Unit 1 - Understanding Business Flashcards
define a business
an organisation that makes, buys or sells goods or provides a service. All businesses aim to satisfy consumer needs and wants.
what is the difference between a need and a want?
needs are the basic requirements that are essential for survival such as food, water, clothing, shelter and warmth. whereas wants are things we would like to have but don’t need to survive. These include luxuries such as mobile phones or holidays.
define a good
products that you can see and touch (tangible) such as laptops, clothes or food.
define a service
products that you cannot hold or touch (intangible) such as public transport, a haircut or a visit to the cinema.
name the four factors of production
land, labour, capital, enterprise
in terms of the factors of production what is land?
natural resources available for production. Examples: fishing, farming and coal
in terms of the factors of production what is labour?
the human input into the production process. Examples: workers
in terms of the factors of production what is capital?
any man made resource that is used to create other goods and services. Examples: machinery, tools
in terms of the factors of production what is enterprise?
the idea the owner had to create the business. how the land, labour and capital is used to make a good or provide a service
what are the four sectors of industry?
primary, secondary, tertiary and quaternary
what is the primary sector?
concerned with the extraction of raw materials or natural resources from the land. Examples - farming, mining, fishing or oil production
what is the secondary sector?
concerned with manufacturing. This would involve taking the raw materials from the primary sector and converting them into new products. Examples - car manufacturers, food production or building companies.
what is the tertiary sector of industry?
concerned with providing a service. Examples - hairdressers, banks or cinemas
what is the quaternary sector of industry?
consists of those industries providing information services, such as computing, ICT (information and communication technologies), consultancy (offering advice to businesses)
what are the sectors of economy?
private, public and third
what are the type of organisations that would be in the private sector?
- sole trader
- partnership
- private limited company/public limited company
- Franchises
- multinationals
what is a sole trader?
a business owned by one person. Sole traders rely on their own savings, bank loans or loans from friends and family to fund their business.
advantages of sole traders?
- easy to set up
- sole traders retain all their profits for themselves
- make all the decisions
disadvantages of sole traders?
- can be difficult to raise finance
- unlimited liability
- heavy workload
what is a partnership?
can have a minimum of two and a maximum of 20 partners.
define a sleeping partner
A partner who invests but is not involved in the day-to-day running of a partnership
advantages of partnerships?
- more equity available to finance the business compared to a sole trader
- different partners bring different skills
- workload is shared
disadvantages of partnerships?
- unlimited liability
- profit is shared between the partners
- partners may not always agree on decisions for the business
what is a private limited company?
must have a minimum of two shareholders and is usually managed by a board of directors. The capital of a private limited company is divided into shares, with each member or shareholder owning a number of shares each.