lo1 Flashcards
primary activity
extract raw materials
tertiary
services
secondary activity
uses raw materials from primary and manufactures the product
examples of primary activity
- mining
- farming
- fishing
-extraction
examples of secondary activity
- factories
- mills
- construction
examples of tertiary activity
- retailers
- personal services
- business services
what are the three sectors?
private
public
third
private sector
owned by an individual
public sector
owned by goverment
third sector
charity
examples of a private sector
- tesco plc
- manchaester united plc
- coca-cola enterprise ltd
examples of a public sector
- NHS
- ofsted
- the british army
examples of third sector
- the british red cross society
- cancer research
- living well CIC
what are the forms of legal business ownership
-sole trader
-partnership
- private limited company
- public limited company
- state-govermenmt-owned organisation
- charity
- CIC
sole trader
- one owner
- unlimited liability
- operates in the private sector
- full control of the business
sole trader advantages and disadvantages
+be own boss
+ keep all profit
+ financial affairs are private
x unlimited liability
x skill shortage
x long hours
partnership
- two or more owners
- unlimited liability
- owners have joint control of the business
-operates in the private sector
partnership advantages and disadvantages
+ financial affairs are private
+ workload shared
+ multiple skills
x split profit
x may disagree
x unlimited liability
private limited comapny
- owned by one or more shareholders
- shares can be brought privately
- incorporated
- limited liability
- directors control the business
- operates in the private sector
ltd advantages and disadvantages
+ can control who buys shares
+ separate legal identity
+ can raise funds by selling shares
x financial accounts not kept private
x dividends need to be paid to shareholders
x complex legal / administrative requirements
public limited company
- owned by two or more shareholders
- shares are brought and sold on the stock exchange
- incorporated
- limited company
- directors control the company on behalf of the shareholders
- operates in the private sector
plc advantages and disadvantages
+ limited liability
+ can raise large amounts of capital
+ business continues if shareholders dies
x loss of control
x higher set up costs
x more expectations to meet
state-/government-owned organisation
- owned by the state and controlled by the gov
- public sector
- aims and objectives are set by government
- limited liability
state/gov advantages and disadvantages
+ limited liability
+ no shareholders to please
+ not driven by the need to make a profit
x slow decision-making
x slow to change
x inflexible procedures
registered charity
- makes revenue not profit
- aim is to benefit a specific cause rather than make a profit
- charitable status test
- ran by trustees not owners
- limited liability
- third sector
charity advantages and disadvantages
+ limited liability
+ wide range of funds available
+ direct control of business aims
x complex legal requirements
x relies on volunteers
x financial accounts not private
community interest company
- set up by private individuals
- benefit society rather than making a profit
- incorporated
- third sector
- limited liability
CIC advantages and disadvantages
+ any profit made will be reinvested in the business
+ limited liability
+ wide range of funds available
x must pay tax on income
x financial accounts not private
x complex legal / administrative requirements
what are the factors that inform business ownership
- legal status
- liability
- funding
- funding
- control / decision-making
- legal / administrative requirements
legal status
- is the business a separate legal identity
- being separate means the business can sue, and be sued, in its own right
liability
- unlimited liability - personal possessions of the owners if the business goes into financial difficulty
- incorporated businesses have limited liability
funding
- public sector organisation may be financed by taxation
- third sector organisation may receive grants and donations
- private sector organisation is more likely to secure funds by borrowing or by taking additional owners
legal/administrative requirements
- sole trader has very little paper work to set them up or to continue trading
- plc has a great deal of paperwork
business aims and objectives
- survival
- financial aims
- growth
- reputation
-being enterprising
survival
- has to build up sales and a customer base
- earn enough revenue to cover costs (break-even)
- the business needs to survive
financial aims
-break-even
-increase revenue
-reduce costs
financial aims (break-even)
- cover costs
- allow the business to survive without
- making a profit
financial aims (increase revenue)
- increase money brought back from sales
- selling more at the same price
- reducing price so more is sold
financial aims (reduce costs)
- lower exenses involved in running the business
- reducing electricity bill
- finding cheaper supplier
- paying lower rent
financial aims (making a profit)
-increasing revenue or reducing costs
- when costs are covered additionally revenue will be profit
growth
- physically - opening a second branch, extending factory, employing more staff
- increase market share
- extend the range of products
reputation
- quality / value for money, being ethical and having a social conscience
- linked to personal ideals of the business owners
- the right reputation will help a business to survive and make a profit
being enterprising
- taking risks
