Topics 21-25 (Firms)

Question 1

What is a sole trader?

Answer 1

A business with one owner, but can employ a number of employees. All sole traders have unlimited liability.

Question 2

What is a partnership?

Answer 2

This is where there are joint owners who share responsibilty. This type of business has unlimited liability and can have up to 20 partners.

Question 3

What is a limited partnership?

Answer 3

This is where some partners provide capital but do not take part in management. They will have limited liability and only loose the amount invested.

Question 4

What are limited companies?

Answer 4

They have a separate legal identity to its owners. It can own assets, contracts, employees, sue and be sued. Capital is raised by selling shares. These shareholders have limited liability.

Question 5

What is a private limited company? (LTD)

Answer 5

This is where shares can only be transferred privately. All shareholders must agree on the transfer. They have limited liability.

Question 6

What are franchises?

Answer 6

This is where franchisee’s have a liscense to make a product, e.g. McDonalds. In return for this, they will be charged fees and a cut of the profit.

Question 7

What are some other types of business?

S—- E——–
L——– B———
O—- B———

Answer 7

Social Enterprise
Lifestyle Businesses
Online Businesses

Question 8

What is a public limited company (PLC)

Answer 8

These businesses are owned by its shareholders. Shares can be bought on the stock market to generate capital for the business.

Question 9

What is opportunity cost?

Answer 9

This is the sacrifice made when an alternative decision is chosen. It is the benefit lost from the next best alternative. Non-monetary opportunity cost is where benefits cannot be measured.

Question 10

What is a trade-off

Answer 10

Where having more of one thing potentially results in having less of another.