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National 5 Business Management > Understanding Business - Part 1 > Flashcards

Understanding Business - Part 1 Flashcards

1
Q

What are needs?

A

Needs are the basic items required to survive

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2
Q

What are wants?

A

Wants are items that we do not need but improve our life and make is more enjoyable

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3
Q

What is an entrepreneur?

A

An entrepreneur is an individual who develops a business idea and combines the factors of production – land, labour and capital – to produce a good or provide a service, with the aim of making a profit.

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4
Q

What is the role of an entrepreneur?

A

Setting up a business is risky – it could be successful or it could fail

The entrepreneur has to decide
What to sell – goods and/or services
Where to sell
Who to sell to

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5
Q

What are the reasons for setting up a business?

A

They believe they can provide goods and services better than an existing business

To develop a hobby into a business

Inventing a new product

To be their own boss

Made redundant from job

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6
Q

What are the risks of setting up a business?

A

Giving up financial security of a wage/salary

Losing their investment if the business fails – could include their personal possessions

Uncertainty over demand for products/services

Competition may enter the market

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7
Q

What are the sources of help/advice?

A 
To reduce the risks when setting up a business an entrepreneur can get help and advice from a number of sources, for example;
Bank
Enterprise Agency e.g. Business Gateway
The Prince’s Trust
Other entrepreneurs
Lawyer
Accountant
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8
Q

What are the sectors of economy?

A

Private Sector
Public Sector
Third Sector

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9
Q

What type of businesses are in the private sector?

A

Sole Traders
Partnerships
Private Limited Company (Ltd)

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10
Q

What type of businesses are in the public sector?

A

Local Government

Central Government

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11
Q

What type of businesses are in the third sector?

A

Charities/Voluntary Organisations

Social Enterprises

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12
Q

What are the advantages of a sole trader business?

A

All profits kept by owner

Owner makes all decisions – fast decision making

Easy to set up as no legal paperwork

Small amount of capital needed to set up

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13
Q

What are the disadvantages of a sole trader business?

A

Owner has unlimited liability

Cannot share workload or decision making

Business could close if owner is ill or on holiday

Can be difficult to raise finance

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14
Q

What should be produced in a partnership?

A

A legal document called a Partnership Agreement should be produced. This will state:

The original investment by each partner
The split of profits (or losses) between partners
The responsibilities of each partner
Procedure if partner leaves

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15
Q

What are the main objectives of a partnership?

A

Main objectives are survival and profit maximisation

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16
Q

What are partnerships financed with?

A

Financed by owner’s savings, bank loan, bank overdraft and government grants.

Can also raise finance from a new partner joining the partnership

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17
Q

Who are partnerships owned and controlled by?

A

A business that is owned and controlled by 2-20 people (Partners).

Partnerships are owned and controlled by the partners

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18
Q

What are the main objectives of sole traders?

A

Main objectives are survival, profit maximisation and good relationship with local community.

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19
Q

What are sole traders financed with?

A

Financed by owner’s savings, loan from family or friends, bank loan, bank overdraft and government grants.

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20
Q

Who are sole traders owned and controlled by?

A

A business that is owned and controlled by a private individual.

Can employ others to work in the business.

No legal procedures required to start up.

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21
Q

What is the private sector financed by?

A

They are financed through owners investment, bank loan, grants and new investors.

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22
Q

What are the main objectives of the private sector?

A

The main objective of these businesses is to maximise profits.

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23
Q

Who are private sector businesses owned by?

A

Businesses in the private sector are owned by private individuals.

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24
Q

What is unlimited liability?

A

If the business owes money, then the owner will have to pay this debt which may mean that their personal possessions such as their car and home are at risk.

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25
Q

What does the “private” stand for in private limited companies?

A

“Private” means that they can only sell their shares to private individuals – usually family and friends

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26
Q

Who are private limited companies owned by?

A

Shares are owned privately (family and friends) and are not available on the stock market

Owned by a minimum of 1 shareholder

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27
Q

Who are private limited companies controlled by?

A

Controlled by a Board of Directors (who are usually shareholders)

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28
Q

What are private limited companies financed by?

A

Financed by shareholder investment, inviting new shareholders, bank loan, bank overdraft and retained profits.

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29
Q

What are the objectives of private limited companies?

A

Main objectives are to maximise profits, maximise sales, survival and growth

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30
Q

What are the advantages of a private limited company?

A

Owner(s) retain control

Easier to raise finance than sole trader or partnership

Limited liability for shareholders

Shareholders bring different skills

Company does not cease to exist if owner(s) dies

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31
Q

What are the disadvantages of a private limited company?

A

Profits are shared between all shareholders

Shares cannot be sold to the public – limits finance raised

Must register with Registrar of Companies; and

Abide by Company Law e.g. publish financial information

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32
Q

What is limited liability?

A

If the business gets into debt the owner (shareholders) will only lose the money they have invested in the business to buy their shares. Their personal possessions are not at risk.

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33
Q

Who is the public sector owned by?

A

Local Government

Central Government

34
Q

What are the main objectives of the public sector?

A

Main objectives are to provide a service to the public and use allocated budgets effectively (they do not operate to make a profit)

35
Q

What is the public sector financed by?

A

Financed via taxation

36
Q

Who is the central government controlled by?

A

Controlled by Ministers and elected MPs who influence policy and civil servants who manage departments.

37
Q

Public sector taxation include…

A 
Income tax (individuals)
VAT 
Council tax (individuals)
Business rates (businesses)
Corporation tax (businesses)
Road Tax
38
Q

What is the central government funded with?

A

Funded by income tax, corporation tax and VAT

39
Q

What does the central government provide?

A

It provides national services e.g. NHS, defence and the emergency services.

40
Q

Give examples of central government

A

Westminster

Scottish Parliament

41
Q

Give examples of local government

A

Dundee City Council

42
Q

What does the local government provide?

A

It provides services such as education, environmental services e.g. refuse collection and leisure and recreation e.g. swimming pools

43
Q

What is the local government financed with?

A

Financed by central government grants, council tax and charges for local services

44
Q

Who is the local government controlled by?

A

Controlled by elected councillors and civil servants who manage departments.

45
Q

What are the non-profit organisations?

A

Voluntary organisations

Charities

Social enterprises

46
Q

Describe organisations in the third (voluntary) sector

A

Organisations that operate in the third sector are known as non-profit making organisations.

47
Q

Describe the ownership of voluntary organisation

A

There is no owner

Volunteers staff the organisation

48
Q

Who are voluntary organisations run by?

A

Voluntary organisations are run by a committee or elected volunteers.

49
Q

What are voluntary organisations financed by?

A

Finance is raised through grants (e.g. government, lottery) and charging a fee to join the organisation or attend groups

50
Q

Give examples of voluntary organisations

A

Girl Guides
Scouts
Sports Clubs

51
Q

What is the aim of a charity?

A

Aim is to raise finance to support a specific cause e.g. cancer research

52
Q

Who are charities owned and controlled by?

A

“Owned” and controlled by a Board of Trustees.

53
Q

Who are charities staffed by?

A

May have some paid employees but mainly staffed by volunteers

54
Q

How are charities financed?

A

Raise finance through donations from the public or businesses, lottery grants and income from charity shops

Charities do not pay tax

55
Q

Who are social enterprises owned and controlled by?

A

Owned and controlled by shareholders/directors

56
Q

How are social enterprises financed?

A

Finance by grants, loans and fundraising

57
Q

What are the main aims of social enterprises?

A

Main objective is to generate income for their specific social or environmental aim.

58
Q

How do social enterprises operate and run?

A

Operates like a private sector business but profit is reinvested into the social enterprise rather than paid to owners

Set up and run with a specific social or environmental aim e.g. The Big Issue

59
Q

What are the advantages of a social enterprise?

A

Help tackle social problems it has chosen

Publicity for the social issue promotes the business

Attract customers who appreciate the good causes they help

Attract good quality staff who want to help the social cause

Can sell shares to raise finance if they are a limited company

60
Q

What is an objective?

A

An objective is an aim, target or goal

61
Q

Objectives of an organisation will depend on…

A

Type of business
Size of business
Competition
Goods/services provided

62
Q

What are the main business objectives?

A

Profit maximisation

Providing a service

Social responsibility

Survival

Customer satisfaction

Growth/market share

Enterprise/innovation

63
Q

Describe profit maximisation

A

To bring in more income than costs

64
Q

Describe providing a service

A

To provide consumers with the service they want e.g. local government might aim to provide a high-quality education service

65
Q

Describe social responsibilities

A

By not harming the environment or community e.g. recycling schemes

66
Q

Describe survival

A

To continue trading, the other objectives would be pointless if the business did not survive

67
Q

Describe customer satisaction

A

To meet customers needs and expectations and encourage them to make repeat purchases

68
Q

Describe growth/market share

A

Increase the number of customers the business has

69
Q

Describe enterprise/innovation

A

Combine the resources needed to produce the product or service the consumer wants. It might involve developing a new idea and trying to satisfy customers needs in a different way

70
Q

Describe customers

A

All organisations have customers;

The customers of a hairdresser are the clients

The customers of a dentist are the patients

The customers of a school are the pupils

These are all EXTERNAL customers

Organisations also have INTERNAL customers – groups within the organisation.

71
Q

What are the 4 Ps?

A

Product, price, place, and promotion of a good or service.

72
Q

Describe place

A

Place refers to where the customer is able to purchase the product or service. This can include:

a retail store
an online store or app
directly from the manufacturer

73
Q

What kind of advice does a bank give?

A

A bank will give financial advice, e.g., on how also give to manage money coming in and going out of your business. A bank can also give advice about bank accounts and bank loans.

74
Q

.

A

.

75
Q

What kind of advice does a enterprise agency give?

A

For example, Business Gateway offers free business advice support service through local advisers. They offer training courses for people wanting to set up a new business and give advice on such things as preparing a business plan.

76
Q

What kind of advice does the prince’s trust give?

A

The Prince’s Trust provides practical and financial support for young people (13-30) setting up in business. It will assist them with producing a business plan, give advice on applying for grants and will also provide grants if certain criteria’s are met.

77
Q

What kind of advice do other entrepreneurs give?

A

Other entrepreneurs may give advice, for example, which suppliers to choose or what mistakes to avoid.

78
Q

What kind of advice does a lawyer give?

A

A lawyer will provide legal advice on business law, for example, Health and Safety at Work Act.

79
Q

What kind of advice does the internet give?

A

A vast amount of information is available online which provides advice for people thinking about starting up a business.

80
Q

.

A

.

81
Q

What does the local government function

A 
Education and Leisure Services 
Social Work 
Planning and Transport 
Environmental Services 
Housing 
Finance
Information Technology
82
Q

What factors influence customers?

A 
Quality of products 
Packaging 
Up-to-date, fashionable products 
Competitive prices value for money 
Product/business Image

National 5 Business Management (6 decks)

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