Section 1 - What is a business? Flashcards
What is meant by the public sector?
governmentally owned organisations that aim to provide services to the public and not make a profit e.g NHS
What is meant by the private sector?
privately owned organisations that range from small sole traders to large organisations such as ASDA. Most aim to make profit
- Apart from not for profit organisations such as charities
What is a mission statement?
A written description of a businesses purpose or main corporate objectives
What does a mission statement include?
Tells u the purpose of the business, its values,standards,statedgy, who the customers are and what makes the business unique
What is a corporate objective?
These are the goals the business has as a whole and depend on things such as size
What is a functional objective?
- These are objectives of each department, more detailed they are the more specific they are to each department
- When set all managers in the business have to look at how their department can help to achieve the objective
What does the phase ‘objectives should be SMART’ mean?
Functional objectives need to be, specific,measurable,agreed,realistic and timely
What is revenue and how is it calculated?
Revenue is the money made from sales
= selling price per unit x quantity of units sold
What is a fixed cost?
Fixed costs don’t change with output e.g rent, new machinery and managers basic salary
What is a variable cost?
These rise and fall as output changes e.g hourly wage, raw materials and packaging costs
How do u calculate total variable cost?
Variable cost per unit x number of units sold
How do u calculate total costs?
Fixed costs + variable costs
Why is profit important?
1) Profit can motivate people e.g some businesses offer profit sharing schemes
2) Good source of finance
3) can be used to attract investors
What is a social enterprise?
Normal businesses with social objectives that trades and makes a profit. However this profit is used to pay for social activities
What is unlimited liability?
The business and the owner are seen as one under the law, meaning debts become personal debts of owner
- huge financial risk
- Sole traders have this
What limited liability?
Means owners aren’t personally responsible for the debts of the business
- The shareholders of both private and public limited companies have limited liability
Key features of a sole trader?
- Individuals who are self employed e.g plumbers
- Have full financial responsibility of debts and requirements
- Minimal legal fees
Advantages of being a sole trader?
- freedom
- profit
- simplicity (less form filling)
- saving on fees (no legal costs
Disadvantages of sole trader?
Risk Time Expertise Finance vulnerability unlimited liability
What are the two types of limited liability companies?
Who owns them?
Public and private limited companies (both have limited liability)
- owned by shareholders run by directors
Key features of a private limited company?
- Cant sell she to the public
- Dont have shares quoted on stock exchange
- Often small family businesses
- End in limited or LTD
Key features of public limited company?
- Can sell shares to the public
- share prices are quoted on stock exchange
- Usually begin private and then move public
- Need over £50000 of share capital and if on stock exchange 25% must be publicly available
- End in PLC
What two documents must be drawn up before an organisation can begin to trade? Where must they be sent?
1) Memorandum of association
2)Articles of association
Must be sent to companies house where a certificate of incorporation is issued
What is ordinary share capital?
money raised through selling shares (usually long term investment)
