unit 1 Flashcards
definition of business
an organization that uses resources to create a product or service that satisfies the needs of customers (turns inputs into outputs)
starting a business pros
- can be your own boss (autonomy)
- can’t get fired (security)
- profit/money
starting a business cons
- financial issues (cash flow, start-up capital)
- strong competition
- not enough customers
economic sectors
- primary sector
- secondary sector
- tertiary sector
- quaternary sector
primary sector
the sector of the economy where natural resources are extracted, harvested and converted for use by other firms
secondary sector
the sector of the economy where resources are used to manufacture and produce products
tertiary sector
the sector of the economy which focuses on providing services to other individuals or companies (banks/insurance etc)
quaternary sector
the sector of the economy which is intellectual and knowledge activity based (ICT, research and development etc.)
definition of entrepreneur
an individual who takes the financial risk to create and manage a business
what is a IPO
“initial public offering” - made when a business wants to transfer from private ownership to public ownership, opening up the opportunity to sell stocks on the stock market
Elements of a business plan
- executive summary
- marketing and sales (what is the product, target audience)
- human resources (details of management team, staff to be recruites)
- operations management (location of shop/factory, what machinery is needed etc.)
- finance ( Where capital will come from. Projected profits and cash flow for 1+ years)
what is a sole trader?
an individual who owns and operates a business enterprise. They take all the risks but in return keep all the profits. They may hire employees to help run the business. They are unincorporated and have unlimited liability.
what is a partnership?
When two or more people combine to make a business enterprise, sharing the risks and also profits.
They are unincorporated and have unlimited liability.
main features of a sole trader
- takes all of the risks and keeps all of the profits
- unincorporated business and unlimited liability
- may hire employees
main features of a partnership
- shared responsibility
- shared profit
- shared start-up capital
- Based on a legal document called a deed of partnership (This can include, How much each partner puts in. How is the profit distributed. How much each partner will be paid. How a partner may leave.)
- unincorporated and unlimited liability
sole trader pro/con
PRO
- quicker decision making
- all profits kept
- easy to set up
CON
- unlimited liability
- less start up capital
- owner gets all the workload and stress
partnership pro/con
PRO
- more startup capital
- more knowledge
more insight into decisions
CON
- shared profits
- disagreements
- unlimited liability
private sector of the economy definition
Firms who are owned and controlled by the people, rather than the government
Usually run in order to make profit
public sector of the economy definition
the sector of the economy in which companies are controlled by the government, often with the aim of providing necessary goods and services for the community at a fair price
Run by government because:
Everyone has access to those services (e.g. hospital) at a fair price
The country can be made safe (e.g. Police/Army)
what are the 2 types of stakeholders and their definition
internal - directly involved with the business, effected by losses (Shareholders (investors),Managers, Employees
external - indirectly involved with the business (outside of business) (Customers, Suppliers, Government, Competitors, Pressure groups)
social enterprise definition
A business that makes revenue and profits but also has social and/or environmental objectives as part of its business model.
Its objectives is to make some profit (so don’t go bankrupt)
Benefits society
Privately held company defenition
- Incorporated
- Limited liability
- Owned by shareholders
Shares cannot be sold on the open market
publicly held company definition
They are Incorporated and have limited liability and owned by shareholders.
Shares can be bought freely on stock market.
Anyone can buy and sell shares easily and ownership is often split across numerous people who are not linked to the company.
Deed of partnership
- definition
- what does it state?
definition:
a legal document on which a partnership is based
what does it state?:
- How much each partner puts in
- How is the profit distributed
- How much each partner will be paid
- How a partner may leave
types of for-profit social enterprises
- producer cooperative
- consumer cooperative
- employee cooperative
for profit social enterprise cooperative definition
a social enterprise that seeks to maximise profits while maximising benefits to society and the environment in socially responsible ways
NGO definition
(Non Governmental Organisation)
a business with a social mission which operates outside of governmental control
traits/aims of for profit social enterprises that are a unlicensed sector company (public sector company)
TRAITS
- owned by the government
AIMS
- to get profit (so there are no losses)
- to raise tax money through profits
- to provide essential goods and services
How do businesses avoid conflicts?
- thinking of the importance of their stakeholders
- incorporating all stakeholders into business decisions
- thinking about the main goals and values of the business
incorporated company definition
when the business and owner have different legal identities (limited liability)
unincorporated company definition
the business and owner have the same legal identity (unlimited liability)
pro/con of incorporated business
PRO
- limited liability
- can be privately/publicly held
CON
- can be expensive to incorporate a business
pro/con of unincorporated business
PRO
- can be started with limited money
CON
- unlimited liability
Define the term Cooperative
For profit social enterprises owned and controlled by its members and run for the common benefit of its members. Decisions can be voted on by members democratically
Define the term Added value
Businesses also “add value”, whereby the output produced is worth more than the inputs.
E.g. a car is worth more than the sum of all the inputs
Define non-profit Social Enterprise
Businesses that are run not for the purpose of making a profit but to benefit society and environment
Their funding can come from:
Donations
E.g. British Red Cross
Selling goods and services
E.g. The Salvation Army
