Understanding Business Flashcards
Factors of production
Land .. ..
The natural resources such as oil water and the land itself
Factors of production
Labour . . .
The people employed by a business to make the product
Factors of production
Capital .. . .``
Man made resources which are needed to make a products such as machines tools and factories
Factors of Production
Enterprise
Combining all the factors of production by the entrepreneur
Primary Sector
Businesses that are involved in exploiting natural resources. Businesses from this sector will take raw materials from the ground.
Secondary Sector
Businesses that are involved in manufacturing and construction by taking natural resources produced in the primary sector and changing them into products.
Tertiary service sector
is when the business that are involved provide services such as banking and tourism
Sole Traders
Advantages and Disadvantages
Sole trader is a person who sets up the business by themselves.
Advantages: Sole trader gets to keep all the profits
Easy and cheap to set up
The sole trader takes all the decisions
Disadvantages : Sole traders have unlimited liability-which means if the business is not successful then the bank are not only take the business but the personal possessions as well
Hard to get finance as banks may not be willing to give you a loan as there is no records in the name of the business.
Partnerships
Advantages and disadvanategs
The type of business which is owned and controlled by two or more people but less than twenty. The business has a partnership agreement which is a legal document
Advantages: The work load can be shared between the partners
Each partners can specialise in each part of the business
More money can be invested into the business as there is more owners
Disadvantages :
Partnerships also have unlimited Liability
Arguments can happen between the partners on how to run the business
Partners may leave and new may join which can cause disruption on the running of the business
Limited Companies
Advantages and disadvantages:
Limited companies as there name suggest have limited liability. The shareholders are the owners of the business.
The main difference between the two is that public limited companies can sell their shares to the public through stock exchange and private limited companies cannot
Advantages: Large amount of capital can be raised by issuing shares.
Shareholders have limited liability. If the business fails, the shareholders will only loose the money they have invested into the business
Disadvantages:
Big organisations can be difficult manage properly or well.
It is more difficult to keep workers happy and well motivated in a big organisation.
Voluntary Third sector
Charities
the aim of organisations in this sector is not to make profits but to raise money for good causes or to provide facilities for their members.
Objectives of a business
Profit maximisation
This aims to make as much money as possible out of the business
Objectives of a business
Growth
To grow and increase market share, the business may have to accept lower profits as its costs will be higher and it may be selling at reduced prices
Survival
For some small firms this is the most important objective- they want to avoid having to close or being taken Overby bigger firms.
Social responsibility
Some businesses may wish to improve their public image by showing they are socially responsible.
