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GCSE Business Studies > Business Structure > Flashcards

Business Structure Flashcards

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1
Q

Give the five main features of unincorporated businesses.

A
  • Unlimited liability
  • Tax on profits
  • No continuity
  • Private financial information
  • Personal bankruptcy
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2
Q

What is unlimited liability?

A
  • The owners are personally liable for any debt.

- Private possessions are at risk.

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3
Q

What is an incorporated business?

A

Business which is a separate legal entity.

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4
Q

What is a separate legal entity?

A
  • Business is separate from its owners.

- It can take legal action against other companies and be the subject of legal action.

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5
Q

What is a co-operative?

A

Trading organisation in which independent producers trade together as though they are single large business.

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6
Q

Give an advantage of trading as a co-operative?

A

-Potential for better prices.

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7
Q

What is a sole trader?

A
  • Business owned by one person.

- Un-incorporated.

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8
Q

What is a partnership?

A
  • Business owned by more than one person.

- Un-incorporated.

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9
Q

What is bankruptcy?

A

Affects individuals and un-incorporated businesses when liabilities exceed assets.

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10
Q

What is insolvency?

A

Affects limited liability businesses when liabilities exceed assets.

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11
Q

What is a PLC?

A
  • Public Limited Company
  • Owned by shareholders.
  • Shares can be sold without restriction.
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12
Q

What is an LTD?

A
  • Private limited company.

- Owned by private shareholders.

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13
Q

What is an entrepreneur?

A

Person who sees a business opportunity and accepts the risks in running the business.

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14
Q

What is merging?

A

Businesses joining together to make a single larger business.

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15
Q

What is a takeover?

A

A business buys control of another.

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16
Q

What is horizontal integration?

A

A merger or takeover of a business in the same industry at the same stage of production.

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17
Q

Give an advantage of horizontal takeovers.

A

-Economies of scale can be achieved.

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18
Q

Give two disadvantages of a horizontal takeover.

A
  • Reduced choice for consumers.

- Monopoly may be formed.

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19
Q

What is backward-vertical integration?

A

Merger or takeover of a supplier.

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20
Q

Give an advantage of backward-vertical integration.

A

-The business has control over supply of raw materials.

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21
Q

Give a disadvantage of backward-vertical integration.

A

-There may be a reduction in the variety of goods available.

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22
Q

What is forward-vertical integration?

A

Merger or takeover of a business providing a sales outlet for goods.

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23
Q

Give two advantages of forward-vertical integration.

A
  • Control over sales outlets.

- Increased job security for workers.

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24
Q

Give a disadvantage of forward-vertical integration.

A

-Reduced choice of goods.

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25
Q

What is a conglomerate?

A

Merger or takeover of a business involved in different business activity.

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26
Q

Give two advantages of a conglomerate.

A
  • Spreads risk

- Reduces dependency on one product.

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27
Q

Give two disadvantages of a conglomerate.

A
  • No understanding of new business activity.

- May lead to diseconomies of scale.

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28
Q

What is diversification?

A

Process of spreading risks by reducing dependence on one product.

29
Q

What is a footloose?

A

Business able to locate anywhere.

30
Q

Give eight factors affecting location of business.

A
  • Availability of grants.
  • Availability of raw materials.
  • Cost of location.
  • Access and nearness to markets.
  • Availability and cost of labour.
  • Physical geography.
  • Transport and infrastructure.
  • Type of product.
31
Q

What are uniform business rates?

A

Tax on business to cover cost of providing local services.

32
Q

What are grants?

A

Payment of money from the government to a business for a specific purpose that doesn’t have to be paid back.

33
Q

What is infrastructure?

A

Name given to basic services needed by businesses to operate effectively.

34
Q

What is a greenfield site?

A

Industrial development in an area that hasn’t previously been built on.

35
Q

What is a brownfield site?

A

Industrial development in an area previously derelict.

36
Q

Give nine possible reasons why businesses fail.

A
  • Poor management.
  • No demand for product.
  • Business located in the wrong place.
  • Poor cash flow.
  • Costs of running the business too high.
  • Too much competition.
  • Poor quality goods.
  • Insufficient profit on goods.
  • Unfavourable exchange rates.
37
Q

Give three main ways in which businesses grow.

A
  • Merging with another business.
  • Internal expansion.
  • Takeover.
38
Q

What is start up capital?

A

Money needed to start a new business.

39
Q

What are economies of scale?

A

As the output increases, the average cost decreases.

40
Q

What is a silent partner?

A

Person who has invested capital but doesn’t take an active role in running the business.

41
Q

What is the deed of partnership?

A

Legal agreement between partners of a business stating their responsibilities.

42
Q

What three things does the deed of partnership include?

A
  • How the business operates.
  • How profits/losses are shared between the partners.
  • How much capital each partner contributes.
43
Q

What is an LLP?

A
  • Limited liability partnership.

- Trades as a partnership but with limited liability.

44
Q

Give six advantages of being sole trader.

A
  • Wide suitability.
  • Cheap and easy to set up.
  • Start up with little capital.
  • The owner has full control.
  • Private financial info.
  • Owner can keep all the profit.
45
Q

Give seven disadvantages of being a sole trader.

A
  • Unlimited liability.
  • Difficult to grow.
  • If the owner is ill, there is nobody to run the business.
  • Long hours are often needed.
  • No continuity.
  • Sole traders are usually small so they can’t get economies of scale.
  • Limited skills.
46
Q

Give six advantages of a partnership.

A
  • There is more than one owner giving a larger pool of capital.
  • Each partner has different skills.
  • Work can be shared between partners.
  • Cheap and easy to set up.
  • Private financial info.
  • Easy to admit extra partners.
47
Q

Give four disadvantages of partnerships.

A
  • Profit has to be shared.
  • There could be disagreements.
  • Unlimited liability.
  • Ability to raise capital restricted.
48
Q

What is incorporation?

A

Process of being a limited liability company.

49
Q

What is the registrar of companies?

A

Person responsible in the UK of maintaining records of LTDs and PLCs.

50
Q

What is the certificate of incorporation?

A

Legal document issued allowing business to trade as a limited liability business.

51
Q

What is a board of directors?

A

People elected by shareholders to represent their interests and make decisions on how the business is operated.

52
Q

What is the AGM?

A
  • Yearly meeting of shareholders.
  • Directors elected.
  • Confirm dividend to be paid.
53
Q

Who is the chair of the board of directors.

A

Person responsible for managing board of directors.

54
Q

Who is the managing director?

A

Person responsible for putting into action decisions made by the board of directors.

55
Q

What is capital?

A

Money usually raised through the sale of shares to investors.

56
Q

What is issued share capital?

A

Amount of share capital issued to investors.

57
Q

What are minority shareholders?

A

Investors who own a small number of shares in the company.

58
Q

What are institutional investors?

A
  • Banks

- Investment companies.

59
Q

Give four advantages of private limited companies.

A
  • Shares can be issued to private investors.
  • Separate legal entities.
  • The business is unaffected by illness.
  • Limited liability.
60
Q

Give six disadvantages of private limited companies.

A
  • Financial info is public.
  • Have to submit info to the registrar of companies.
  • LTDs cannot offer shares to the public
  • It is difficult to raise capital by selling shares.
  • Dividends have to be paid to shareholders.
  • High set up cost.
61
Q

What is a franchise?

A

Marketing arrangement that allows other businesses to trade in the same style as the existing business.

62
Q

Give seven advantages of franchises.

A
  • No competition from the other franchises of the same brand.
  • Tried and tested idea.
  • Logos and products are already established.
  • Advertising paid for by the franchisor.
  • Franchisor gives advice on running the business.
  • Reduced risk of business failure.
  • Easy to get finance.
63
Q

Give five disadvantages of franchises.

A
  • All supplies have to bought from the franchisor.
  • Large amount of initial capital is needed.
  • Annual royalty payment.
  • Owner of the business doesn’t have control.
  • Losses have to be paid by the franchisee.
64
Q

What is a royalty?

A

Payment made to franchisor based on revenue of the franchise.

65
Q

Give three advantages of operating in several countries.

A
  • Manufacturing bases can be located near the market.
  • Economies of large scale production.
  • Production can be located in cheaper countries.
66
Q

Give four disadvantages of operating in several countries.

A
  • There could be communication problems.
  • High cost of transporting goods.
  • Different legal requirements of different countries.
  • Fluctuating exchange rates.
67
Q

What is the public sector?

A

Business owned and funded by the government.

68
Q

What is a public corporation?

A

Organisation owned by the government.

69
Q

Since you’ve been using these flashcards for free, please consider making a small donation for the hundreds of hours it took to make them.

A

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GCSE Business Studies (14 decks)

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