unit 3 aos 1

Question 1

business

Answer 1

is any activity conducted by an individual/s to produce and sell goods and services that satisfy the needs of society as well as making a profit

Question 2

profit

Answer 2

is left after business expenses have been deducted from money earned from sales (revenue)

Question 3

what is a sole trader business

Answer 3

• Single owner
• may employ other people to work in the business, but the owner provides all the finance, makes all the decisions and takes all the responsibility for the operation of the business.
• the name of the business must be registered with the Australian Securities and Investments Commission (ASIC), but only if it is different from the name of the owner
• not a sperate legal entity

Question 4

Advantages of a sole trader

Answer 4

• Simplest and most inexpensive form of business in Australia
• owner = complete control
• no partner disputes
• less government regulation
• profit taxed as personal income

Question 5

disadvantages of sole trader

Answer 5

• owner has peersonal (unlimited) liability
• if owner dies = business dies
• difficult to raise finance for expansion
• owner needs tp perform a wide variety of tasks

Question 6

what is a partnership

Answer 6

• business owned by 2-20 people
  -not a seperate legal entity
• partnership can be established verbally or in writing or by implication ( written agreement is not compulsury)
• partnership has its own tax file number (so ATO can asses the partnership’s tax returns )

Question 7

advantages of a partnership

Answer 7

• low startup cost
• shared responsibility and workload
• pooled funds + talent
• no tax on business, only on personal income

Question 8

disadvantages of a partnership

Answer 8

• partners have unlimited liability
• possibility of disputes
• divided loyalty and authoritu

Question 9

incorporation

Answer 9

the changing in ownership structure from sole trader or partnership to a company

Question 10

what is a private limited company

Answer 10

• must have1-50 non employee shareholders
• must have one director
• shareholders can only sell their shares if approved by the directors
• business must have “proprietary limited” = “pty td” after its name
• sperate legal entity

Question 11

advantages of a private limited company

Answer 11

• easier to attract finance bc there is limited liability
• there is an experiamce management through board of directors
• company tax rate is lower than personal income tax rate

Question 12

disadvantages of a private limited company

Answer 12

• high cost of formation
• requirement to produce an annual report of audited accounts
• company is taxed on any profits and dividends + income from company to shareholders are also taxed as personal income

Question 13

what is a public listed company

Answer 13

• min 1 to no maximum number of shareholders
• listed in the australian securities exchange (ASX)
• must have atleast 3 directors with 2 residing in aus
• “limited”= “ltd” must be in its name
• must publish its audited financial accounts each year to public

Question 14

advantages of Public listed companies

Answer 14

• easier to attract finance bc there is limited liability
• there is an experiamce management through board of directors
• company tax rate is lower than personal income tax rate
• no restrictions on the transfer of shares or raising of money from public via shares

Question 15

disadvantges of a public listed company

Answer 15

• high cost of formation
• requirement to produce an annual report of audited accounts
• company is taxed on any profits and dividends + income from company to shareholders are also taxed as personal income

Question 16

what is a social enterprise

Answer 16

a business that produces goods/services for the market but operates with the primary objective of fulfilling a social need.
- majority of its profits are either reinvested into the business to improve its ability to fufill that social need or donated to a charity

Question 17

advantages of a social enterprise

Answer 17

• can open new markets bc it mau meet the needs that a commercial business chooses not to
• can have a positive effect on the profit and market share = customer satisfaction increased

Question 18

disadvantages of a social enterprise

Answer 18

• difficult to obtain capital to start the business
• significant operating costs
• may be difficult to focus on both social and financial objectives

Question 19

what are government based enterprises?

Answer 19

a business that is government owned and operated.
- they carry out government policies while they deliver community services.

Question 20

advantages of a GBE

Answer 20

• able to carry out government policies delivering community services in areas the private sector may hesitate to invest in
• provisions of healthy compition to businesses operating in the private sector - can lead to lower prices in the market where GBEs are cometing

Question 21

BO: to make a profit

Answer 21

Profit is what is left after business expenses have been deducted from money earned from sales (revenue)
- BUSINESSES AIM TO MAXIMISE THEIR PROFIT

Question 22

BO: to increase market share

Answer 22

Market share is a business’s proportion of total sales in a market or an industry.
- shows how B is doing against its competitors

Question 23

BO: to improve efficiency

Answer 23

to minimise the resources used and/or to maximise the outputs generated from those inputs.

Question 24

BO: to impove effectiveness

Answer 24

refers to how successful a business has been in terms of achieving its stated objectives.

Question 25

BO: to fulfil a market need

Question 26

BO: to fufil a social need

Answer 26

This objective involves the production and/or selling of goods and services for the purpose of making the world a better place.

Question 27

BO: to meet shareholder expectations

Answer 27

bc shareholders = investors of the B
- they expect make a return on their investment
- thus expect to recieve a proportion of the profits (dividend)

Question 28

Stakeholders

Answer 28

the people and groups that interact in some way with the business and have a vested interest (or stake) in its activities.

Question 29

owners

Answer 29

the people who operate/manage B on the day-to-day basis & have a vested interest
- bc they are likely to depend on the success of the business for their income or wealth.
- they business sucess is most likely to affect their reputation

Question 30

shareholders

Answer 30

Have an ownership interest and have a say in the conduct of the company as they are able to vote at an annual general meeting (AGM). The number of votes equate to the number of shares owned.

Question 31

managers

Answer 31

• have the responsibility of running a profitable or successful business.
• must ensure that the strategies that the business has implemented will achieve its objectives.
• IN RETURN THEY HOPE to be fairly remunerated, including through a salary and other benefits.

Question 32

employees

Answer 32

to be fairly remunerated, including through a salary and other benefits. they do the tasks that contribute to the acievement of BO

Question 33

customers

Question 34

suppliers

Answer 34

those who provide the resources for a business to use in tis production process

Question 35

the general community

Answer 35

Members of the community expect that a business will give back to society something of what they take out in generating profi