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BUSINESS STRUCTURE Flashcards

1
Q
A
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2
Q

What is the primary sector of business activity?

A

Collecting and extracting natural resources

Examples include fishing and mining.

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3
Q

What is the secondary sector of business activity?

A

Processing and manufacturing products from natural resources

Examples include car manufacturing and clothes-making.

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4
Q

What is the tertiary sector of business activity?

A

Firms selling services to consumers and other firms

Examples include banking and transportation.

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5
Q

What is the quaternary sector of business activity?

A

Businesses providing information services

Examples include computing, web design, R&D, ICT, and consultancy.

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6
Q

Define the public sector.

A

Firms controlled and managed by the government/local authority.

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7
Q

Define the private sector.

A

Firms controlled and managed by individuals.

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8
Q

What is industrialisation?

A

When the importance of the secondary sector rises

Occurs in developing countries like India and China.

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9
Q

List advantages of industrialisation.

A
  • Increases GDP of the country
  • Increases employment opportunities
  • Increases exports and reduces imports
  • Firms become more profitable
  • Manufacturing goods have more value than primary sector goods.
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10
Q

List disadvantages of industrialisation.

A
  • Causes a movement from rural to urban areas
  • Increases import costs due to raw material imports
  • Growth often occurs due to MNCs.
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11
Q

What is de-industrialisation?

A

When the importance of the secondary sector declines

Occurs in developed countries like the USA and UK.

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12
Q

Define a free market economy.

A

Only private sector and no government intervention.

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13
Q

Define a mixed economy.

A

Both private and public sectors; governments and individuals make decisions together.

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14
Q

Define a command economy.

A

Economies that have only the public sector.

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15
Q

What is a sole trader?

A

A business owned by one person.

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16
Q

List advantages of being a sole trader.

A
  • Easy to set up and manage
  • Complete control
  • Ability to choose working times
  • Easy to establish relations
  • Freedom of making own decisions.
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17
Q

List disadvantages of being a sole trader.

A
  • Limited finance
  • Unlimited liability
  • Intense competition
  • Lack of continuity.
  • Insufficient skills.
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18
Q

What is a partnership?

A

A business owned by a group of individuals.

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19
Q

List advantages of a partnership.

A
  • Specialisation in different areas
  • Shared decision-making
  • Additional finance injected by each owner
  • Losses are shared.
20
Q

List disadvantages of a partnership.

A
  • Unlimited liability
  • Profits are shared
  • Risk of conflicts
  • No continuity.
21
Q

What is limited liability?

A

Each shareholder will only lose the amount invested if the business fails.

22
Q

What is a private limited company?

A

A business owned by shareholders who are friends and family.

23
Q

List advantages of a private limited company.

A
  • Limited liability
  • Separate legal identity
  • Continuity
  • Ability to raise capital from sale of shares.
24
Q

List disadvantages of a private limited company.

A
  • High legal formalities
  • Can’t sell shares to the public
  • Difficult to sell shares.
25
What is a public limited company?
Businesses which have legal rights to sell shares to the public.
26
List advantages of a public limited company.
* Limited liability * Separate legal identity * Continuity * Easy to buy and sell shares.
27
List disadvantages of a public limited company.
* High legal formalities * Cost of hiring specialists * High fluctuation in share prices.
28
What documents must be submitted to register a company?
* Memorandum of association * Articles of association.
29
What are cooperatives?
Organisations owned by their members.
30
List advantages of cooperatives.
* Buying in bulk * Working together to solve problems * Good motivation.
31
List disadvantages of cooperatives.
* Poor management skills * Capital and finance shortage * Slow decision making.
32
What is a joint venture?
When 2 or more businesses agree to join for one project.
33
List reasons for a joint venture.
* Shared costs and risks * Different companies’ strengths * Together more powerful.
34
List risks of a joint venture.
* Conflicts * Errors or mistakes * Business failure of one partner risks the whole project.
35
What is a franchise?
A business which uses the name, logo, trading methods of an existing successful business.
36
List advantages of a franchise to the franchisor.
* Guaranteed income from franchisee * Easy, risk-free way of expansion * Easy to manage.
37
List disadvantages of a franchise to the franchisor.
* Poor management of one business affecting reputation * Potential management issues * Difficult to monitor.
38
List advantages of a franchise to the franchisee.
* Lower risks as business is established * Advice, training, supplies, and advertising * Economies of scale.
39
List disadvantages of a franchise to the franchisee.
* Proportion of revenue sent to franchisor * Rigid business model * Expensive initial fee.
40
What are public corporations?
Known as public corporations, they operate in the public sector.
41
List advantages of public corporations.
* Managed with social objectives * Operate even if making a loss * Finance raised from government.
42
List disadvantages of public corporations.
* High chances of inefficiencies * Subsidies may encourage inefficiency * Government interference in business decisions.
43
What is a social enterprise?
Organisations that directly produce goods and services with social aims.
44
What is the triple bottom line?
Social, economical, and environmental objectives.
45
List reasons for changes in business ownership.
* Access to more sources of finance * Gaining legal identity * Protection of personal assets through limited liability.
46
What is the aim of a social enterprise?
To make a surplus while achieving social aims.

BUSINESS-AS (3 decks)

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