Unit 1: Business Forms

Question 1

define the public sector

Answer 1

businesses that are owned and sometimes funded by the government

Question 2

what three things make up the public sector

Answer 2

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

Question 3

give an example of each of the three things that make up the public sector

public corporations -

public services -

municipal services -

Answer 3

public corporations - BBC

public services - NHS

municipal services - local libraries

Question 4

define the private sector

Answer 4

businesses owned by individuals for a specific purpose

Question 5

Give 3 examples of the private sector

Answer 5

Nike
Coca-Cola
Royal Mail

Question 6

Give 3 examples of the public sector

Answer 6

Wheatley Park School
The BBC
The NHS

Question 7

What is privatisation?

Answer 7

Privatisation is when the government sells businesses that they have owned and managed to private individuals and businesses

Question 8

What are examples of privatisation?

Answer 8

Royal Mail
Railways
Utilities
Social Housing

Question 9

Why would the government privatise?

Answer 9

• Raises finance for them
• Privately run businesses are considered more efficient

Question 10

What are the four ownership structures?

Answer 10

Sole trader
Partnership
Company
Not for profit

Question 11

define sole trader

Answer 11

owned by one person - they can employ people to help

Question 12

define partnership

Answer 12

owned by more than one person (usually 2-20) - a deed of partnership is needed

Question 13

define company

Answer 13

owned by shareholders
has gone through the incorporation process
shares are sold

Question 14

define not for profit organisations

Answer 14

has an objective other than for profit e.g British heart foundation

Question 15

What is the incorporation process?

Answer 15

the process of establishing a business as a separate legal entity and limited liability
shares can now be sold

Question 16

What are the 3 important documents needed in the incorporation process?

Answer 16

Memorandum of association
Articles of association
Registering with companies house

Question 17

what is limited liability

Answer 17

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

Question 18

what is unlimited liability

Answer 18

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

Question 19

what are 6 advantages of being a sole trader

Answer 19

• own boss
• can decide things quickly
• easy to set up
• keep all profit
• make own decisions
• finances are kept private

Question 20

what are 4 disadvantages of being a sole trader

Answer 20

• unlimited liability
• may lack finance
• heavy workload
• you may not have all the skills required

Question 21

what are 5 advantages of being a partnership

Answer 21

• share the workload
• more sources of finance
• more skills to utilise
• finances kept private
• easy, and can be cheap, to set up

Question 22

what are 4 disadvantages of being a partnership

Answer 22

• may disagree with partners
• unlimited liability
• liable for actions of all partners
• need to share profits

Question 23

Unlimited liability is not ideal, how do we get rid of it?

Answer 23

become a company through the incorporation process which requires the three important documents:

• Memorandum of association
• Articles of association
• Registering with companies house

Question 24

define shareholder

Answer 24

an investor and an owner

Question 25

define dividends

Answer 25

share of profit that is distributed to shareholders

Question 26

what are the two types of company? (define them)

Answer 26

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

Question 27

List the positives (3) and negatives (2) of Ltds:

Answer 27

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

Question 28

List the positives (4) and negatives (2) of Plcs:

Answer 28

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

Question 29

What is the purpose of not for profit organisations?

Answer 29

humanitarian causes ethical pursuits environmentalism social justice equality and equity

Question 30

equation for market capitalisation

Answer 30

market capitalisation = share price x number of shares

Question 31

define market capitalisation

Answer 31

The value of outstanding shares in a public limited company.

Question 32

why do people buy shares?

Answer 32

- primarily financial reasons - investment - dividends from profits - have more of a say in what happens in that business

Question 33

what are the risks of buying shares?

Answer 33

- external factors reducing share price - profits falling - less dividends - might not be able to sell shares for/ equal to what you paid

Question 34

what factors affect/influence share price?

Answer 34

Company’s performance Economy Competitors Trends Natural disasters

Question 35

what does rising shares mean for a business

Answer 35

- Reflect well on management - Happier shareholders - Easier to raise capital

Question 36

what does falling shares mean for a business?

Answer 36

- Reflects poor management - Difficult to raise capital - Vulnerable to takeover

Question 37

what are the four overarching areas to consider when determining the applicable ownership structure for a business?

Answer 37

- The mission (mission statement) - The objectives - Decisions i.e speed and complexity - Performance i.e how it is measured and how do they compete