Paper 2 example questions Flashcards
Everything you need to know for paper 2 from the advanced information 2022
What does the term public sector organisations mean?
Public sector organisations are owned and run by the government. They aim to provide services to the public, rather than making a profit.
What does the term private sector organisations mean?
Private sector organisations are owned and run by private individuals. They range from small sole traders to huge organisations. Most private sector organisations aim to make profit but non-profit organisations are also part of the private sector.
What is unlimited liability?
Unlimited liability means that the business and the owner are seen as one under the law. This means that the business debts become the personal debts of the owner. So traders can be forced to sell personal assets to pay off business debts
What is limited liability?
Limited liability means that the owners aren’t personally responsible for the debts of the business and have separate legal identities to the business
What is a sole trader?
A sole trader is an individual trading in his or her own name or under a suitable trading name. The owner is responsible for all business debts because they have unlimited liability
Give 4 advantages of being a sole trader
– Quick and easy to set up
– simple to run
– easy to close/shut down
– all profit entitled to owner
Give 5 disadvantages of being a sole trader
– Unlimited liability – harder to raise finance – vulnerability, business suffers if the owner becomes ill – limited expertise – long hours
What is a partnership?
Partnerships are started and owned by more than one person up to 25 people. There is a legal partnership agreement which covers areas such as: how profits are shared, how decisions are taken and what happens if a partner wants to leave. Partnerships still have unlimited liability
Give 4 advantages of a partnership
– Simple to run
– expertise an effort of more than one person
– partners can provide specialist skills
– greater potential to raise finance
Give 3 disadvantages of a partnership
– Unlimited liability
– poor decision by one partner can damage the interest of other partners
– complicated to sell or close business
What are the two kinds of limited companies?
There are private limited companies (LTDs) and public limited companies (PLCs)
Who own limited companies and how are they run?
Limited companies are owned by shareholders and run by directors. Shareholders have a part ownership of a company
Give 6 characteristics of a private limited company
– Can’t sell shares to the general public
– don’t have share prices quoted on the stock exchanges
– shareholders may not be able to sell their shares without agreement of other state shareholders
– they are often small family businesses
– there is no minimum share capital requirement
– they end their name with the “limited” or LTD
Give 6 characteristics of a public limited company
– Can sell shares to the general public
– their share prices can be created on stock exchanges
– shares are freely transferable and can be bought and sold through stock brokers, bank and share shops
– they usually start as a private limited company then go public later to raise more capital
– They need over £50,000 of share capital and if they are listed on the stock exchange, at least 25% of this must be publicly available
– they always have the initials PLC in their name
What is ordinary share capital?
Ordinary share capital is the original value of shares sold
What is market capitalisation?
Market capitalisation is the current total value of all the ordinary shares issued by a company
Formula for market capitalisation
Number of issued shares X current share price
Give 4 advantages of being a limited company
– Limited liability
– easier to raise finance
– stable form of structure – business continues to exist even when shareholders change
– less tax
Give three disadvantages of being a limited company
– Greater admin costs
– public disclosure of company information
– legal duties to follow
What is a not-for-profit organisation?
And not-for-profit organisation runs for the benefit of the community and have social aims. Examples include charities, housing associations and community development trusts
What is a shareholder?
Shareholders anyone who owns at least one share in the company
Who usually buy shares in a public limited company?
Individuals, companies and institutions (such as pension funds)
Who usually buys shares in private limited companies?
Family and friends of the original owners
Give 6 reasons why a shareholder would invest in a company
– To achieve a capital gain
– Shareholders may be paid a dividend in return for their investment
– Shareholders want to be involved in the running of the business
– They believe in the aims and objectives of the company and want it to succeed
Invest in order to help the company grow or survive
– Venture capitalist