the advantages of a Private Limited Company (Ltd) (five)?
Pg. 1.17
- 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
What are the disadvantages of a Private Limited Company (Ltd) (five)?
Pg. 1.17
- 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
What is a Public Limited Company (Plc)?
Pg. 1.19
A company that can sell and trade shares freely on the stock exchange and ran by a board of directors on behalf of shareholders
How is a Public Limited Company (Plc) set up?
Pg. 1.19
Register with Companies House and must have issued share capital more than £50,000
What are shareholders?
Pg. 1.19
Minority - private individuals own a small percent
Majority - banks/investment companies
Why do share prices change (four)?
Pg. 1.19
- Supply and demand (more buy or sell shares)
- Prospects for the company look good/bad
- Possibility of a takeover bid
- Economy is doing well
What are the advantages of a Public Limited Company (Plc) (four)?
Pg. 1.20
- 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
What are the disadvantages of a Public Limited Company(Plc) (four)?
Pg. 1.20
- 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
What is a franchise?
Pg. 1.21
A franchise is where a business sells a sole proprietor the right to set up a business using their name
What is a franchisor?
Pg. 1.21
A franchisor is the business whose sells its rights to another business to operate a franchise
What is a franchisee?
Pg. 1.21
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
What are the advantages of a franchisor (two)?
Pg. 1.21
- 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
What are the disadvantages of a franchisor (two)?
Pg. 1.22
- Successful franchises are heavily reliant on franchisees
- Original brand damaged if franchisees do not follow rules properly, so check ups are required
What are the advantages of a franchisee (four)?
Pg. 1.21
- 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
What are the disadvantages of a franchisee (three)?
Pg. 1.22
- 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
What is a cooperative?
Pg. 1.23
A cooperative is a company owned by a group of people whom produce and distribute goods and services, benefiting the owners
What is a producer cooperative?
Pg. 1.23
A consumer cooperative are producer owned companies whom serve their members through cooperative marketing by supporting/purchasing
What is a consumer cooperative?
Pg. 1.23
Consumer cooperatives are businesses owned by the customers, with members voting on major decisions
What is a worker cooperative?
Pg. 1.23
Worker cooperatives are businesses owned by its workers whom have shares in the business
What is the aim of cooperatives?
Pg. 1.24
Cooperatives aim to provide goods and services to gain income, providing maximum economic benefits to members, allowing each member to be paid equally
What are the advantages of cooperatives (five)?
Pg. 1.24-25
- 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
What are the disadvantages of cooperatives (three)?
Pg. 1.25
- Lack of secrecy, annual reports are submitted
- Corruption, lack of profit motivate fraud
- Lack of mutual interest
How is a business big or small (four)?
Pg. 1.26
- 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
Why do firms want to grow (four)?
Pg. 1.26
- 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
What are the types of growth (three)?
Pg. 1.26
- 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
How can firms grow (three)?
Pg. 1.27
- Internal expansion, more workers/shops
- Mergers, two businesses join
- Takeovers, business buys at least 51% of another
Benefits of Growth (four)?
Pg. 1.27
- 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
Problems with growth (three)?
Pg. 1.27
- Diseconomies of scale, longer communication
- Separation of managers and workers, work less
- Less flexible, production slower to change
What are the factors which affect location (eight)?
Pg. 1.30-32
- 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
