The Nature of a Business Flashcards
What is the purpose of a business?
Businesses make products (goods/services) in the pursuit of profit
What are the characteristics of goods?
Goods are tangible, and can be perishable or durable
What does the value of a service depend on?
The skill level involved
Convenience
Time Taken
The reputation of the service provider
What is the profit formula?
Profit = Total Revenue - Total Costs
What is entrepreneurship?
Entrepreneurship occurs when a businesses creates wealth by focussing on a vision and bringing together all the inputs required to visualise that vision
What are the qualities of an entrepreneur?
Drive, Determination and Creativity
What is wealth?
Wealth is the total amount of assets owned by a person or business
What are the features of small businesses?
Businesses of less than 20 employees
Micro businesses of 5 or less people
Non-employing businesses
Small Businesses = Less than $200,000
What are the features of medium businesses?
Employ more than 20 but less than 200 people
Between $200,000-$2 million
What are the features of large businesses?
Employ more than 200 people
Above $2 million
Primary Industry
Businesses involved in the acquisition of raw materials
Secondary Industry
Businesses that use raw materials, combined with labour and capital equipment, to create finished products
Tertiary Industry
Businesses that are concerned with retail and the provision of services
Quaternary Industry
Businesses that that provide information services to their customers
Quinary Industry
Businesses that provide services typically performed in the home
What is a sole trader?
A sole trader business is owned and managed by one person
It is not incorporated, which means that the business and its owner are not separate
How many sole traders are there, and how many fail?
There were 561,000 sole trader businesses in Australia in 2016 - 51% lasted fewer than 4 years
What is a partnership?
A partnership is a businesses run by between 2 and 20 people
There may be a partnership agreement between the parties
Like a sole trader, partnerships have unlimited liability - they are personally liable for all debt
What is agency?
Contracts or agreements entered into by any partner is binding on all other partners
How many partnerships are there, and how many fail?
There were 276,300 partnerships in Australia in 2016 - 36.3% lasted fewer than 4 years
What is incorporation?
A business structure that separate the owners from the business because the business is a separate legal entity
What is a Private Company?
A private company is a legal structure with 1 to 50 shareholders
They are privately owned and are bound by the Corporations Australia Act 2001
They are very large, and do not have to disclose their financial data
They have the letters Pty Ltd after their name
What is a Public Company?
Legal structures with at least 1 and up to an unlimited number of shareholders
They follow the Corporations Act 2001, monitored by ASIC
Public companies are listed on the Australian Securities Exchange
What is a Government Enterprise?
Businesses run by the government, but treated like companies with profit motive
What is Privatisation?
When the government turns a government provided service into a public company
What are the four classifications of businesses?
Size
Reach
Industry
Legal Structure
What are the different reaches of a business?
Local Business
National Business
Global Business
