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Business from the book > unit 1 - chapter 2 & 3 > Flashcards

unit 1 - chapter 2 & 3 Flashcards

1
Q

advantages of operating as a sole trader

A
  • easy to start up and manage
  • freedom to make their own decisions
  • ## profits don’t have to be shared
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2
Q

challenges of working as a sole trader

A
  • lonely
  • demanding hours
  • difficult to raise finance (mainly own money)
  • risk with having unlimited liability
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3
Q

sole trader definition

A

a business that is owned and managed by one person, but it may employ other people

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4
Q

unlimited liability definition

A

occurs when an individual or group is personally responsible for all the actions of the business.

with sole traders, there is no distinction between the business and the person so they could lose their personal assets if the business has financial problems

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5
Q

company definition

A

a business organisation that has its own legal identity and that has limited liability

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6
Q

who owns a company

A

owned by shareholders

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7
Q

what happens if a company fails

A

shareholders lose the money they invested when they bought the shares but nothing else (limited liability)

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8
Q

what 2 ways can shareholders benefit from

A
  • the value of the company and the value of the shareholders part ownership may increase
  • shareholders may receive a cut of the companies profits (known as dividends)
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9
Q

incorporation definition

A

the process of establishing a business as a separate legal identity that allows it to benefit from limited liability

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10
Q

shareholder definition

A

an investor in and one of the owners of a company

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11
Q

limited liability definition

A

in the event of financial difficulties, the personal belongings of shareholders are safe

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12
Q

dividends definition

A

a share in profits of a company that are distributed to the holders of certain types of company shares

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13
Q

what is a private limited companies (LTD)

A
  • relatively cheap to start up
  • benefit from limited liability
  • shareholders can restrict who the shares are sold to
  • shares cannot be advertised and sold publicly
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14
Q

benefits of being a private limited company

A
  • the desire to retain control over the company
  • taking decisions in the company’s long term interests (shareholder in PLC seek short-term profits)
  • enjoying the profits generated by the company (dividends shared between fewer shareholders)
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15
Q

what are public limited companies (PLC)

A
  • tend to be larger the LTD
  • sell shares publicly
  • easier to raise finance
  • many more stakeholders
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16
Q

how do you measure the size of a PLC

A

market capitalisation

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17
Q

market capitalisaion definition

A

total value of the issued shares of a public limited company

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18
Q

market capitalisation equation

A

company’s current share price X the number of current shares

19
Q

advantages of being a public limited company (PLC)

A
  • easy access to capital
  • publicity (in media for size and importance, so free advertisement)
  • ability to take over other companies
20
Q

takeover definition

A

occurs when one company acquires control of another by buying more than 50% of its share capital

21
Q

privatisation definition

A

process under which sate sells businesses that it has previously owned and managed to private individuals and businesses

22
Q

what are public sector businesses

A

organisations that are owned by national or local governments

23
Q

what are the 3 elements of the public sector:

A
  • public corporations (owned by state but offer products for sale publicly
  • public services (NHS)
  • municipal services (services offered by gov e.g libraries)
24
Q

why do not-for-profit businesses exist

A
  • owners strong beliefs
  • provide a hobby to replace employment
  • to act change and create funding
25
Q

what are mutual businesses

A

characterised as a mutual business run for the benefit of their members, whether they are employees, customers, suppliers or the local community

26
Q

what are 3 types of co-operatives

A
  • consumer co-operatives
  • worker co-operatives
  • producer co-operatives
27
Q

what is the role of shareholders

A
  • influence decision making (1 share 1 vote)
  • annual general meeting (all shareholders invited receive a copy og the companies annual report)
28
Q

what are the 2 main things influences share prices

A
  • companies performance
  • economic conditions
29
Q

the effects of changes in share price of a company

A

rising share price :
- easier to raise capital
- easy to get loans
falling share price :
- difficult to raise capital
- vulnerable for a takeover

30
Q

2 reasons for changing business forms

A
  • growth/expansion, to gain more capital and limited liability
  • privatisation
31
Q

what is the external environment

A

influences on costs and demand

32
Q

what are 4 external factors

A
  • economic factors
  • demographic factors
  • market factors
  • environmental and social factors
33
Q

what are 2 examples of economic factors
(external factors)

A
  • consumers incomes
  • level of interest rates
34
Q

what are 2 examples of demographic factors
(external factors)

A
  • changes in migration
  • changes in birth and death rates
35
Q

what are 2 examples of market factors
(external factors)

A
  • changes in the power of competitors
  • growth in sales within the market
36
Q

what are 2 examples of environmental and social factors
(external factors)

A
  • consumers prefer environmentally friendly products
  • growth in popularity of fair trade products
37
Q

external environment definition

A

external forces that can have both a negative or positive effect on a businesses costs and sales

38
Q

market conditions definition

A

refers to number of features of a market such as the level of sales, the rate at which they are changing and the number and strength of competitors

39
Q

unit 2

A

-

40
Q

flotation definition

A

the process of a private limited company offering shares for sale on the stock market to therefore become a public limited company

41
Q

what are the pros of flotation

A
  • raise capital/external finance
  • stable business ownership structure
  • higher prestige (media coverage)
  • shareholders retain limited liability
  • become larger
42
Q

cons of flotation

A
  • very expensive
  • anyone can buy shares (no longer in control, potential takeover)
  • increased legal requirements (more info public)
  • short-term shareholders for profits
43
Q

PESTLE meaning (external factors)
unit 3

A

Political
Economic
Social
Technological
Legal
Environmental + ethical

Business from the book (10 decks)

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