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Fundamentals Of Business Administration > Terms Of Business > Flashcards

Terms Of Business Flashcards

Learn all about business

1
Q

What is Business

A

The regular activity carried out with the aim of earning profits through production or purchase, production and sale of goods and services with the intention of satisfying human wants

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2
Q

Xtics of business

A
  • Regular activity
  • Exchange motive
  • profit motive
  • production of goods and services
  • satisfaction of human wants
  • uncertainity of returns
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3
Q

Types of business classification

A

Industry_which is production of goods

Commerce_which deals in Trade of goods and services

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4
Q

Aids to trade

A 
Banking
Transport
Insurance
Market research-consulting services
Ware house
Communication
Advertising
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5
Q

Production industry contains the following

A

Primary industry
Secondary industry
Tertiary industry

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6
Q

Primary industry

A

Provision of natural resources or God given gifts

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7
Q

Under primary industries we have

A

Extraction
To dig out something in it’s original form eg, gold,silver, diamond
Genetic
Multiplication of God given things eg; fish,

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8
Q

Secondary industry

A

Provision of production of artificial product like capital industries, manufacturing industries, construction industry

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9
Q

What are finished goods

A

These are goods which are in consumable state

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10
Q

Tertiary industry

A 
They deal in services
Eg law firms
Warehouses
Banking
Insurance
Advertising
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11
Q

Purposes of business

A 
Economic
Creation of a customer
Make profits
Survival (earn a living)
Growth (carrier)
Social
Protect the environment
Fair deal to the society
Fair deal to the government
Fair deal to the customer
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12
Q

Sole proprietorship

A

The sole proprietorship is the kind of business entity that is owned by one person

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13
Q

Characteristics or features of sole proprietorship

A
  • Management and control
  • Unlimited liability
  • No separate legal entity
  • limited government intervation
  • Creation (requires minimum requirements)
  • profit or losses distribution
  • Capital or financing
  • Duration
  • Taxation
  • Reporting requirements (none)
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14
Q

Formation of sole proprietorship

A

Obtain a license or permit for the particular type of business from regulatory bodies
Decision are all made by one person

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15
Q

Advantages of a sole proprietorship

A
  • Direct motivation
  • it is flexible
  • secrecy
  • has complete control
  • no corporate tax payments
  • few formal business requirements to establish and dissolve
  • easiest type of business organization to establish
  • the start up cost are minimal
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16
Q

Demerits or disadvantages of sole proprietorship

A
  • Lack of collateral security hence borrowing is limited
  • poor decision making/limited managerial skills
  • demotivation because of unshared losses
  • poor or no book keeping
  • owner has unlimited liability both the owner and the assets are subjected to the claims of creditors
  • uncertainity of duration
  • it is difficult for a sole proprietor to raise capital
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17
Q

Partnerships

A

A relationship that exists between two people with the view of making promises

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18
Q

Who can be a partner

A

Any person who is legally capable of contractual capacity that is sane financially sound

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19
Q

Characteristics of partnerships

A
  • Non transferability of shares
  • plurality of members for professions of banking,lawyers 2-50. Standard partnership is 2-20
  • contractual agreement usually between two people
  • Unlimited liability
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20
Q

Formation of a partnership agreement

A

In Uganda partnerships are registered by the partnership act 2010

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21
Q

Partnerships agreement is done by the following

A
  • Word of mouth
  • writing (partnership deed)
  • Implication (implaied agreement)
  • holding out
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22
Q

Partnerships deed

A

An agreement that spells out the right and obligations of each of the partners made out by the partners and witnesses by a solicitor

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23
Q

Content of a partnership deed my

A
  • Mode of sharing the profits
  • Name and signature of partners
  • interest on capital and drawings
  • winding up/ changes and dissolutions
  • nature of business
  • capital contribution per partner
  • preparation and auditing of accounts
    -the ratio in which profits/losses will be shared
  • Amount,if any partner may draw in advance
  • Partner’s salary
  • Admission of new members
    Duration of partnership
24
Q

Types of partners

A
  • General partnership
  • limited partnership
  • limited liability partnership
25
Q

General partnership

A

Where all partners participate in management of the business and each partner is liable for all business debts or losses

26
Q

Limited liability

A

Partners are not actively involved in the day to day running of the business
They have limited liability

27
Q

Limited liability partnership

A

Partnership where all partners have limited liability

They are not responsible for the debts and liabilities of the debts and liabilities

28
Q

Types of partners

A
  • Active partners
  • dormant/sleep partners
  • Nominal / quasi
  • minor partner
  • Partner in profits only
  • Sub partners
    Partners by Estoppel or holding out
29
Q

Active partners or regular or ordinary or ostensible

A

Participate actively in management of business and are liable to third parties

30
Q

Domant or sleeping partners

A

One who does not take part in the management of the business
Contributes capital and shares the profits
Liable for all the debts

31
Q

Nominal or quasi

A

Does not contribute any capital nor shares in the profits or take part in the management of the business
He is liable to third parties
He or she is known to outsiders and earns good will for using his or her name as a partner

32
Q

Minor patner

A

A partner below the contracting age

Enjoys limited and his decisions are not legally binding

33
Q

Partner in profits only

A

Partner who shares on profits only without being liable of the losses
Doesn’t take part in the active management of a business

34
Q

Sub partners

A

This is a stranger sharing the profits derived from the firm

Shares profits with one of the partners and has no rights against the firm

35
Q

Partner by Estoppel or by holding out

A

One who without being a partner conducts himself in such a way that leads third parties to believe he is a partner

36
Q

Advantages of partnerships

A
  • Going concern or survival capacity
  • increased capital
  • better management skills
  • More access to credit
  • Losses are shared
  • Relatively easy to form and dissolve
  • Few government regulations
  • relative flexibility in management
  • relatively easy decision making
  • limited liability of some partners
37
Q

Disadvantage or demerits of partnership

A
  • Unlimited liability of some people
  • a mistake by a partner will affect other partners
  • less secrecy
  • relatively limited resources
  • non transferability of interest
  • relative delays in decision making
  • possibility of instability
  • demotivation (sharing of profits)
38
Q

Factors that could lead to termination of a partnership deed

A
  • Agreement
  • Departure
  • Dismissal of a partner
  • failure to observe the regulations
39
Q

Joint Stock Companies

A

A voluntary association of individuals for profit incorporated into transferable shares of a fixed face value the ownership of which is the condition of membership,with limited liability, perpetual succession and a common seal.

40
Q

Features of a company

A
  • Compalsary incorporation
  • voluntary association
  • artificial person
  • separate legal entity
  • common seal
  • limited liability
  • transferability of shares
  • perpetual succession
  • separation of ownership and management
    _ large membership
41
Q

Compulsory incorporation

A

A company is a voluntary association of persons formed

Only when there is a certified then it comes into existence

42
Q

Voluntary association of in cooparation

A

Two or more people come into existence with the aim of carrying out a business under the companies act

43
Q

Artificial person

A

A company is an artificial person created by law

44
Q

Separate legal entity

A

Since a company is created by law it has a separate legal existence compared to it’s members

45
Q

Common seal

A

Since a company is an artificial person having no physical features like a natural person,it cannot sign
However each company has to have a common seal of on which the name is engraved

46
Q

Limited liability

A

The limited number of a company is limited to the face value shares held by them or amount guaranteed

47
Q

Transferability of shares

A

The member who holds the shares of the company can transfer it’s own to any other without the company’s permission

48
Q

Perpetual succession

A

Since the company has separate existence from it’s members any emagancy like death will not affect the continuations of the business

49
Q

Separate ownership and management

A

In a company the ownership and the management are separated. Share holders who are owners do not take part in the every day share

50
Q

Large membership

A

The company is owned by a longer number of members this explains better the 100 persons for Private limited companies and unlimited number for unlimited companies

51
Q

Types of companies

A
  • Companies limited under the royal chatter
  • companies limited under the companies act
  • companies in comparated under the statute /acts of the parliament
52
Q

Companies incorporated under the special/royal charter

A

These are companies most of which originated from the UK under the permission of the queen of England/special charter

53
Q

Examples of the companies incorporated under the royal chatter

A

British South African companies
Imperial British East African company
British East Indian Company

54
Q

Companies incorporated under the company’s act

A

In Uganda the companies Act lays down procedures into which a company can be brought in to existence

55
Q

Types of companies incorporated under the company’s Act

A

Companies limited by shares
Companies limited by guarantee
Unlimited companies

56
Q

Companies limited by shares

A

These are companies where liability of members is limited to the face value of the shares they own

57
Q

Examples of companies limited by shares

A

Private limited companies
Public limited companies
Government Companies

Fundamentals Of Business Administration (2 decks)

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