Miss Chambers Knowledge Test Part 2

Question 1

What is a limited company?

Answer 1

A business that is owned by shareholders and controlled by directors

Question 2

What are the two types of limited company?

Answer 2

private limited company (‘Ltd’) and public limited company (‘plc’)

Question 3

What is a private limited company?

Answer 3

Private limited companies cannot sell their shares on the Stock Market. They are often owned by people who know each other, such as family or friends

Question 4

What are some advantages of being a private limited company

Answer 4

• More capital can be raised by selling shares (unlike a sole trader or a partnership)
• The owners have limited liability (unlike a sole trader or a partnership)

Question 5

What are some disadvantages of being a private limited company?

Answer 5

• The profits have to be shared between the shareholders (dividends)
• It is slower and more expensive to set up than a sole trader or partnership
• The original owners can lose control if they own less than 50% of the shares
• Anyone can find out the financial position of the company from Companies House

Question 6

What is a public limited company?

Answer 6

Public limited companies can sell their shares on the Stock Market. Anyone can buy shares in them. They are usually larger than private limited companies

Question 7

What are advantages of being a public limited company

Answer 7

• Large amounts of capital can be raised by selling shares through The Stock Market
• The capital can be used to pay for expanding the company.
• Expanding the company should lead to higher profits.

Question 8

What are disadvantages of a public limited company?

Answer 8

• The profits have to be shared between large numbers of shareholders
• The original owners will probably lose control, because they will now own less than 50% of the shares in the company.
• Changing from Ltd to plc is a very expensive process
• Anyone can find out the financial position of the company from the company website

Question 9

What does the choice on business ownership depend on?

Answer 9

• The amount of funding that is needed
• Whether the owners want to keep control of important decisions
• Whether the owners are willing to share the profits
• Whether the owners are prepared to have unlimited liability instead of limited liability
• Whether the owners are willing to meet the legal and administrative requirements of operating as a limited company instead of a sole trader or partnership

Question 10

What are aims and objectives of a businesses survival?

Answer 10

Especially if a business is new or is facing difficult circumstances

Question 11

What are aims and objectives of a businesses financial objective?

Answer 11

• Breaking even
• Specific targets for revenue
• Specific targets for costs
• Specific targets for profit

Question 12

What are aims and objectives of a businesses growth

Answer 12

• Physical expansion (e.g. opening more branches)
• Increased market share
• Increased provision of goods and services

Question 13

What are aims and objectives for a businesses reputation

Answer 13

• Quality (of goods and of customer service)
• Offering value for money
• Being ethical (doing what is morally right)
• Social responsibility (towards employees, customers, suppliers and the community)
• Being environmentally friendly

Question 14

What are the aims and objectives of a businesses job satisfaction from being enterprising

Answer 14

• Being his/her own boss
• Pursue his/her own interests
• Being competitive