Unit 1 Flashcards
5 major reasons why businesses exist
- create and sustain employment & develop skills of people
- drive innovation through R&D and new products
- contribute to infrastructure of the country
- pay taxes on profit earned & collected on behalf of the government
- create wealth by providing returns on investment
define mission statement
the businesses overall purpose
what to focus on to achieve the businesses mission statement
- organisational values
- non financial goals
- benefits of business to community and stakeholders
- how consumers will be satisfied
what is the objectives hierarchy
aim
mission
corporate objectives
functional objectives
what is the difference between corporate objectives and functional objectives
corporate objectives are set by the owners or the directors of the business which influence the functional objectives which are set at department level
5 key reasons why businesses set objectives
- provide quantifiable steps to achieve aims
- clarify direction of the business
- measure success of business against targets
- provide targets with aims of motivating and rewarding employees
- influence potential lenders and investors
factors influencing business objectives
- size
- sector
- market
- ownership
- consumer satisfaction
what are the 3 types of business ownerships
- public - driven by public interest, shareholders have limited liability, funded by government
- private - owned by private individuals or shareholders, driven by maximising profits,
- mixture - combination of both
what is a sole trader and whats its pros and cons
a business controlled and owned by one person
- pros: keep all profit, easy to set up, make all decisions
- cons: heavy workload, unlimited liability, difficult to raise finance
what is a partnership and whats its pros and cons
a business owned by two or more people
- pros: workload shared, difficult skills, easier to raise finance
- cons: unlimited liability, shared profit, don’t always agree
what is a private limited company (ltd) and whats its pros and cons
a separate legal entity from its owners (shareholders) where shares shares cant be sold publicly
- pros: limited liability, retain control, easier to raise finance, customers trust more
- cons: high set up cost, time consuming, hard to motivate employees
what is a public limited company (PLC) and whats its pros and cons
a company that sells shares to the public through a stock exchange
- pros: raise finance through share capital, limited liability for shareholders, increased brand recognition
- cons: high set up cost, greater risk to hostile takeover, shareholders get dividends
what is a non-profit organisation and its pros
these business operate for purposes other than making a profit, profits are reinvested into their mission
pros: limited liability
what are cooperatives
a business owned and run by its members who may be employees, customers or stakeholders.
- Members share profits and decision making.
- They are common in sectors like agriculture and retail, primary goal of meeting member needs
what are social enterprises
business that trade for a social or environmental purposes.
- while they generate profit,primary goal is to benefit society.
- profits often reinvested rather than distributed to owners
what are joint ventures
- when two or more businesses collaborate to achieve a specific goal, sharing resources, risks and rewards. it can be temporary or long-term, but each business remains independent outside the venture
what are mutual organisations
owned by and run for the benefit of their members rather than external shareholders. Common in financial services, profits are reinvested or shared with members
define flotation
an occasion when a company’s shares are sold to the public for the first time
what is the difference between limited and unlimited liability
limited - owners or shareholders of the company are not responsible for all of its debts if the company fails
unlimited - shareholders of a company are responsible for all of the debts of a company if it fails
