unit 1 chapter 3 Flashcards
The three types of categories of resources
Natural - raw materials
Labour- Staff
Capital - equipment
Business locations
land is zoned by governments to seperate commercial and industrial businesses and houses
Types of business locations
- Large suburban shopping centres
- Retail shopping strips
- online
- home based businesses
factors to consider when choosing location
- visibility
- cost
- close to customers/suppliers
- competitors
- complementary businesses
Sources of finance
- self funding
- Family or friends
- private investors
- crowd funding
- shares
Debt finance
- provided by banks
- paid back in regular payments
- interest and charges
bank overdraft
overdraw an account to an agreed limit
loan
secured- lower interest rate, must offer another asset as security
unsecured- higher interest rate, no need to offer security
mortgage
used to finance properties such as offices and factories.
Repaid in regular payments over years
leasing
paying money to use equipment that is owned by someone else
collateral
when a borrower pledges a property or a business to lender to secure repayment of the loan
government grants
the government provides finance to help promote exports, and start a business
must meet specific conditions set out by the government
factors affecting choice of finance
- terms of finance, the amount borrowed and length of loan
- business structure, equity finance and external finance
- overall cost, interests
- flexibility
- level of control
benefits of purchasing an established business
- stock and equipment
- existing customers and existing reputation
main reasons of starting a business from scratch
- identified a gap in the market
- to develop new goods and services
costs of developing a business from scratch
- high risk
- uncertainty
- difficulties securing finance
- may not have profits for a while
Legal business structure types
Sole trader (unincorporated)
Partnership (unincorporated)
Company(incorporated) private/public
sole trader
- one person owns
- other staff may be employed
- unlimited liability
- must register with ASIC if different to owner’s name
advantages of sole trader
- low start up costs
- complete control
- retain all profits
- no tax on profits, only personal income
partnerships
- 2-20 partners
- owners and partners are the same
- sleeping partner
advantages of partnerships
- lower costs to start and operate
- shared responsibilities and workload
- no tax on business profits
- business can continue if one partner dies
incorporation
when a sole trader or partnership becomes a company with a legal entity seperate from its owners known as shareholders
Private business
- Most common type in Australia
- min 1 shareholder and max 50 not employed
- shares only sold to those who are approved by directors
public business
- shares listed on the Austrlian Securities Exchange
- has limited or Ltd in it’s name
- min 3 directors, 2 must be in Australia
