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Business > Chapter 2 - Types Of Business > Flashcards

Chapter 2 - Types Of Business Flashcards

1
Q

Types of legal structure

A
  • private company
  • public company
  • partnership
  • sole trader
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2
Q

Types of business sizes

A
  • micro-business
  • small
  • medium
  • large
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3
Q

Types of geographical spread

A
  • local
  • national
  • global
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4
Q

Types of industry sector (there are 5)

A
  • primary
  • secondary
  • tertiary
  • quaternary
  • quinary
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5
Q

How you can determine the size of a business

A
  • number of employees
  • number of owners of the business
  • market share (the proportion of total market shares the business has compared to competitors)
  • the legal structure
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6
Q

What is market share

A

The proportion of total market shares the business has compared to competitors

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7
Q

How descriptions help you know if the business is small or medium

A
  • the owner makes most management decisions (e.g. who to hire, what to produce, how to advertise)
  • the owner provides most of the capital (finance)
  • the business has little control within the market
  • it is independently owned and operated
  • the business is locally based, and only in the one location
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8
Q

Number of employees a small business has

A

Fewer than 20 employees

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9
Q

Number of employees a medium business has

A

20-199 employees

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10
Q

Number of employees a large business has

A

200 or more employees

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11
Q

Most common legal structure(s) for a small business

A
  • sole trader

- partnership

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12
Q

Most common legal structure(s) for a medium business

A
  • partnership

- private company

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13
Q

Most common legal structure(s) for a large business

A
  • public company
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14
Q

What is an enterprise

A

It’s just another name for business

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15
Q

How is a business labelled as an SME?

A
  • defined by the ‘Australian Bureau of Statistics’

- firms with less than 200 full-time equivalent employees AND/OR less than $10 million turnover

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16
Q

Number employees in a micro-business

A

Fewer than 5 people (including the owner)

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17
Q

What is a SOHO

A

Small Office Home Office

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18
Q

Why do national businesses become global businesses

A
  • A national business will expand and increase it sales, but will eventually run out of nee customers to sell to; that is, the domestic market becomes saturated.
  • To continue expanding, it must tap into new markets.
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19
Q

Describe the primary industry

A

The businesses involved in the collection of natural resources

E.g. farming, grazing, mining, forestry

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20
Q

Facts about the primary industry

A
  • only takes up 4% of labour force
  • provides 100% our food requirements
  • approximately 60% of all our exports come from these industries
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21
Q

Describe the secondary industry

A
  • involves taking a raw material and making it into a finished or semi-finished product
  • e.g. iron, coal, limestone and ore turned into steel (semi-finished product), which is then used to manufacture cars
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22
Q

Describe the tertiary industry

A

Involves performing a service to other people

E.g. dentists, retailers, museums, health workers

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23
Q

Describe the quaternary industry

A
  • services that involve the transfer and processing of information and knowledge

E.g. teaching, telecommunication, property, computing, finance

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24
Q

Describe the quinary industry

A
  • all services that have traditionally been performed in the home. It includes both paid and unpaid work.
  • e.g. hospitality, childcare, tourism
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25
Q

What two groups has the tertiary industry been divided into?

A
  • quaternary

- quinary

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26
Q

Is a sole trader unincorporated or incorporated?

A

Unincorporated

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27
Q

Is a partnership unincorporated or incorporated?

A

Unincorporated

28
Q

Is a private company unincorporated or incorporated?

A

Incorporated

29
Q

Is a public company unincorporated or incorporated?

A

Incorporated

30
Q

What does incorporated mean

A

Refers to the process companies go through to become a separate legal entity from their owner(s)

31
Q

What does unincorporated mean

A

It isn’t a separate legal entity to its owner(s)

32
Q

Advantages of a sole trader

A
  • managerial freedom to make all decisions
  • simple management structure
  • retain all profits made from business
  • low cost of entry
  • less government regulations
33
Q

Disadvantages of sole trader

A
  • unlimited liability
  • is owner lacks skills in all aspects of managing can result in poor decision making
  • limited capital for expansion
34
Q

Explain a sole trader

A
  • ownership by 1 person (not 1 worker!)
  • funding by owner -> own capital and some borrowings
  • unlimited liability
35
Q

Explain a partnership

A
  • a business owned and operated by 2-20 owners with aims of making a profit
  • unlimited liability
36
Q

Advantages of a partnership

A
  • share responsibilities and workload
  • low start up costs
  • less costly to operate than a sole trader
  • death of one partner won’t lead to cessation of the business activities
37
Q

Disadvantages of partnership

A
  • unlimited liability
  • problems of join decision making (conflict)
  • have to share profits
38
Q

What does LTD mean

A

Limited liability

39
Q

What does Pty mean

A

Public company

40
Q

What does Pty Ltd mean

A

Proprietary limited company (private)

41
Q

Do ALL companies go through incorporation?

A

Yes

42
Q

What is perpetual succession

A

Where the company will still exist is the owners change or die

43
Q

Explain a private company

A

Usually has between 2-50 private shareholders

Registered with ASIC

Has a board of directors that MUST act in businesses favour

Shares aren’t available to the public

It has perpetual existence so the owners can change

44
Q

Advantages of a private company

A
  • limited liability so can only lose the money they put in
  • perpetual succession
  • able to raise money by selling shares
45
Q

Disadvantages of a private company

A
  • more expensive to set up
  • could be hard to expand and find more shareholders
  • reporting requirements
46
Q

Explain a public company

A
  • listed on Australian Securities Exchange and may be bought and sold by members of the public or other businesses
47
Q

Advantages of public company

A
  • potential for larger capital base (more shareholders)

- limited liability

48
Q

Disadvantages of public company

A
  • more expensive to set up
  • strict reporting requirements
  • annual external audit of accounts required
  • potential for a hostile takeover
  • large number of shareholders = possible loss of control, possibly making decision-making harder
49
Q

What 4 ways can a business be classified?

A
  • legal structure
  • size
  • industry sector
  • geographical spread
50
Q

How does a business become incorporated

A
  • company name must be registered with the Australian Securities and Investments Commission (ASIC)
  • ASIC will then issue a certificate of incorporation and an Australian Company Number (ACN)
  • directors must be appointed to run the company on behalf of its owners
51
Q

What is a propriety company

A

Private

52
Q

Does a public company HAVE to have at least one shareholder

A

YES

53
Q

How many directors must a public company have

A

A minimum of three directors (two of which must live in Australia)

54
Q

Describe a government enterprise

A
  • government-owned and operated businesses
  • e.g. NSW Trains, Medibank Private, Australia Post
  • often referred to as public sector businesses
55
Q

Give an example of a GBE (Government Business Enterprise) that went through privatisation

A
  • Qantas
  • Telstra
  • Commonwealth Bank
56
Q

What is privatisation

A
  • the process of transferring the ownership of a government business to the private sector
57
Q

Three things that influence the choice of legal structure

A
  • size of business
  • ownership
  • finances
58
Q

What legal structure would suit a small or micro-business

A

Sole trader

Partnership

59
Q

If a sole traders business grows, what might they do?

A
  • a partnership or private company might be formed with the new partners or private shareholders bringing with them extra finance, skills and expertise
60
Q

What is a float?

A

The raising of capital in a company through the sale of shares to the public

61
Q

What type of legal structure can have a float?

A

ONLY a public company

NOT a sole trader, partnership or private company

62
Q

What is a prospectus

A

A document giving details of a company and inviting the public to buy shares in it

63
Q

What legal structure should be chosen if the owner wishes to have complete control

A

Sole trader

Or (possibly)

Private company (owner must own more than 50% of shares)

64
Q

What is the max number of shareholders generally for a private company

A

50 shareholders

65
Q

What is money used for when expanding a business

A
  • opening new outlets
  • exploit new markets
  • hire more staff
  • purchase new equipment
  • undertake research and development (R&D)
66
Q

What is venture capital

A

The money that is invested in small and sometimes struggling businesses that have the potential to become very successful

Business (12 decks)

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