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Business Environment > Types of businesses > Flashcards

Types of businesses Flashcards

0
Q

Explain the features of primary industry.

A

Refers to firms involved in the extraction of natural resources. They have little choice in their location.

Examples: Farming, fishing, diamond, mining, oil draining, etc.

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1
Q

Identify the core business sectors

A
  • Primary industry
  • Secondary industry
  • Tertiary industry
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2
Q

Explain the features of the secondary industries.

A

Refers to firms involved in the conversion of raw materials from the primary industries into manufactured components or finished goods.

Example: Petrol-refining from crude oil, tyre-making from rubber.

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3
Q

Explain the features of the tertiary industries.

A

Refers to firms involved in the provision of supporting services to any industry or to final consumer. Located close to where demand/market is.

Example: Wholesale and retail, banking, transport, F&B outlets, etc,

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4
Q

State the criteria for a small and medium enterprise in Singapore.

A

Annual sales turnover below S$100 million & employment size below 200 workers.

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5
Q

Explain what owner management means.

SMEs

A

Managed and controlled by owner, close and less formal relationship with employees.

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6
Q

Explain what limited capital means.

SMEs

A

Financed by personal savings and loans from relatives and friends. Problem for SMEs because it is difficult to borrow from banks as collaterals are needed.

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7
Q

Explain small number or workers.

SMEs

A

Employ mainly family members and relatives. Owner-manager plays multiple roles.

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8
Q

Explain the term neighborhood-based.

SMEs

A

Serve the neighborhood community. Close and friendly relationship with their customers.

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9
Q

Explain indispensable owner management.

SMEs

A

Owner knows all details of the operation.

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10
Q

Explain inadequate bookkeeping.

SMEs

A

Do not keep proper business accounts, difficult to compute profits.

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11
Q

Explain what holding company means.

Large business

A

Formed for the sole purpose of acquiring a controlling ownership in two or more companies.

Voting and management control in these acquired companies if ownership is more than 50%

Example: Temasek Holdings has controlling ownership of PSA (100%), SIA (56%), and SMRT (54%).

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12
Q

Explain subsidiary company.

Large business

A

Subsidiary is effectively controlled by another company through either partial or complete ownership.

Example: PSA, SIA and SMRT are subsidiaries of Temasek Holdings.

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13
Q

Explain associate company.

Large business

A

Associate is owned by another company that has substantial interest but less than a majority ownership.

Two companies that are both subsidiaries of a third company are associates.

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14
Q

Explain franchises.

Large business

A

Refers to the practice and methods of operating a business based on another business’ philosophy and operation.

Example: 7-eleven, MacDonald’s and Subway

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15
Q

Explain the relationship between franchisor and franchisee.

Large business

A

Franchisor grants independent operator (franchisee) the right to distribute it’s products, techniques and trademarks in return for a percentage of gross monthly sales and a royalty fee.

16
Q

Explain management buy out.

Large business

A

A company’s existing managers acquire a large part of the company from the existing shareholders because they have the expertise to grow the business better.

17
Q

Explain mergers and takeovers/acquisitions.

Large business

A

Merger is the mutual decision of two companies to combine and become one entity.

Takeover occurs when a smaller company is purchased by a larger one.

Cut costs, increase profits and boost shareholder values.

18
Q

Define unincorporated businesses

Unincorporated

A

Businesses registered in the name of owner thus not registered as legal corporations. Business and owner are seen as one and the same. Legal obligations by the business are legal obligations of the owner.

19
Q

State the features of sole proprietorship.

Unincorporated

A

Owned and controlled by one person.

Oldest and most common form of business ownership.

Easiest form of business to start with limited funds under Business Registration Act with ACRA

Unlimited liabilities. No legal distinction between owner’s personal assets and business assets.

Most are in retail and wholesale trading, building and contrition and service industries. Small scaled.

20
Q

What are the advantages of sole proprietorship?

Unincorporated

A

Ease of formation
- Any person with legal status can start business with little caption without proper offices with approval from ACRA.

Ease of dissolution
- End business by selling his inventory, paying his business debts and de-registering his business with ACRA.

Control of business
- Full control so he can decide how and when he wants to work.

Flexibility
- Quick decisions and respond to changing situations.

Direct reward
- Owner is rewarded directly and proportionately to his own effort.

Secrecy
- Does not need to share confidential information which is useful if the success of business depends on a secret formula/techniques.

21
Q

What are the disadvantages of sole proprietorship?

Unincorporated

A

Limited sources of funds
- Personal savings and borrowings from relatives and friends to start a new venture or expand his business

Limited life
- Owner and business are not a separate entity so owner’s death, imprisonment or insanity terminates the business.

Unlimited liability
- Personally liable to an unlimited extent for his business debts because there is no distinction between personal and commercial assets.

Lack of specialized management skills
- Rely on his own skills and judgement in managing his business as he could not afford to hire professional managers

22
Q

State the feature of partnership.

Unincorporated

A

Pooling of resources by 2 to 20 people for the purpose of making profit.

Register under Business Registration with ACRA.

Partnership agreement can be made orally or in writing. Otherwise the partnership act shall apply.

Partners are collectively called a “firm”.

No separate legal entity so the partners are individually and collectively responsible for the debts and obligations or the partnership.

Amount of capital invested by each partner need not be equal.

Partnership agreement must state that profits and losses are borne in proportional to their shares. Otherwise, each partner shares equally in profits and losses.

23
Q

State the advantages of partnership.

Unincorporated

A

More funds available
- 2 to 20 partners combined can raise more funds

Enhanced credit standing
- Banks are more willing to extend credit because partners are liable for firm’s debt.

Increased specialization of management skills
- Partners of different backgrounds can complement one another interns of skills, contacts and specialization.

Possibilities of growth & expansion
- Diversification in management skills and multiple sources of capital enhances firm’s growth and expansion into new products or markets.

Freedom from regulations
- Partnership does not need to submit their accounts to ACRA

Tax savings
- No tax is levied on the partnership itself. Individual partners must pay their own personal income tax.

24
Q

States the disadvantages of partnership.

Unincorporated

A

Unlimited liability
- All partners are personally and jointly liable to an unlimited extend for the debts of the partnership

Dilution of control
- More than one owner, no total control of business

Group commitment
- Held responsible for decisions of other partners

Conflicts
- Each partner is entitled to a say in the management. Disagreement may occur.

Limited life
- If one partner dies or resigns, business will come to and end and a new business has to be formed.

25
Q

State the features of limited partnership

A
  • Similar to general partnership except there must be at least one general partner and at least one limited partner
  • limited partner have limited liability. Only liable to to the extent of their registered investment.
  • No management authority
  • Pay limited partners a return on their investment.
26
Q

State the features of incorporated companies.

Incorporated

A

Private limited & Public limited

A legal entity created for the purpose of carrying on a business.

Owners’ losses are limited to the amount of their investments in the company

Company has separate legal entity so it can buy, sell, own property, sue and be sued.

Requirements for registration under companies act are more complex.

Potential shareholders need lawyers’ and public accountants advice to help them register their company.

27
Q

State the advantages of incorporated companies.

Incorporated

A

More sources of funds

Specialized management skills

Transferability of ownership

Perpetual life

28
Q

State this disadvantages incorporated companies.

Incorporated

A

More government regulations
- Governed by companies act and needs to submit annual returns to ACRA

Lack of secrecy
- Required to disclose important information in its annual report which is regularly used by competitors.

Higher taxation
- Tax rate on companies is a flat rate of 17% which can be higher than personal income tax

29
Q

State the feature of private sector organizations.

Private Enterprise

A
  • Owned and run by private individuals
  • To earn maximum profits for the owners
  • To achieve the best possible return on investment
  • Scale of business ranges from very small one man operated business to very large business with thousands of shareholders

Examples: Sole proprietorships, partnerships, private and public limited companies.

30
Q

Define Public Sector Organizations.

A

Directly or indirectly owned by government

Provides broad range of goods and services to the community

Scale of business is generally large

31
Q

What are the three types of public enterprise?

A

Ministries, statutory boards and government-linked companies.

32
Q

State the features of ministries.

Public enterprise

A
  • Set strategic and policy direction for the various sectors
  • Oversee development and regulations of the various sectors under their purview

Examples: MOE, MINDEF

33
Q

State the features of statutory boards.

Public enterprise

A
  • Established by Act of Parliament
  • Specialize in carrying out specific plans and policies of ministries
  • Higher autonomy

Examples, PUB, ITE, HDB, EDB

34
Q

State the features of government-linked companies.

Public enterprise

A
  • Incorporated under companies act
  • Invest heavily in diverse sectors of the national economy
  • wholly or partially owned by the government through Temasek Holdings

Example, SIA, DBS, PSA, Singtel

Business Environment (3 decks)

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