Section 1 Flashcards
What are the advantages of barter?
- Encouraged specialization in production and better use of available resources
- increased total volume and variety of goods and services available for trade
- Provided a means to avoid any surplus produced
What are the disadvantages of barter?
- Need for double coincidence of wants
- Difficulty establishing an agreed rate of exchange
- Indivisibility of goods
- Inability to store wealth
What is money?
A medium of exchange that is vastly accepted by society
What are the functions of money?
1) to provide a medium of exchange
2) to be a unit of account
3) to be a store if value
4) to be a means of deferred payment
What is the public sector?
Public sector is any business owned and controlled by the government
What is the private sector?
Private sector is any business owned by private individuals
What is a stakeholder?
Any individual that is affected by the business
What is a sole trader?
A person who owns and financed a business by himself
What are the characteristics if a sole trader?
1) owned by one person
2) usually small scale
3) easily set up
4) owner has unlimited liability
What are the advantages of a sole trader?
1) he can personalise his working hours
2) he gets all of the profits
3) simple organisational structure
4) no employee costs as the owner usually runs the business by himself
5) easy to set up
What are the disadvantages of a sole trader?
1) unlimited liability
2) owner will have to assume all roles of management if he cant hire workers
3) time restraint
4) limited personal assets
5) lack of continuity
What is a partnership?
An agreement between two or more people to own and finance a business
What are the advantages of a partnership?
1) greater access to sources of finance
2) more access to knowledge then sole traders
3) no income or wealth related taxes
4) ablilty to take vacation days
5) sharing of workload and liabilities
What ate the disadvantages of partnerships?
1) general partners have unlimited liability
2) slower decision making process
3) risk of raising conflict between members
4) all partners can be held legally liable for unethical actions of one partner
What is a company?
A separate legal entity that is owned by a group of persons of other companies who have purchased shares in the busuness
Describe the characteristics of a private limited company
1) had lots at the end of the business name
2) has a minimum of 1 and max of 50 shareholders
3) shareholders have limited liability
4) can only sell shares privately
What are the characteristics if a public limited company?
1) has the abbreviation plc at the end of the business name
2) has a minimum of 2 and no max number of shareholders
3) shareholders have limited liability
4) shares can be sold publicly through the stock exchange
What are the advantages I’d private limited companies?
1) shareholders have limited liability
2) greater access to capital compared to smaller orgs
3) all profits retained by the owner
4) if one shareholder dies the business continues on
5) company financial statements are private
6) shareholders are rewarded with dividends on profits
What are the disadvantages if private limited companies?
1) only able to sell shares privately
2) company must submit final reports for auditing by relevant authorities
3) shares are not easily transferable without the consent of other shareholders
4) decision making process is slow due to large number of shareholders
What are the advantages of public limited companies?
1) All shareholders have limited liability
2) Greater access to capital as there are no restrictions in the number of shareholders
3) shares are easily transferred
4) risk of business is spread of many shareholders
5) shareholders are rewarded with dividends
What are the disadvantages of public limited companies?
1) financial statements must be audited and published
2) complex organisational structure
3) lack personal element
4) risk of losing control of the business
