Understanding business Flashcards
What are the 3 features of a public limited company?
Owned by shareholders
Controlled by directors
Financed through selling shares on the stock market
What types of paperwork does a PLC need?
Publishing a company report
Annual financial report
Memorandum of association
Article of association
Yearly AGM
Advantages of a PLC
Limited Liability
Large amounts of finance raised through share issue
Easier to borrow money
Easily dominate a market
Plenty of holiday cover
Disadvantages of a PLC
A lot of legal requirements
Dividends shared among many shareholders
Lost control of business
Annual accounts must be published
Setup is costly and complicated
What is a franchise
An existing business selling the rights to someone wanting to setup their own franchise of the pre established business.
Why become a franchisee?
Starting a pre established business
Receive help and training from franchiser
Benefit from ideas from other franchisers
Advantages to becoming a franchiser
Low risk
Low cost form of growth
Receive % of annual profits
Increased brand awareness
Disadvantages to becoming a franchiser
One franchisee can tarnish the whole business
Only receive a share of profits
Have to provide training
Advantages to franchisee
Well known already
Knowledge/training provided
Benefit from advertising
Disadvantages to franchisee
Little decision making
Royalties have to be paid yearly
High initial start up fees
What is a Multi National Company?
A company carrying out business in more than one country
Advantages to MNC
Increased brand recognition
Accessing growing materials
Spread risk
Low production costs
Avoid trade tariffs
Can take advantage of exchange rates
Disadvantages to MNC
Rules vary in each country
Cultural differences
Different languages
Different time zones
Shipping costs vary
Different currencies
Different demands in each country
Features of the public sector
Owned by government
Controlled by g’ment
Aims to stay in budget
Finance raised through tax
3 Levels of government
UK government
Scottish government
Local council
What do the UK government do?
Deal with reserved matters
Eg defence, immigration
What do the Scottish government do?
Deal with devolved matters - health, education, police and transport
Received money from uk government annually
What do local councils do
Provide services eg social work, education and libraries
What’re public corporations
Organisations founded by an Act of parliament
What is nationalisation?
Reasons for this
This is taking a business from the public sector and the government buying it out and placing it in the public sector.
Economic reasons
Protect customers
Financial reasons
Vital for defence
Social reasons
What is privatisation?
Reasons
Shift of functions, activities and responsibilities from the government like the Royal Mail.
Restores profit motive
Improves efficiency by incentive to cut costs
Creates competitive market
Increases investment opportunities
Raises money for government
What do the voluntary organisations consist of
Charities
Voluntary organisations
Social enterprises
