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Principles of Business > The Nature of Business > Flashcards

The Nature of Business Flashcards

1
Q

what is barter?

A

barter is the exchange of goods and services for other goods and services without the use of money

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2
Q

what is an enterprise?

A

an enterprise is the vision and creativity shown by people when they are prepared to take risks to set up a new business venture

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3
Q

what is an entrepreneur?

A

showing enterprise skills of vision and creativity when taking risks to set up a new business venture

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4
Q

define a business

A

An organization that uses resources to produce a good for service that meets a customer’s wants with the aim of making profit

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5
Q

define an organization

A

a person of group of people working together to achieve a common objective

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6
Q

what is an economy

A

the system of production, distribution and consumption used by society to allocate scarce resources

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7
Q

what is a commodity

A

a good often an agricultural product or a natural resource that is traded and interchangeable with any goods of the same type

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8
Q

define the term capital

A

resources used by a business such as machines and equipment used in the production of goods and services

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9
Q

define the term money

A

any item that is willingly accepted in exchange for goods and services

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10
Q

what are the 6 characteristics of money?

A
  1. acceptability
  2. portability
  3. divisibility
  4. durability
  5. limited in supply
  6. homogeneity
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11
Q

what are the functions of money and define them

A
  1. medium of exchange: money that can be used to purchase goods and services
  2. store of value: money can be saved for future use without loosing its value
  3. measure of value
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12
Q

bills of exchange

A

a binding agreement by one party to pay a fixed amount of cash to another party as of a predetermined date of on demand

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13
Q

telebanking

A

a facility enabling customers to make use of banking services by means of a computer network

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14
Q

e-commerce

A

the buying and selling of goods and services or the transmitting of data or funds over an electronic network

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15
Q

cheque

A

a written instruction to a bank to transfer a certain sum to the account of the payee

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16
Q

money order

A

a guaranteed instrument for making payment issued by banks or post offices

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17
Q

debit card

A

a card allowing the holder to transfer money electronically from their bank account when making a purchase

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18
Q

credit card

A

a card issued by a financial institution that allows an individual to borrow money at the point of sale to complete a purchase

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19
Q

bank draft

A

a cheque drawn on the bank itself

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20
Q

telegraphic money transfer

A

an electronic method of transferring funds utilized primarily for overseas wire transactions

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21
Q

bank transfers

A

the transfer of money from one bank account to another

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22
Q

m-money / mobile money

A

the use of a mobile phone in order to transfer funds between banks or accounts, deposit or withdraw funds or pay bills

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23
Q

private sector

A

this refers to that part of the economy that is owned and controlled by the private firms

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24
Q

list 4 features of private sector

A
  1. aims to make profits
  2. profits are shared among shareholders + owners
  3. the business is funded by loans from banks
  4. there is little to no government intervention
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25
Q

list public sector

A

this refers to operations in the economy that are undertaken for the benefit of the citizens.

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26
Q

list 4 features of the public sector

A
  1. aims to provide a service for citizens
  2. profits
  3. the business is funded by taxation
    4.
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27
Q

sole trader

A

a business in which one person provided the permanent finance and has full control of the business

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28
Q

list 4 advantages of a sole trader

A
  1. owner keeps all profits
  2. decision making is quick and easy
  3. flexible working hours
  4. easy to set up
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29
Q

list 4 disadvantages of a sole trader

A
  1. owner bears all risks and loses
  2. difficult to raise additional capital
  3. long working hours and heavy work load
  4. owner keeps all loses of the business
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30
Q

partnership

A
  1. a business formed by 2-20 people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
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31
Q

list 4 advantages of a partnership

A
  1. decision making is shared
  2. additional capital is injected by each partner
  3. partners may specialize in different areas of business management
  4. business losses are shared between partners
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32
Q

list 4 disadvantages of a partnership

A
  1. profits are shares
  2. all members must be involved in decision making
  3. the death of one partner may result is rearrangement of the partnership
    4.
33
Q

co-operatives

A

a business that is controlled and operated by a group of users for their own benefit.

34
Q

list 3 advantages of co-operatives

A
  1. members work together to solve problems and make decisions
  2. profits are shared in the form of dividends
  3. motivation levels are good
35
Q

list 3 disadvantages of co-operatives

A
  1. decision making is slow
  2. management can be inefficient
  3. finance for expansion is often limited
36
Q

list the 5 types of co-operatives

A
  1. consumer co-operatives
  2. producer co-operatives
  3. agricultural co-operatives
  4. worker’s co-operatives
  5. marketing co-operatives
37
Q

limited liability

A

the only potential loss a shareholder has if the company fails

38
Q

company

A

a business entity that has a separate legal identity from its owner

39
Q

private limited company

A

a small to medium sized business that is owned by 1-50 shareholders who ae often members of the same family

40
Q

list 3 advantages of private limited company

A
  1. shareholders have limited liability
  2. there is continuity in the event of the death of a shareholder
  3. the company is able to raise capital from sale of shares to family, friends and employees
41
Q

list 3 disadvantages of private limited company

A
  1. it is difficult for shareholders to sell shares
  2. limited to 50 shareholders
  3. capital cannot be raised by sale of shares to the general public
42
Q

public limited company

A

a limited company with a minimum of 7 shareholders, often a large business, with the legal right to sell shares to the general public

43
Q

list 3 advantages of public limited company

A
  1. there is limited liability for shareholders
  2. continuity
  3. the company has a separate legal identity
44
Q

list 3 disadvantages of public limited liability

A
  1. legal formalities are involved in formation
  2. share prices are subject to fluctuation, sometimes for reasons beyond business control
  3. risk of takeover due to the availability of shares on the stock exchange
45
Q

multinational company - MNC

A

A network of firms which operated in multiple countries but are owned + controlled by a single group of share holders

46
Q

unlimited liability

A

the person is responsible for all of the business debt

47
Q

characteristics of MNC

A
  1. create foreign direct investment
  2. head office: developed country
    subsidiary: developing country
  3. capital intensive and benefit from economies of scale
48
Q

advantages of MNC

A
  1. employment for local citizens
  2. foreign capitals stimulate the economy
  3. there is a transfer of skills from foreigners to locals
49
Q

disadvantages of MNC

A
  1. poor working conditions
  2. destruction of the environment
  3. repatriation of profits
50
Q

state corporations

A

independent organization set up by the government to carry out a service

51
Q

how are state corporations formed?

A

by legislation - the passing of laws by parliament

52
Q

list 3 characteristics of state corporations

A
  1. funding is provided by government however the organization is allowed to raise their own funds
  2. the government appoints auditors to monitor all accounting procedures
  3. annual accounting reports must be sent to the auditor general
53
Q

management of state corporations

A

the government appoints a board of directors for a stipulated time frame

54
Q

nationalized industries

A

firms which have been nationalized that is they were once privately owned but now have been taken over by the government

55
Q

national industries formation

A

a company becomes nationalized when the

government purchases all or the majority of shares in the company

56
Q

management of nationalized industries

A

the government assigns a board of directors

57
Q

characteristics of the nationalized industries

A
  1. they are illegal entities (separate from the owner)

2. the government is the only share holder

58
Q

advantages of nationalized industries

A

1, owned and controlled by government so all profits remain in the country

  1. the company is in better position to service the needs of the community
  2. nationalization prevents monopolies from being formed
59
Q

monopoly

A

A monopoly market is on in which there is a single seller or supplier of a product to the entire market.

60
Q

list 2 disadvantages of nationalized industries

A
  1. relatively low salaries are paid and therefore it may not attract the best professionals
  2. it may be a drain on government revenues if it doesn’t earn any profits
61
Q

government department

A
  1. the central government

2. the local governmen

62
Q

franchise

A

a business that uses the name, logo and trading systems of an existing successful business

63
Q

list 3 advantages of a franchise

A
  1. fewer chances of business failure as an existing brand and product is being used
  2. advice and training are offered by franchisor
  3. national advertising are paid for by franchisor
64
Q

disadvantages of franchise

A
  1. share of profits and sales revenue has to be paid to franchisor each year
  2. initial franchise license fee can be expensive
  3. there is no choice of supplies or supplies or suppliers to be used
65
Q

disadvantages of state corporations

A
  1. government provides most of the finance
  2. the avoid wasteful duplication of services
    loss making services might still be kept operating if the social benefit is great enough
66
Q

reasons for becoming multinational

A
  1. closer to the main market
    2 . lower costs of production
    3 access to local natural resources
67
Q

share

A

part ownership of a company entitling the shareholder to dividends and certain shareholder rights

68
Q

economic system

A

a way in which a society allocates scarce resources

69
Q

opportunity cost

A

the best alternative given up when a choice is made

70
Q

command economy

A

economic resources owned, planned and controlled by the state

71
Q

list 3 advantages of a command economy

A
  1. the basic needs of the population are met
  2. there is little inequality of wealth and income
  3. there are no private monopolies
72
Q

list 3 disadvantages of a command economy

A
  1. there is very limited consumer choice
  2. there is little incentive to work hard to earn more and make profits
  3. there is too many non- productive government officials
73
Q

traditional / subsistence economy

A

based on traditions and customs where nearly the whole population is engaged is agriculture, producing just enough food for their own needs

74
Q

advantage of traditional economy

A

they are less environmentally destructive than industrial markets

75
Q

disadvantages of traditional economy

A

they rarely have surpluses for exchange as they produce just enough food to survive

76
Q

free market economy

A

economic resources owned largely by the private sector with very little state intervention

77
Q

list 3 advantages of free market economy

A
  1. the incentive to work is high
  2. the profit motive encourages firms to be efficient
  3. there is competition between private firms which results in greater efficiency
78
Q

list 3 disadvantages of a free market economy

A
  1. there are great inequalities of income and wealth
  2. some of the basic need may not be met if they are very poor
    wealthy people have much more economic power than the poor
79
Q

mixed economy

A

economic resources are owned and controlled by both the private and public sectors

Principles of Business (5 decks)

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