Chapter 3 - Small Business

Question 0

Owning a Small Business

Answer 0

• Profit motive
• A desire for greater independance
• The identification of a market oppurtunity
• Employment

Question 1

Small Business

Answer 1

• Employ fewer than 15 people
• Are usually independantly owned and operated
• Owner and manager is the same person
• Owner contributes most of the capital
• Owner/Manager is the main decision maker

Question 2

Small business owners seek assistance from:

Answer 2

• Accountants
• Lawyers
• Bank Manager
• Marketer

Question 3

Alternitives

Answer 3

• Cash
• Property
• Shares

Investors must take into account the correlation between the level of risk and the rate of return, the term, and the liquidity of any alternative investment

Question 4

Planning

Answer 4

• A detailed business plan is essential before operations commence. The more information included in the plan, the greater the business’s chances of success
• A business plan may make it easier to convince a financial institution to provide finance

Question 5

Business Operations

Answer 5

• Business can be classified by the nature of their operations as trading, service or manufacturing businesses
• In some cases, businesses will combine one or more types of operation
  Trading firms sell goods at higher prices than they bought them for
  Service firms provide a service

Question 6

Ownership Structures

Answer 6

The choice of ownership structure will have consequences for a whole host of issues, including:

• how much start up money they have
• what skills they have
• how much time they have
• The three principle ownership structures are sole proprietorships, partnerships and companies
• Sole proprietorships and partnerships have unlimited liability; companies have limited liability

Question 7

Starting a Small Business

Answer 7

• A prospective business owner can start a new business, buy an existing business or buy a franchise
• Small businesses can also gain assistance from a variety of sources

Question 8

Recipe for a successful small business

Answer 8

• a high demand for their product or service,
• a good location,
• a thorough business plan,
• sufficient starting capital
• a knowledgeable and resilient owner