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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
What does the "private" stand for in private limited companies?
“Private” means that they can only sell their shares to private individuals – usually family and friends
26
Who are private limited companies owned by?
Shares are owned privately (family and friends) and are not available on the stock market Owned by a minimum of 1 shareholder
27
Who are private limited companies controlled by?
Controlled by a Board of Directors (who are usually shareholders)
28
What are private limited companies financed by?
Financed by shareholder investment, inviting new shareholders, bank loan, bank overdraft and retained profits.
29
What are the objectives of private limited companies?
Main objectives are to maximise profits, maximise sales, survival and growth
30
What are the advantages of a private limited company?
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
31
What are the disadvantages of a private limited company?
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
32
What is limited liability?
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.
33
Who is the public sector owned by?
Local Government Central Government
34
What are the main objectives of the public sector?
Main objectives are to provide a service to the public and use allocated budgets effectively (they do not operate to make a profit)
35
What is the public sector financed by?
Financed via taxation
36
Who is the central government controlled by?
Controlled by Ministers and elected MPs who influence policy and civil servants who manage departments.
37
Public sector taxation include...
``` Income tax (individuals) VAT Council tax (individuals) Business rates (businesses) Corporation tax (businesses) Road Tax ```
38
What is the central government funded with?
Funded by income tax, corporation tax and VAT
39
What does the central government provide?
It provides national services e.g. NHS, defence and the emergency services.
40
Give examples of central government
Westminster | Scottish Parliament
41
Give examples of local government
Dundee City Council
42
What does the local government provide?
It provides services such as education, environmental services e.g. refuse collection and leisure and recreation e.g. swimming pools
43
What is the local government financed with?
Financed by central government grants, council tax and charges for local services
44
Who is the local government controlled by?
Controlled by elected councillors and civil servants who manage departments.
45
What are the non-profit organisations?
Voluntary organisations Charities Social enterprises
46
Describe organisations in the third (voluntary) sector
Organisations that operate in the third sector are known as non-profit making organisations.
47
Describe the ownership of voluntary organisation
There is no owner | Volunteers staff the organisation
48
Who are voluntary organisations run by?
Voluntary organisations are run by a committee or elected volunteers.
49
What are voluntary organisations financed by?
Finance is raised through grants (e.g. government, lottery) and charging a fee to join the organisation or attend groups
50
Give examples of voluntary organisations
Girl Guides Scouts Sports Clubs
51
What is the aim of a charity?
Aim is to raise finance to support a specific cause e.g. cancer research
52
Who are charities owned and controlled by?
“Owned” and controlled by a Board of Trustees.
53
Who are charities staffed by?
May have some paid employees but mainly staffed by volunteers
54
How are charities financed?
Raise finance through donations from the public or businesses, lottery grants and income from charity shops Charities do not pay tax
55
Who are social enterprises owned and controlled by?
Owned and controlled by shareholders/directors
56
How are social enterprises financed?
Finance by grants, loans and fundraising
57
What are the main aims of social enterprises?
Main objective is to generate income for their specific social or environmental aim.
58
How do social enterprises operate and run?
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
What are the advantages of a social enterprise?
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
What is an objective?
An objective is an aim, target or goal
61
Objectives of an organisation will depend on...
Type of business Size of business Competition Goods/services provided
62
What are the main business objectives?
Profit maximisation Providing a service Social responsibility Survival Customer satisfaction Growth/market share Enterprise/innovation
63
Describe profit maximisation
To bring in more income than costs
64
Describe providing a service
To provide consumers with the service they want e.g. local government might aim to provide a high-quality education service
65
Describe social responsibilities
By not harming the environment or community e.g. recycling schemes
66
Describe survival
To continue trading, the other objectives would be pointless if the business did not survive
67
Describe customer satisaction
To meet customers needs and expectations and encourage them to make repeat purchases
68
Describe growth/market share
Increase the number of customers the business has
69
Describe enterprise/innovation
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
Describe customers
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
What are the 4 Ps?
Product, price, place, and promotion of a good or service.
72
Describe place
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
What kind of advice does a bank give?
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
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75
What kind of advice does a enterprise agency give?
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
What kind of advice does the prince's trust give?
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
What kind of advice do other entrepreneurs give?
Other entrepreneurs may give advice, for example, which suppliers to choose or what mistakes to avoid.
78
What kind of advice does a lawyer give?
A lawyer will provide legal advice on business law, for example, Health and Safety at Work Act.
79
What kind of advice does the internet give?
A vast amount of information is available online which provides advice for people thinking about starting up a business.
80
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81
What does the local government function
``` Education and Leisure Services Social Work Planning and Transport Environmental Services Housing Finance Information Technology ```
82
What factors influence customers?
``` 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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