Intro & Chapter #1

Question 1

State two disadvantages for sole trader businesses. (2)

Answer 1

Disadvantage:
*Owner is fully responsible for any dept (also known as unlimited lability.

*Difficult to raise finance, so often owner has to rely on personal savings.

Question 2

State two advantages for sole trader businesses. (3)

Answer 2

• Cheap, quick and simple (less documentation and legal formalities) to start.
• The owner can keep all the profits.
• The owner can make his/her own decisions in relation to the business.

Question 3

What are some examples of a sole trader?

Answer 3

• Hairdresser
• Photographer
• Freelance writers
• Tutor

Question 4

What is the definition of a sole trader (simple)?

Answer 4

A business that is owned and run by just one person although they may employ staff. It is an unincorporated business in which the owner unlimited liability for the business.

Question 5

What is the definition of an unincorporated business?

Answer 5

A business that does not posses a different identity from the owner. If the business goes into dept it is viewed as if the owner has gone into dept.

Question 6

What is the definition of a partnership business?

Answer 6

A business owned and run by one or more people (up to 20) known as partners. This sort of business is an unincorporated business so, the partners have unlimited liability.

Question 7

What are two advantages of a partnership? (4)

Answer 7

• Cheap, quick, simple to start
• partners can keep all profits
• partners have full control of business
• the decision-making and workload is shared

Question 8

What are two disadvantages of a partnership? (4)

Answer 8

• partners have unlimited liability
• Difficult to raise finance so entrepreneurs have to rely on personal savings.
• Disagreements and conflicts may slow down business progress.
• the decision made by one partner is legally binding on all others.

Question 9

What is the definition of unlimited liability?

Answer 9

Shareholders/owners are liable for all depts of their organization and stand to lose their investments as well as personal assets if the business goes in dept.

Question 10

What is the definition of a limited company?

Answer 10

An incorporate business that is separate legal entity from its owners.

Question 11

What is the difference between a public and private limited company?

Answer 11

In a private limited company the shares are usually held by friends and family so their are a small number of shareholders.

In a public company the shares are offered to and often owned by the public and other organizations.

Question 12

What is the definition of limited liability?

Answer 12

Shareholders/owners are only liable to pay or lose the amount they have invested.

Question 13

What are two advantages of a limited company?
(3)

Answer 13

• Shareholders have limited liability
• It is easier to raise finance than it is for sole traders and partnerships as they can sell their companies shares.
• Since the company is a separate unit from the owner, it will continue to exist even if one owner leaves or dies.

Question 14

What are two disadvantages to a limited company? (3)

Answer 14

• Not very easy to set up (a lot of legal formalities, rules and regulations needed to be followed.)
• Original owner may lose control over business as shares are sold to public.
• Accounts of company have to be published for public to be seen.

Question 15

What is a co-operative business?

Answer 15

A business organization that is owned and managed by the people who use its services or who work there.

Question 16

What are two advantages of a co-operative business? (5)

Answer 16

• They are democratic.
• The members work together and there are fewer chances of conflicts as members share a common interest.
• The owners/shareholders often have limited liability.
• Usually get a lot of tax relief from the government.
• Most co-operatives are treated as separate legal units.

Question 17

What are two disadvantages of a co-operative business? (3)

Answer 17

• Difficult to raise finance because co-operatives cannot issue shares.
• Accounts have to be made accessible by public.
• Members may not have the skill sets to run the business and hiring professional to do it may be expensive.

Question 18

What is the meaning of a franchise?

Answer 18

A form of business that allows a company (franchisee) to buy the rights to use an existing company’s (franchisor) brand name and products/service.

Question 19

What are two advantages of franchises. (3)

Answer 19

• The franchisee has a great chance of success as they are selling a well known product/service.
• The franchisor may offer some support to the franchisor with advice and training.
• easier to gain loans from bank, as the business is low-risk.

Question 20

What are two disadvantages of franchises. (3)

Answer 20

• Franchisee will have to pay a licensee fee and possibly a percent of the revenue to the franchisor.
• The initial cost of setting up a franchise may be expensive.
• Franchisee will not have control over how to run the business as he will have to follow the controls set by the franchisor.

Question 21

What is a social enterprise?

Answer 21

A business aimed at benefitting the community. the money owned is reinvested in the business or used for a social cause. There are different types of a social enterprise.

Question 22

What are the two different types of social enterprises?

Answer 22

Not-for profit enterprise and charities.

Question 23

What are the differences between not-for profit enterprise and charities.

Answer 23

Not for profits are directly in volved with making and providing their services or products in a socially responsible way. They use all of their money to reinvest it in their business to further their cause. Charities raise money through solely donation and fundraisers. Charities work quick solutions for immediate disaster/adversity and there impact is often short lived.

Question 24

What are the advantages of a social enterprise? (3)

Answer 24

• Employees who work for the social enterprise often feel for the cause and have a personnel interest and aim and objectives.
• Job satisfaction is high as they know they have they have a difference to there cause.
• They bring positive changes to the community.

Question 25

What are the disadvantages of a social enterprise? (4)

Answer 25

• A reliance on donations and grants at time.
• limited access to capital for growth
• Stringent regularity and reporting requirements.

Question 26

What are key attributes that comprise enterprises? (4)

Answer 26

*Risk taking
* Innovation
* Decision-making
* positive attitude

Question 27

What is an entrepreneur?

Answer 27

A person who starts up a business or enterprise and have a new ide for a good or service,

Question 28

What are stakeholders?

Answer 28

An individual, group or organization with an interest in the activities of a business.

Question 29

What are the two different kinds of stakeholders?

Answer 29

Internal: Directly in volved in running the company

External: Outside parties that can affect or be affected by the business

Question 30

What re the different internal stakeholders?

Answer 30

• employees
• owners/shareholders

Question 31

What re the different external stakeholders? (6)

Answer 31

• Customers/Consumers
• Government
• Local community
• Suppliers
• Lenders
• Competition

Question 32

What are recourses?

Answer 32

Land, labor and capital (money you are investing into your business)