sac 1 Flashcards
What is a sole trader?
A sole trader is a business owned and operated by one person who has full control over all decisions and keeps all profits. However, they have unlimited liability, meaning they are personally responsible for all debts if the business fails.
What are two advantages of being a sole trader?
- The owner has full control over business decisions, allowing for quick and independent decision-making.
- The owner keeps all profits, meaning they directly benefit from the business’s success.
What are two disadvantages of being a sole trader?
- The owner has unlimited liability, meaning personal assets (house, car, savings) can be used to pay off business debts.
- The workload and responsibility can be overwhelming since the owner manages all aspects of the business alone.
What is a partnership?
A partnership is a business structure where 2 to 20 people share ownership, responsibilities, and profits. Partnerships operate under a partnership agreement and typically have unlimited liability, unless structured as a limited partnership.
What are two advantages of a partnership?
- Workload is shared between partners, allowing for specialization in different areas (e.g., one handles finance while another focuses on marketing).
- Partners can contribute more capital, making it easier to expand the business compared to a sole trader.
What are two disadvantages of a partnership?
- Unlimited liability means all partners are personally responsible for business debts, which can be risky if the business fails.
- Potential conflicts can arise between partners if they disagree on decisions, which may slow down progress or cause disputes.
What is a private limited company (Pty Ltd)?
A private limited company is a business owned by up to 50 private shareholders. Shares are not publicly traded, and shareholders have limited liability, meaning their personal assets are protected if the business goes into debt.
What are two advantages of a private limited company?
- Limited liability protects owners from personal financial loss, as they are only responsible for the amount they invested.
- Easier access to capital, as private investors can buy shares to help the business grow.
What are two disadvantages of a private limited company?
- More complex and expensive to set up compared to a sole trader or partnership, requiring legal and financial documents.
- Stricter regulations and reporting requirements, meaning businesses must comply with more legal obligations.
What is a public listed company (Ltd)?
A public listed company is a business that sells shares on the Australian Securities Exchange (ASX), allowing anyone to invest. It is owned by shareholders, and the company is run by a board of directors.
What are two advantages of a public listed company?
- Unlimited capital-raising potential, as shares can be sold to the public, making it easier to fund large projects.
- Limited liability for shareholders, meaning they can only lose the amount they invested, not personal assets.
What are two disadvantages of a public listed company?
- Loss of control for original owners, as shareholders can vote on business decisions, potentially influencing management.
- High costs and strict regulations, including financial reporting and compliance with stock exchange rules.
What is a business objective?
A business objective is a specific goal that a business aims to achieve within a certain timeframe. Objectives guide decision-making and help measure success.
What are two ways a business can increase profit?
- Reducing operating costs, such as negotiating cheaper supplier contracts, cutting waste, or improving efficiency.
- Increasing sales revenue by launching new products, improving marketing strategies, or expanding into new markets.
How can a business increase market share?
A business can increase market share by offering better products, competitive pricing, and stronger brand marketing to attract more customers compared to competitors.
What is meant by fulfilling a market need?
Fulfilling a market need means identifying and providing a product or service that customers want but may not be readily available in the current market.
How can a business fulfil a social need?
A business can fulfil a social need by operating ethically, reducing environmental impact, supporting charities, or creating job opportunities for disadvantaged groups.
Why do businesses aim to meet shareholder expectations?
Shareholders invest money expecting returns through dividends or an increase in share value. If a company performs well financially, shareholders benefit, making them more likely to invest further.
What is an autocratic management style?
An autocratic management style is where the manager makes all decisions without employee input. It focuses on strict control and clear instructions, making it useful in urgent situations or when employees lack experience.
When is an autocratic management style appropriate?
This style is effective when quick decisions are needed, such as in emergency situations or when managing unskilled workers who need direct supervision.
What is a persuasive management style?
A persuasive management style is when a manager makes decisions alone but explains the reasoning to employees to gain their support. It still maintains control but considers employee concerns.
When is a persuasive management style appropriate?
This style is useful when employees may resist change, such as during company restructuring, and need reassurance that decisions are in their best interest.
What is a consultative management style?
A consultative management style is where managers seek input from employees before making final decisions. While employees’ opinions are valued, the manager still has the final say.
When is a consultative management style appropriate?
It is effective when employees have valuable experience and knowledge, such as in industries where teamwork and expertise improve decision-making.
