Unit 1: Business Forms Flashcards
define the public sector
businesses that are owned and sometimes funded by the government
what three things make up the public sector
public corporations - enterprises - BBC
public services - offers a service to the nation - NHS
municipal services - basic services expected to be provided by a local council - local libraries
give an example of each of the three things that make up the public sector
public corporations -
public services -
municipal services -
public corporations - BBC
public services - NHS
municipal services - local libraries
define the private sector
businesses owned by individuals for a specific purpose
Give 3 examples of the private sector
Nike
Coca-Cola
Royal Mail
Give 3 examples of the public sector
Wheatley Park School
The BBC
The NHS
What is privatisation?
Privatisation is when the government sells businesses that they have owned and managed to private individuals and businesses
What are examples of privatisation?
Royal Mail
Railways
Utilities
Social Housing
Why would the government privatise?
- Raises finance for them
- Privately run businesses are considered more efficient
What are the four ownership structures?
Sole trader
Partnership
Company
Not for profit
define sole trader
owned by one person - they can employ people to help
define partnership
owned by more than one person (usually 2-20) - a deed of partnership is needed
define company
owned by shareholders
has gone through the incorporation process
shares are sold
define not for profit organisations
has an objective other than for profit e.g British heart foundation
What is the incorporation process?
the process of establishing a business as a separate legal entity and limited liability
shares can now be sold
What are the 3 important documents needed in the incorporation process?
Memorandum of association
Articles of association
Registering with companies house
what is limited liability
the business owners personal possessions and the business assets are separate.
if the business folds the owners personal possessions will not be used to pay off any debts
what is unlimited liability
the businesses personal possessions and the business assets are one.
if the business folds, the owners personal possessions will be used to pay off debt
what are 6 advantages of being a sole trader
- own boss
- can decide things quickly
- easy to set up
- keep all profit
- make own decisions
- finances are kept private
what are 4 disadvantages of being a sole trader
- unlimited liability
- may lack finance
- heavy workload
- you may not have all the skills required
what are 5 advantages of being a partnership
- share the workload
- more sources of finance
- more skills to utilise
- finances kept private
- easy, and can be cheap, to set up
what are 4 disadvantages of being a partnership
- may disagree with partners
- unlimited liability
- liable for actions of all partners
- need to share profits
Unlimited liability is not ideal, how do we get rid of it?
become a company through the incorporation process which requires the three important documents:
- Memorandum of association
- Articles of association
- Registering with companies house
define shareholder
an investor and an owner
define dividends
share of profit that is distributed to shareholders
what are the two types of company? (define them)
Private limited company (Ltd): shares can only be sold to family and friends (people must be invited to buy shares)
Public limited company (PLC): Shares can be sold to the general public via the stock exchange
List the positives (3) and negatives (2) of Ltds:
Positives:
- can retain control of the company
- can keep a larger share of profits
- can make decisions in the company’s long-term interests
Negatives:
- restricted on who they sell shares to
- unlimited liability
List the positives (4) and negatives (2) of Plcs:
Positives:
- can gain access to large sums of capital
- gain more publicity
- can take over other companies more easily
- unlimited liability
Negatives:
- shares sold on the stock exchange
- shares can be advertised in the media
What is the purpose of not for profit organisations?
humanitarian causes
ethical pursuits
environmentalism
social justice
equality and equity
equation for market capitalisation
market capitalisation = share price x number of shares
define market capitalisation
The value of outstanding shares in a public limited company.
why do people buy shares?
- primarily financial reasons
- investment
- dividends from profits
- have more of a say in what happens in that business
what are the risks of buying shares?
- external factors reducing share price
- profits falling
- less dividends
- might not be able to sell shares for/ equal to what you paid
what factors affect/influence share price?
Company’s performance
Economy
Competitors
Trends
Natural disasters
what does rising shares mean for a business
- Reflect well on management
- Happier shareholders
- Easier to raise capital
what does falling shares mean for a business?
- Reflects poor management
- Difficult to raise capital
- Vulnerable to takeover
what are the four overarching areas to consider when determining the applicable ownership structure for a business?
- The mission (mission statement)
- The objectives
- Decisions i.e speed and complexity
- Performance i.e how it is measured and how do they compete
