Companies Flashcards
What is unlimited liability?
When the owners of a business are personally liable for any debts which the business may have.
What is limited liability?
When the liability of the owners of the business, the shareholder, to pay off its debts is limited to the amount of money which they have invested in the business when buying shares.
What’s a shareholder?
Anyone who has invested in the business.
What’s a business plan?
A document which puts together all the information showing how a business might survive in a competitive world.
What’s a brand?
A design, name or symbol which differentiates a product from competition and allows customers to identify it easily e.g. Nike, McDonald etc.
What’s a sole trader?
Any business that is owned and controlled by one person despite having employees.
They tend to be specialists in a service e.g. Photographers, plumbers etc.
It’s easier to set up and you have the freedom to make decisions however they have responsibility and unlimited liability.
What’s a partnership?
A business owned by 2 or more people
Professionals who may go into partnerships can benefit from shared expertise.
E,g, doctors, dentists etc.
The benefit from shared experience and a second opinion however there may be disagreements and they have unlimited liability.
What’s a private limited company?
An ltd is often a small business such as independent retailers in a market town.
They don’t trade on the stock exchange and profits are shared proportionally amongst shareholders.
E.g. New look, book ends etc.
They have limited liability but it’s growth may limit to the number of shareholders and shares can’t be sold without the agreement of other shareholders.
What’s a public limited company?
A plc is often a larger, well known business.
It shares trade on the stock exchange and is available to the general public.
E.g. Microsoft, McDonald, Facebook etc
They have limited liability and can raise a large capital sum since there’s no stakeholder limit and profits are shared among more people, overall ownership is lost and decisions may take longer.
How could a sole trader raise finance?
Bank loans
Friends and family
Personal savings
What’s a deed of partnership?
A legal document which will stop partners from falling out and having disagreements over the basic business rules which is considered a disadvantage of partnerships.
What’s an advantage of a sole trader registering to an ltd?
An advantage of a sole trader registering themselves to a private limited company is that they will only be partially liable for debt and so gain limited liability.
This is an advantage as they don’t have to pay for all of the debt themselves and so won’t be at risk of losing their own possessions e.g. Their home.
An example could be that, if a mechanics opened up as a sole trader and couldn’t pay off the debt, the sole trader would risk losing their home but, as an ltd, he’d only have to pay back what he put in so there’s a reduced risk.
Adv and dis of forming a limited company
Advantages
Limited liability
Company has it’s own legal personality
Raising money by selling shares
Disadvantages
Expensive to set up
Company information must be published yearly
Ownership is diluted
What documents must be filled out when forming a limited company?
The memorandum of association and articles of association.
Why choose to be a plc instead of a private limited company?
A plc can make money by selling their shares.
What is customer service?
Customer service is the experience a customer gets when using products made by the business. Satisfied customers make repeat purchases and recommend the product to friends, leading to additional word-of-mouth sales.
Customers want to buy goods and services that meet their needs at a price they can afford. For example a café thrives when friendly staff serve tasty, well made meals, in generous portions, at competitive prices.
The minimum standard required to meet a customers expectations.
Good customer service is all about exceeding customers’ expectations to give customers a positive experience that brings them back I me and time again.
What’s quality?
Meeting the minimum standard expected to satisfy customer needs. High quality products will meet and even exceed expectations.
How can customer service be improved?
Training so that staff understand their role and responsibilities. For instance, asking every customer if they are happy with their meal.
Innovation or introducing new ideas and methods.
For example, altering the menu every three months keeps customers interested and helps a café to stay one step ahead of the competition.
Listening to customers helps a business adjust its products to better match consumer needs and respond to any problems.
What are the main methods of managing quality during production?
Quality control
Quality assurance
Quality culture
What’s quality control?
The checking of a good or service at the end of the production process (before it’s delivered to a customer).
It relies on the inspection process.
It’s more detection than prevention.
This ensures it meets minimum standards.
Pros and cons of quality control
Pros: Cheaper in the short run Quicker More productive Only an an inspector
Cons:
More wastage
More expensive in the long run
More defects - lower quality
What’s quality assurance?
The checking of a product or service at each stage of its production / while travelling along the production line.
Every member of staff has the role and responsibility for quality and relies upon self-checking, this the business can assure the customer that the product is high quality.
Pros and cons of quality assurance
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What’s a brand?
A design, name or symbol which differentiates a product from competition and allows customers to identify it easily e.g. Nike, McDonald etc.
What’s a sole trader?
Any business that is owned and controlled by one person despite having employees.
They tend to be specialists in a service e.g. Photographers, plumbers etc.
It’s easier to set up and you have the freedom to make decisions however they have responsibility and unlimited liability.
What’s a partnership?
A business owned by 2 or more people
Professionals who may go into partnerships can benefit from shared expertise.
E,g, doctors, dentists etc.
The benefit from shared experience and a second opinion however there may be disagreements and they have unlimited liability.
How could a sole trader raise finance?
Bank loans
Friends and family
Personal savings
What’s a deed of partnership?
A legal document which will stop partners from falling out and having disagreements over the basic business rules which is considered a disadvantage of partnerships.
What’s an advantage of a sole trader registering to an ltd?
An advantage of a sole trader registering themselves to a private limited company is that they will only be partially liable for debt and so gain limited liability.
This is an advantage as they don’t have to pay for all of the debt themselves and so won’t be at risk of losing their own possessions e.g. Their home.
An example could be that, if a mechanics opened up as a sole trader and couldn’t pay off the debt, the sole trader would risk losing their home but, as an ltd, he’d only have to pay back what he put in so there’s a reduced risk.
Adv and dis of forming a limited company
Advantages
Limited liability
Company has it’s own legal personality
Raising money by selling shares
Disadvantages
Expensive to set up
Company information must be published yearly
Ownership is diluted
What documents must be filled out when forming a limited company?
The memorandum of association and articles of association.
Why choose to be a plc instead of a private limited company?
A plc can make money by selling their shares.
What is customer service?
The minimum standard required to meet a customers expectations.
Good customer service is all about exceeding customers’ expectations to give customers a positive experience that brings them back I me and time again.
Customer service is the experience a customer gets when using products made by the business. Satisfied customers make repeat purchases and recommend the product to friends, leading to additional word-of-mouth sales.
Customers want to buy goods and services that meet their needs at a price they can afford. For example a café thrives when friendly staff serve tasty, well made meals, in generous portions, at competitive prices.
How can customer service be improved?
Training so that staff understand their role and responsibilities. For instance, asking every customer if they are happy with their meal.
Innovation or introducing new ideas and methods.
For example, altering the menu every three months keeps customers interested and helps a café to stay one step ahead of the competition.
Listening to customers helps a business adjust its products to better match consumer needs and respond to any problems.
What are the main methods of managing quality during production?
Quality control
Quality assurance
Quality culture
What’s quality control?
The checking of a good or service at the end of the production process (before it’s delivered to a customer).
It relies on the inspection process.
It’s more detection than prevention.
This ensures it meets minimum standards.
Pros and cons of quality control
Pros: Cheaper in the short run Quicker More productive Only an an inspector
Cons:
More wastage
More expensive in the long run
More defects - lower quality
What’s quality assurance?
The checking of a product or service at each stage of its production / while travelling along the production line.
Every member of staff has the role and responsibility for quality and relies upon self-checking, this the business can assure the customer that the product is high quality.
Kaizen
Means continuous improvements in Japanese to achieve the highest possible standards in the industry.
What are quality standards?
What’s acceptable in industry or not e.g. Seatbelts in cars.
Limited and unlimited liability
Limited - Owners of the business are liable for debt up to the amount they’ve invested and no more.
Unlimited - when the owners of the business are personally liable for any debts.
What are the consumer protection laws?
Sale of goods legislation - gives consumers the right to compensation if a product they buy is not of merchantable quality, not as described or not fit for purpose.
Trade descriptions legislation - makes business liable for prosecution and fines if products are sold in a misleading way e.g. False info, not gang important info, acting aggressive etc.
What’s stock?
The raw materials, work-in-progress and finished that a company keeps on hand.
What’s happens with too much or too little stock?
Too much: May go out of fashion Might have to sell off cheaply Expensive to store May go of
Too little:
Miss out on sales
Customers may go to competitors
Can affect reputation may disappoint customers
What’s buffer stock?
The minimum amount of stock held by a business in case of late delivery or sudden increase in demand.
What’s the re-order level?
The level of stock at which an order is placed for new stock.
What’s the re-order quantity?
The amount of new stock ordered
What’s the lead time?
The time taken for the delivery of new stock to arrive after ordering.
What’s just in time and just in case stock management?
Just in time - no stock is held. Stock is delivered only when needed / ordered. Stock is only delivered when needed by production so no stock is kept.
Pros -
Cuts storage costs
Less money tied up in storage
Fresher supplies
Cons -
Risk running out
Lose bulk buying discounts
Mistakes lead to larger issues
Just in case -
When a buffer stock is held by a business all the time in case of late delivery or a sudden increase in demand.
(Too much or too little stock)
What’s the design mix?
The products design which allows it to differentiate from competitors, based on:
Function
Economic manufacture
Aesthetics.
What’s productivity?
A measure of how much output on average a worker is producing.
It’s calculated by finding:
total output / number of workers.
It’s the output per worker
How can a business improve productivity?
Training
Better equipment
More effective work practises.
How can a business improve efficiency?
Improved purchasing - but in bulk
Better design
Cutting overheads - reduce fixed costs
What’s research and development?
The process by which a firm undertakes scientific research and develops new and innovative products to differentiate.
Why is research and development good for businesses?
Helps them come up with new product ideas.
Helps them come up with better / cheaper ways to do things.
Helps them beat competition.
Explain one benefit of marks and spencer using research and development.
Research and development implies the scientific research taken to develop a new product which is beneficial as it can result in producing new products.
Marks and Spencer can benefit from R&D as, by producing new clothes, they’ll be able to differentiate themselves from other clothing and furniture stores and so product trials will increase, resulting in an increase in repeat purchases and profits.
What’s total quality management?
An attitude adopted by the whole business to ensure everyone takes responsibility for something.
Pros and cons of quality assurance
Pros:
Less wastage
Better quality
Less costs and pays itself back in the long run
Involves all staff - empowered to check quality.
Cons:
Costly in short run - training
Slower
Less productive
What are the consumer protection laws?
Sales of goods act
Trade descriptions act
What’s the sale of goods act?
Products sold by a business must be fit for purchase, match the description and be of merchantable quality
What’s the trade descriptions act?
This relates to how business to deals with and sells to customers.
Businesses must not give false information, not withhold important information and not act aggressively or force sales.
Pros and cons of consumer protection laws
Pros
Meeting consumer protection laws can improve the businesses image
Good publicity is followed
Improved relationship with stakeholders
Less likely to be sued or receive fines by customers
Cons
Business must know the law and keep up to date
Bad publicity if not followed
Laws can restrict businesses from operating as they would wish
They have to comply with laws by changing their products and practices which can be costly
How can output be increased?
Training employees better
Better equipment
Work overtime
Motivate employees
What are the methods of reducing costs?
Improved purchasing or cheaper suppliers Better design of products Cheaper labour costs Cutting overhead costs Streamline the production process Relocation
