educate Flashcards
What is a sole trader?
an individual who is the exclusive owner of a business
cash outflow
Cash outflow is money leaving a business, such as expenses, bills, or purchases.
What is meant by the term “limited liability”?
the owner’s liability is limited to the amount they invested in the business and does not extend to their personal assets
What is meant by the term “unlimited liability”?
the owner’s liability is not limited to the amount they invested in the business and extends to their personal assets
Why may a business be reluctant to go below zero in their bank account even if they have arranged an overdraft?
they tend to have very high interest rates
stock market flotation
the process of a company offering its shares to the public for the first time by listing on a stock exchange, allowing investors to buy and sell ownership stakes.
[a business becoming a public limited company (PLC)],
what’s a possible solution to a cash flow problem?
Rescheduling payments to suppliers will improve a short-term cash position, all the other options will reduce cash flow in the short term.
True or false? Some businesses simply do not need limited liability, because there is virtually no risk involved in the business.
true
Some business do carry very little risk, making it unnecessary to go through the process of getting limited liability. One example would be an individual writing and selling educational resources online.
which business structures is most likely to be able to raise money through share capital?
public limited company (PLC)
A public limited company (PLC) can sell shares to anyone on the stock exchange. A sole trader or partnership cannot sell shares.
Which source of finance is most appropriate for a school to use to replace 150 staff laptops?
The bank loan is the only appropriate option, as it is the only long-term source of finance.
Petty cash
Petty cash is a small amount of money kept on hand for minor, everyday expenses.
an advantage of purchasing a franchise rather than operating as an independent business?
There is an established customer base with a franchise.
With an established customer base, there is less chance of failure.
a disadvantage of purchasing a franchise rather than starting an independent business?
the lack of control over business decisions, as you must follow the franchisor’s rules and guidelines.
they can be very strict and restrict decision making.
cash inflow
Cash inflow is money received by a business, such as from sales, loans, or investments.
what is likely to help a business achieve the objective of increasing shareholder value?
increasing market share.
Shareholder value is the financial benefit shareholders receive for owning shares in a company and includes share price and dividends. Higher profits increase shareholder value whereas higher sales or market share would not necessarily increase the shareholder value, as it also depends on the impact on costs.
