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Prelim Business Studies > Types of Businesses > Flashcards

Types of Businesses Flashcards

1
Q

Describe the layout of a profit/loss statement.

A

List revenue, COGS, gross profit, expenses and net profit down the left side.

Gives monetary values of each on right.

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2
Q

What does a profit/loss statement measure?

A

Profitability

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3
Q

Describe the layout of a balance sheet.

A

Lists assets in one column, and liabilities and owner’s equity in the other.

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4
Q

State the relationship between assets, liabilities and owner’s equity.

A

A = L + OE

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5
Q

What do balance sheets measure?

A

Solvency or gearing.

Ability to pay off all debts.

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6
Q

Describe the layout of a cash flow statement.

A

Each column contains the total cash inflows, outflows, opening and closing balance for each month.

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7
Q

What does a cash flow statement measure?

A

Liquidity.

The ability to pay off current liabilities.

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8
Q

What is R+D?

A

Research and Development.

Used to ensure innovation and new technology.

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9
Q

What is an entrepreneur?

A

Someone in business who takes a large risk in hope of a large reward.

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10
Q

Identify five reasons for starting a business.

A

Profit, lifestyle, flexibility, power and providing family with jobs.

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11
Q

What is quality of life?

A

The physical and mental well being of individuals in a society.

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12
Q

How can a business affect quality of life?

A

Providing jobs, working conditions and their impact on the environment.

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13
Q

Identify the four types of classifications for a business by number of employees, and how many employees each has.

A

Micro 0-5
Small 0-20
Medium 21-200
Large 200+

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14
Q

What are the five classifications for the size of a business by geographical spread?

A

Local, regional, state, national, international.

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15
Q

What is market share?

A

The percentage of sales a business has in a certain market.

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16
Q

Identify five reasons a business would want to increase geographical spread.

A 
Allow for economies of scale
Increase market size
Lower compliance costs
Avoid saturating a market
Avoid competition
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17
Q

Identify the five industries.

A 
Primary            Raw Materials
Secondary       Manufacturing
Tertiary:            Service
-Quaternary     Knowledge-Based
-Quinary           Traditionally Home-Based
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18
Q

What industry sector is mining in?

A

Primary

19
Q

What industry sector is car making in?

A

Secondary

20
Q

What industry sector is a lawyer in?

A

Quaternary

21
Q

What industry sector is a maid in?

A

Quinary

22
Q

What is the private sector?

A

All businesses not owned by the government.

23
Q

What is the public sector?

A

All business owned by the government.

24
Q

By buying a franchise, what do you buy the rights to?

A

Use the name, operating system and sell the products of an existing business.

25
Q

What are five advantages of a franchise?

A 
Consistency
Customer loyalty
Free advertising
Low risk
Support and advice
26
Q

What are four disadvantages of a franchise?

A

Can’t sell without approval
Expensive ongoing costs
Franchiser only source of stock
Lack of freedom

27
Q

Describe the relationship between franchisees and franchisers.

A

Franchisees buy franchises from franchisers.
Franchisers own the franchise and sell franchises.
Franchisees pay royalties to franchisers.

28
Q

What does it mean if a business is incorporated?

A

It is either a private or public company.
It is its own legal entity, and has the rights of a person.
Its owners have limited liability.

29
Q

Identify how many owners each type of legal structure has.

A

Sole Trader 1
Partnership 2-20
Private Company 2-50
Public Company 50+

30
Q

Identify whether each legal structure has limited or unlimited liability.

A

Sole Trader/Partnership Unlimited Liability

Public/Private Company Limited Liability

31
Q

Is a private company’s shares available on the ASX?

A

No

32
Q

Is a public company’s shares available on the ASX?

A

Yes

33
Q

What does the abbreviation ‘Pty Ltd’ stand for and what does it identify?

A

Proprietary Limited

Private Company

34
Q

What does the abbreviation ‘Ltd’ stand for and what does it identify?

A

Limited

Public Company

35
Q

What does the abbreviation ‘Inc.’ stand for and what does it identify?

A

Incorporated

Private or public company

36
Q

What is a float?

A

The first time shares of a business are issued for sale.

37
Q

What is a prospectus?

A

A publication giving details about an upcoming float to inform potential shareholders.
Required by law.

38
Q

What is the difference between a current or non-current asset/liability.

A

Current assets/liabilities are sold/paid off within 12 months.
Non-Current assets/liabilities are sold/paid off after 12 months.

39
Q

State the formula for calculating net profit.

A 
Revenue
         COGS -
Gross Profit =
   Expenses -
    Net Profit =
40
Q

What is the difference between liquidity and solvency/gearing?

A

Liquidity is ability to pay of current liabilities.
LCD - Liquidity Current Debt
Solvency or gearing is ability to pay off all liabilities.
GAS - Gearing All Solvency

41
Q

Identify two advantages of opening a new business.

A

Freedom

Free goodwill

42
Q

Identify two disadvantages of opening a new business.

A

High cost

No customer base or known brands

43
Q

Identify three advantages of purchasing an existing business.

A

Instant cash flow (WIWO/turnkey)
Keep experienced staff
Inherit reputation

44
Q

Identify two disadvantages of purchasing an existing business.

A

Lack of flexibility

Pay for goodwill

Prelim Business Studies (5 decks)

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