Module 2 Flashcards
What is the key objective of businesses?
To make profit.
What are the objectives of a sole trader?
To provide a living for the owner, profit and growth.
Who controls a sole trading business?
One owner.
What are the sources of finance for a sole trader?
Owner’s capital, overdraft, credit card, loans, grants, mortgage and profit.
How are the profits distributed in sole tradership?
All to the owner.
What are the objectives of a partnership?
To provide a living for the owner, to run a professional service, profit, growth and increased market share.
Who controls a partnership?
Well, the partners… Duh.
What are the sources of finance to a partnership?
Partners’ capital, credit card, overdraft, loans, grants, mortgage and profit.
How are the profits distributed in a partnership?
Between the partners.
What are the objectives of an incorperated business?
Profit, growth and increased market share.
Who controls an incorperated business?
The board of directors, and managers working on their behalf.
What are the sources of finance to an incorperated business?
Share capital, overdraft, loans, mortgage, debentures and profits.
How are profits distributed in an incorporated business?
Between shareholders.
What are the objectives of a franchise?
For the franchisor to expand business over a wider area and increase profits.
For the franchisee to set up a profitable enterprise using the support of the franchising organisation.
Who controls a franchise?
The franchisee, subject to limitations established when forming the franchise.
What are the sources of finance available to a franchise?
Franchisees have to pay a fee to the franchisor to buy the franchise rights; they can then access other sources of finance, such as bank loans, to keep the business running.
How are the profits distributed in a franchise?
Franchisees pay a set percentage of their profits to the franchisor.
What are the objectives of a joint venture?
To create a new venture based on an agreement between two existing companies; to make a profit in a new area of operations.
Who controls a joint venture?
The new venture becomes a distinct entity, with responsibility for running the venture.
What are the sources of finance for joint ventures?
Funds provided by the companies that create the joint venture; the joint venture can then access other sources of funds.
How are profits distributed in a joint venture?
The joint venture distributes the profits to the companies that set it up.
A business must have clear objectives. Businesses should keep their objectives in line with SMART. What does SMART stand for?
S - Specific M - Measurable A - Achievable R - Realistic T - Timed
What are the 7 objectives of the public sector?
- Growth
- Expansion
- Survival
- Increased market share
- Social responsibly and image
- Customer loyalty
- Brand recognition
What is another term for internal growth?
Organic growth.
How can a business grow internally?
By reinvesting the profits made back into the business, or by the owners putting more capital into the business.
Is internal growth normally fast or slow?
It tends to be a slow form of growth.
How can a business grow externally?
It can merge with another business or take over another business.
What is a merger?
When two business combine to form one firm.
What form of expansion is a takeover classed in?
An “unfriendly” form of expansion.
How do you measure a business by the number of employees?
Small business - less than 50 employees
Medium business - 50 - 249 employees
Large business - over 250 employees
How do you measure a business by the value of output/turnover?
Small business - turnover of less than €10 million
Medium business - turnover of €10 - €50 million
Large business - A turnover of more than €50 million
How do you measure a business by the market share?
A small firm may supply less than 5% of the total market, for example, whereas a firm supplying 44% of the market would be deemed a large business.
How do you measure a business by capital employed?
Small business - capital employed of less than €10 million
Medium business - capital employed of between €10 - €43 million
Large business - capital employed of greater than €43 million
What are the 6 main stakeholders in a business?
- Owner’s/shareholders
- Local community
- Suppliers
- Government
- Customers
- Managers/Directors/Employees
Is the likelihood of business failure in the first 24 months of trading high or low?
Likelihood of failure. VERY HIGH.
It is hard work to succeed!
What are some common reasons why businesses fail?
- poor selling techniques
- poor management
- poor cash management
- failure to plan for upcoming changes
- expanding too fast
Why do a lot of smaller businesses choose to remain small?
- Flexibility of working hours and independence.
- Greater control over the firm.
- Able to understand your market better and provide a more personalized service.
