unit 3 aos 1 Flashcards
business
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
profit
is left after business expenses have been deducted from money earned from sales (revenue)
what is a sole trader business
- 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
Advantages of a sole trader
- Simplest and most inexpensive form of business in Australia
- owner = complete control
- no partner disputes
- less government regulation
- profit taxed as personal income
disadvantages of sole trader
- 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
what is a partnership
- 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 )
advantages of a partnership
- low startup cost
- shared responsibility and workload
- pooled funds + talent
- no tax on business, only on personal income
disadvantages of a partnership
- partners have unlimited liability
- possibility of disputes
- divided loyalty and authoritu
incorporation
the changing in ownership structure from sole trader or partnership to a company
what is a private limited company
- 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
advantages of a private limited company
- 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
disadvantages of a private limited company
- 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
what is a public listed company
- 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
advantages of Public listed companies
- 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
disadvantges of a public listed company
- 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
what is a social enterprise
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
advantages of a social enterprise
- 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
disadvantages of a social enterprise
- difficult to obtain capital to start the business
- significant operating costs
- may be difficult to focus on both social and financial objectives
what are government based enterprises?
a business that is government owned and operated.
- they carry out government policies while they deliver community services.
advantages of a GBE
- 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
BO: to make a profit
Profit is what is left after business expenses have been deducted from money earned from sales (revenue)
- BUSINESSES AIM TO MAXIMISE THEIR PROFIT
BO: to increase market share
Market share is a business’s proportion of total sales in a market or an industry.
- shows how B is doing against its competitors
BO: to improve efficiency
to minimise the resources used and/or to maximise the outputs generated from those inputs.
BO: to impove effectiveness
refers to how successful a business has been in terms of achieving its stated objectives.
BO: to fulfil a market need
BO: to fufil a social need
This objective involves the production and/or selling of goods and services for the purpose of making the world a better place.
BO: to meet shareholder expectations
bc shareholders = investors of the B
- they expect make a return on their investment
- thus expect to recieve a proportion of the profits (dividend)
Stakeholders
the people and groups that interact in some way with the business and have a vested interest (or stake) in its activities.
owners
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
shareholders
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.
managers
- 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.
employees
to be fairly remunerated, including through a salary and other benefits. they do the tasks that contribute to the acievement of BO
customers
suppliers
those who provide the resources for a business to use in tis production process
the general community
Members of the community expect that a business will give back to society something of what they take out in generating profi
