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Unit 5 > chapter 15 Business Start-Ups > Flashcards

chapter 15 Business Start-Ups Flashcards

1
Q

challenges of setting up a business

long-term finance

A

attracting investment, balancing souces- not taking on too much debt (repayments), not giving away much equity (loss of control)

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2
Q

challenges of setting up a business

working capital

A

having enough cash to meet day-to-day expenses (cash flow)

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3
Q

challenges of setting up a business

production method

A

choosing job, batch or mass (depending on USP, customer, price)

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4
Q

challenges of setting up a business

ownership

A

choosing suitable structure- sole trader, partnership or limited company

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5
Q

challenges of setting up a business

marketing

A

conducting research to know where to advertise, cost if sales promotions, how to use social media and public relations for publicity

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6
Q

challenges of setting up a business

market research

A

finding useful, up-to-date research, conduct field research (takes time and money)

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7
Q

challenges of setting up a business

creating a USP

A

developing features to stand out from competitors and existing products

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8
Q

challenges of setting up a business

location

A

cost of buying/leasing shops or premises (the right place for the target market)

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9
Q

challenges of setting up a business

staff

A

availability/ cost of staff, interviewing, employee legislation, tax

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10
Q

name 3 organisation options

A

sole trader
partnership
private limited company

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11
Q

sole trader

A

one person
farmers, local pubs
owner/company are the same

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12
Q

unlimited liability

A

if the business goes bankrupt and owes a lot of money, the sole trader will become responsible for paying the debts

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13
Q

benefits of sole trader

A

quick and easy to set up
keep profits
private (finance records don’t have to be published)
quick decisions can be made

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14
Q

challenges sole trader

A 
unlimited liability
expansion is difficult (can’t sell shares)
lack of experience in some areas
requires a lot of effort and stress 
no continuity of existence
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15
Q

partnership

A

2-20 people
solicitors, doctors etc
jointly owned

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16
Q

partnership benefits

A 
easy to set up 
more capital
losses shared
optional to have a deed of partnership 
more experience
private- financial records don’t have to be published
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17
Q

deed of partnership

A 
profits to be shared
each partner is responsible for it
what happens if business closes
salaries of partners 
can partners withdraw money
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18
Q

challenges partnership

A 
disagreements
profits shared
unlimited liability
decision making slower
not a separate legal entity
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19
Q

private limited company

A 
owned by 1-149 shareholders 
limited liability 
directors run the business on behalf of the shareholders 
ltd follows the name
cannot sell shares to the public 
separate legal entity
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20
Q

limited liability

A

in Irish law the company is separate from its owners, the company makes the contract therefore the company is sued not the shareholders

21
Q

private limited company benefits

A 
limited liability
more experience
workload shared
easy to raise extra capital
lower tax rates (12.5%) than PAYE
continuity of existence
22
Q

private limited company challenges

A 
complicated to set up
legal issues
registration expenses
submission of audited acc. companies. Registration Office- costly
publish financial accounts- not private
23
Q

name 3 production options

A

1 job production
2 batch production
3 mass production

24
Q

job production

A 
high quality
single product 
produced to order
unique products
no stock holding
highly skilled labour
payment in advance
products tend to be expensive
boat-making
25
Q

batch production

A 
producing a large amount in one go
all products are the same
average quality 
stock of goods planned for sale
careful planning required
semi-skilled labour (lower wages)
cheaper products than job
economies of scale
eg fashion clothing
26
Q

mass production

A 
once used- need to replace
buy the item time and time again
products are in constant demand
huge economies of scale
unskilled labour
storage facilities are essential and costly
large quantities, standard quality goods
costly machinery
marketing is essential to achieve mass salea
eg Biro pens
27
Q

impact of going from job to batch

A

1 investment required
purchase machines
lower wages less skilled
offer redundancies

2 loss of USP
unique products lost
lose competitive advantage
lose loyal customers

3 effective stock control
storage space
too much stock
too little stock

4 reduced prices
premium pricing will jot work
sell at a lower price

5 lower profit margins
GP will fall
NP will fall
overall profit will increase

28
Q

list impact of job to batch

A 
1 investment required
2 loss of USP
3 effective stock control
4 reduced prices
5 lower profit margins
29
Q

impact of going from batch to mass in general

A 
fewer options for consumers because only one product no variation
USP will be a low price
does a larger market exist?
capital investment required
brand image impacted
30
Q

batch to mass impact on staff

A

redundancies
bad industrial relations
low morale
repetitive tasks

31
Q

batch to mass less diversified business

A

less flexible
less variety
low to respond to market changes

32
Q

selecting a source of finance

A

cost- interest, charges
risk- what happens if there’s a problem repaying
security- is collateral required
ownership- is part of the business given away

33
Q

accrued expenses

A

cost- free, no interest
risk- failure to pay reputation damaged
security- no security
ownership- full ownership required

34
Q

bank overdraft

A

cost- expensive, high rate of interest, extra charges for exceeding limit
risk- failure to pay, reputation damaged, repayment can be demanded at any time
security- no security
ownership- full ownership retained

35
Q

trade credit

A

cost- free, no interest
risk- failure to pay, reputation damaged
security- no security
ownership- full ownership retained

36
Q

hire purchase

A

cost- expensive rate of interest
risk- failure to pay, reputation damaged, asset repossessed
security- no security
ownership- full ownership retained

37
Q

leasing

A

cost- rent could be more expensive than buying
risk- failure to pay- reputation damaged
security- no security
ownership- full ownership retained

38
Q

medium term loan

A

cost- cheaper than HP and leasing
risk- failure to pay, reputation damaged
security- security needed, collateral required
ownership- full ownership retained

39
Q

grants

A

cost- free
risk- must be repaid if agreement broken
security- no security
ownership- full ownership retained

40
Q

debentures

A

cost- fixed rate of interest each year
risk- failure to pay, reputation damaged, security can be taken if default occurs
security- security required
ownership- full ownership retained

41
Q

equity capital

A 
cost-  dividends paid each year
directors decide amount
risk-  bankrupt, directors are banned from being involved in a company for 5 years
security-  security required
ownership-  ownership is reduced
42
Q

business plan

A 
written statement
objectives want to achieve
strategies to achieve them
direction
map
43
Q

description of business

A

the people who are starting the business, experience
products, USP
long term objectives, mission statement, strategic planning

44
Q

market analysis

A 
viable market for product
compete with competition
competitive advantage
target market
market trands
45
Q

marketing plan- marketing strategy

A

product
price
place
promotion

46
Q

production plan

A 
how to make the product
manufacturing process
equipment used
ensure quality
source raw materials
47
Q

finance

A

cost to finance the business
how much money they will invest
how much extra money is needed
is collateral available
projected- profit and loss account, balance sheet, cash flow forecast
short, medium, and long term sources of finance

48
Q

list importance of a business plan

A

1 convince investors
2 set targets
3 guide for a business’ success
4 anticipate problems

49
Q

explain importance of a business plan

A 
1 convince investors 
sound idea
projected P&L account
sufficient future profits to repay finance
2 set targets
performance can be measured corrective action can be taken
control progress can occur
3 guide for a businesses success
sets out objectives
outlines strategies to achieve them
all stakeholders have a coordinated approach 
helps to know where your business should be
4 anticipate problems
corrective action
prepare solutions
helps to keep you on the right road

Unit 5 (8 decks)

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