Understanding business

Question 1

What are the 3 features of a public limited company?

Answer 1

Owned by shareholders
Controlled by directors
Financed through selling shares on the stock market

Question 2

What types of paperwork does a PLC need?

Answer 2

Publishing a company report
Annual financial report
Memorandum of association
Article of association
Yearly AGM

Question 3

Advantages of a PLC

Answer 3

Limited Liability
Large amounts of finance raised through share issue
Easier to borrow money
Easily dominate a market
Plenty of holiday cover

Question 4

Disadvantages of a PLC

Answer 4

A lot of legal requirements
Dividends shared among many shareholders
Lost control of business
Annual accounts must be published
Setup is costly and complicated

Question 5

What is a franchise

Answer 5

An existing business selling the rights to someone wanting to setup their own franchise of the pre established business.

Question 6

Why become a franchisee?

Answer 6

Starting a pre established business
Receive help and training from franchiser
Benefit from ideas from other franchisers

Question 7

Advantages to becoming a franchiser

Answer 7

Low risk
Low cost form of growth
Receive % of annual profits
Increased brand awareness

Question 8

Disadvantages to becoming a franchiser

Answer 8

One franchisee can tarnish the whole business
Only receive a share of profits
Have to provide training

Question 9

Advantages to franchisee

Answer 9

Well known already
Knowledge/training provided
Benefit from advertising

Question 10

Disadvantages to franchisee

Answer 10

Little decision making
Royalties have to be paid yearly
High initial start up fees

Question 11

What is a Multi National Company?

Answer 11

A company carrying out business in more than one country

Question 12

Advantages to MNC

Answer 12

Increased brand recognition
Accessing growing materials
Spread risk
Low production costs
Avoid trade tariffs
Can take advantage of exchange rates

Question 13

Disadvantages to MNC

Answer 13

Rules vary in each country
Cultural differences
Different languages
Different time zones
Shipping costs vary
Different currencies
Different demands in each country

Question 14

Features of the public sector

Answer 14

Owned by government
Controlled by g’ment
Aims to stay in budget
Finance raised through tax

Question 15

3 Levels of government

Answer 15

UK government
Scottish government
Local council

Question 16

What do the UK government do?

Answer 16

Deal with reserved matters
Eg defence, immigration

Question 17

What do the Scottish government do?

Answer 17

Deal with devolved matters - health, education, police and transport
Received money from uk government annually

Question 18

What do local councils do

Answer 18

Provide services eg social work, education and libraries

Question 19

What’re public corporations

Answer 19

Organisations founded by an Act of parliament

Question 20

What is nationalisation?

Reasons for this

Answer 20

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

Question 21

What is privatisation?

Reasons

Answer 21

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

Question 22

What do the voluntary organisations consist of

Answer 22

Charities
Voluntary organisations
Social enterprises