Chapter 1

Question 1

Unincorporated

Answer 1

The owner is the business- no legal difference.
Unlimited liability for business actions.
Most are sole traders.

Question 2

Incorporated

Answer 2

Legal difference between business and the owners.
Company has separate legal identity.
Owners have limited liability.
Most are private limited.

Question 3

Unlimited liability

Answer 3

unincorporated business.
Owner is personally responsible for debts and liability.
If it fails, owners liable for amounts owed.

Question 4

Sole traders (unincorporated)

Answer 4

Own business on their own.
Can employ people but they don’t share in ownership.
Owns all business assets personally, responsible for debts.
Unlimited.

Question 5

Sole trader advantage

Answer 5

Quick and easy to set up.
Simple to run.
Easy to shut down.

Question 6

Disadvantages

Answer 6

Harder to raise finance-limited funds of their own.
Owner can’t go on holiday as easily.

Question 7

Limited liabity

Answer 7

Shareholders only lose the value of their investment in the share capital of company.
Separate legal identity. Personal safe.

Question 8

Limited company

Answer 8

Separate legal entity to founders.
Owned by shareholders and run by directors.
Shareholders appoint directors (often same people) who run the company in interest of shareholders.
Shareholders own share not assets and not liable for debts
Company owns assets and pays debts.
Shareholders aren’t liable for debts.

Question 9

Limited company advantages

Answer 9

Protect shareholders
Business still exists when shareholders change.
Easy raise finance through sale of shares

Question 10

Limited company disadvantages

Answer 10

Public knows about company information
Greater administration costs,

Question 11

Plc

Answer 11

Shares quoted and traded on public stock market
When traded, plc have more shareholders
Subject to more regulation as public disclosure of financial info.

Question 12

Not for profit organisation

Answer 12

Trade to benefit community, social aims.
E,g job creation and training, community services and fair trade.
Sports clubs.

Question 13

Cash flow objective

Answer 13

Sufficient cash available to meet day to day expensives.

Question 14

Ethical

Answer 14

Behave morally correct
Treat key stakeholders (suppliers and employees) in fair manner.
Reduce negative impact on environment.

Question 15

Social

Answer 15

Benefit society
Create employment
Support local community
Improve educational standards.

Question 16

Mission statement

Answer 16

Purpose of company or organisation.
Guides actions of organisation spells out its overall goal, sense of direction, guide decision making for all management.

Question 17

Corporate aims

Answer 17

Long term targets and plans to fulfil mission statement

Question 18

Corporate objectives

Answer 18

MEDIUM TO LONG TERM quantifiable target to fulfil mission statement.

Question 19

Corporate strategy

Answer 19

Actions taken to achieve objectives.

Question 20

Why set objectives

Answer 20

Short term
Motivate employees
Reward systems
Measure and review performance

Question 21

Profit

Answer 21

Revenue( money in from goods and service) - tc.
Not a financial target for all businesses

Question 22

Revenue

Answer 22

Sell price x quantity sold
Starts at 0.
Increase with units sold.

Question 23

What should objectives be

Answer 23

SMART
Specific- exactly what is measured e.g sales
Measurable- quantifiable target. 10% increase
Agreed- more likely to commit to the
Realistic
Time- how long

Question 24

To calculate costs of making particular product in multi product company.

Answer 24

Difficult.
Costs aren’t specific to simple product

Question 25

Diversification

Answer 25

Produce range of goods that are unrelated.
If one is obsolete, the others will be a source of revenue while the firm seeks new products.

Question 26

Profit margin

Answer 26

‘Amount or percentage of final selling price that is profit.

Question 27

Why profit important

Answer 27

-firm that makes profit is likely to persuade individuals or institutions to invest. Makes it cheaper to raise finance.

Question 28

Private sector

Answer 28

Own by shareholders or private individuals
Not owned by gvmnt, local authorities, organisations.

Question 29

Incorporation

Answer 29

Establish business as a separate legal identity while being limited

Question 30

Dividend

Answer 30

Share in profits of company distribute to holders of certain types of company shares.

Question 31

Ltd

Answer 31

Private Ltd company can enjoy profits made as no dividends

Question 32

Market capitlisation

Answer 32

Total value of issued shares of plc
Current share price x Shares

Question 33

Public sector

Answer 33

Owned by gvmnt

Question 34

Mutual businesses

Answer 34

Co-op
Several