EOT REVIEW Flashcards
what is bartering?
bartering is the exchange of goods and services for other goods and services without the use of money.
what are 3 challenges of bartering?
rates of exchange
store of wealth/value
double coincidence of wants
indivisibility
what are 3 advantages of bartering?
- No Need for Money
Bartering eliminates the need for cash, making it accessible for people who lack financial resources. - Flexibility
Almost anything can be exchanged, allowing people to trade items or services based on their immediate needs and wants. - Builds Community
Bartering fosters personal connections and trust among participants, which can strengthen local communities.
what is store of wealth or value?
goods lose or gain value as time passes.
what is double coincidence of wants?
each person must have what the other wants and be willing to exchange.
therefore LACK of double coincidence of wants (which is the disadvantage) is
the opposite. each person would not have what the other wants and not willing to exchange.
what is rates of exchange?
problems deciding how much of an item should be traded for another.
what is indivisibility?
some items could not be realistically traded in parts.
what is the role of money?
money is a medium of exchange that is widely accepted by everyone across the globe.
describe the 7 features/characteristics of money.
PHRSADD
portable - can be taken anywhere
homogenous - each bill is the same size, length, feel, look
relatively scarce - it’s a limited supply
acceptable - acceptable by all
divisible - can be broken down into smaller parts
durable - long-lasting
name the four functions of money.
medium of exchange - all must accept money in exchange for goods and services
store of value - allows for saving and investing for future use
measure of value - determines the worth of a good or service so that prices can be determined or compared
standards of deferred payment - pays for any item or service bought on credit
name the instruments of exchange
bills of exchange - a document stating that the receiver of my goods must pay a particular sum by a stated date.
credit cards - a card authorizing the holder to purchase items ‘on credit’ up to a particular limit.
debit cards/bank cards - a plastic payment card that is a cash alternative when making purchases.
electronic transfers - funding transfers from one financial institution to another through computer and communications technology
tele-banking - conducting business transactions using a phone device
e-commerce - doing trade via the internet
define an organisation.
it is a system that groups people together establishing a common goal.
name 3 reasons to start your own business
- you’ll be your own boss.
- can choose your co-workers.
- can work from home and cut down on travelling time and traffic stress.
- if you are juggling an existing job, your business can be considered a second career
- can set your own deadlines
- can choose work hours or have flexible work hours
name the two types of business organisations.
Private sector
Public sector
PRIVATE SECTOR:
1. funded by
2. owned and controlled by
3. objective
4. who it includes (3)
5. what is profit used for
- private individuals
- private firms
- to make a profit
- self-employed, multi-national firms, joint ventures, construction and manufacturing industry, co-operatives.
- shared among investors and shareholders
PUBLIC SECTOR:
1. financed by
2. controlled and operated by
3. objective
4. who it includes
5. what is profit used for
- the Government through taxation
- the Government or its agents
- to provide cost-effective goods and services to the public
- government-controlled companies, companies incorporated by the government through legislation, companies essential for the development of the economy
- to benefit the entire nation
what are 3 features of private firms?
- little or no government control, so owners are free to do as they please.
- make profit that is shared among shareholders and investors.
- funded by private individuals (owners)
what are 3 features of public firms?
- profit is used to improve the firm or benefit citizens
- owned and primarily controlled by the government
- funded by the government through taxation.
name the 6 forms of business organizations.
- sole traders
- partnerships
- public limited liability companies
- private limited liability companies
- franchises
- co-operatives
what is a sole trader?
is a single business owner that makes all decisions and acquires all the capital.
list 3 advantages of a sole trader.
- consultations are not necessary for decision-making
- owner enjoys all the profit
- ease of formation as all is need is to submit the registration documents to the Registrar of Companies
list 3 disadvantages of sole trader.
- lack of specialized staff so the owner may have trouble in particular technical areas of the business as they aren’t specialized in them.
- lack of leisure time to rest and spend time with friends and family
- unlimited liability if the business goes bankrupt all personal assets will be lost.
name the two types of limited liability companies.
public limited liability company
private limited liability company
name 3 characteristics of private limited liability companies (PLLC)
- membership is between 2-50 persons
-* capital is obtained from private individuals*, financial institutions, government agencies or retained profits
- limited liability shareholders have limited liability
name 3 advantages of a PLLC
- larger capital base than sole traders and partnerships as membership is larger.
- the company has continuity so they can easily obtain loans from financial institutions
- shareholders have limited liability
name 3 disadvantages of PLLC
- capital is limited because membership is limited to 50 persons. (the larger the membership, the larger the capital base)
- the company must file their financial reports with the registrar of companies
- selling of shares is restricted to the private grouping
what are the 4 companies involved in registering a business?
- registrar of business names
- registrar of companies: memorandum of association, articles of association
- other statements and declarations
- certificate of incorporation
registrar of business names
the name of the business is registered in the Business Registrar.
Registrar of Companies: Articles of Association
The document that lists the regulations that govern the running of the company
What does the Articles of Association document?
It documents how:
directors are elected
profit is divided
meetings are conducted
Registrar of Companies: Memorandum of Association
provides general information about the company and outlines the external relationship of the company
What information does the Memorandum of Association include?
TIBBD (pronounced tibbed)
- The objectives of the company
- Initial capital investment
- Business name
- Business adress/location
- Declaration that the shareholders have limited liability
what is a nominal capital statement?
it outlines the maximum number of shares that the company is authorized to raise.
what is a prospectus?
it is prepared by a public company to provide details on new issues of shares and the intention of the company.