THEME 1: 1.4 Flashcards
What is a sole trader business?
just one owner of the business (but they may employ other people to work for them).
Is a sole trader responsible for all debts of the business?
Yes
What is meant by the term partnership?
Multiple owners of the business (generally between 2-20 people)
What does limited liability mean?
If something goes wrong the company is liable not the owners.
What are two disadvantages of private limited companies compared to sole traders and partnerships.
More expensive to set up because of all of the legal paperwork. Legally obligated to publish its accounts every year but they don’t have to be publicised.
State one advantage and disadvantage of setting up a franchise compared to starting up a new business.
Customers will already recognise the franchisors brand so are more likely to buy from the franchisee. However, the franchisor may have strict rules about what the business can sell and how it can operate so the franchisees freedom is limited.
What is a franchise?
A business pays another firm for using a name or selling the other companies products.
Explain why these factors effect business location. - a) market location b) raw material location c) internet
a) locate near the market so people can easily access them, helps sales from passing trade and cheaper to transport finished products if closer.
b) if located nearby smaller transport costs.
c) E-commerce means the business can locate further from the market but closer to raw materials because people purchase online, don’t always need a physical/fixed store and can employ people all over the world to work from home.
Whats an advantage of a business locating itself in n area of high unemployment.
help keep wages low, good selection of people to choose from and firm will be able to find enough workers.
Give one reason why a business may locate near its competitors.
Skilled labourers there, local suppliers already there
What are the 4 p’s of the marketing mix?
Product, place, price and promotion
What does place mean?
Method of distribution.
Why does a business use promotion?
So potential customers are aware that the product exists and will want to buy it.
Describe how e-commerce can affect the marketing mix.
Place - products sold online and delivered
Promotion - on social media and can order after see it
Physical stores may also not be needed
Explain how promotion may affect how much a business spends on promotion.
If there’s competition then the business may choose to spend more on promotion to make their product more appealing than competition.
Describe what a small business may focus its promotion on in its marketing mix.
TV ads are expensive so could do cheap flyers. Local customers because they are nearby so convenient for them possibly ads in local newspapers.
Why might a small business not sell products through large retailers.
Large retailers will sell products form recognised and well known brands because customers are more likely to buy them.
Explain how a business plan may help a business to obtain a source of finance.
Convinces potential investors because they know what they’re doing which shows the financial backer how the business will operate and how likely they are to get their money back.
Explain how a business plan may help to reduce risk for an entrepreneur.
If the business is a bad idea the plan should help the financial backers realise this in the early stage. Can also help make good business decisions.
Give one prince of information that would be included in the business idea in the plan.
What the firm is all about. Could include product and USP.
Explain why market research needs to be carried out before writing a business plan.
To show that the product will interest the target market and provide evidence of it.
What are 3 pieces of financial information that should be included in a business plan?
How much is needed to start business, where money to start it will come from and cash flow forecasts.
