02) UK business banking sector types of customer

Question 1

What proportion of the economy do SME’s make up?

Answer 1

BIS oct 2015 -99.9% of all private sector businesses were small or medium sized
turnover 47% of annual turnover for UK economy

Question 2

Name the 3 main legal structures a company can take?

Answer 2

sole trader/partnership/plc

Question 3

What is segmentation and why do banks do it?

Answer 3

Segmentation is the separation of delivery channels to different types of customers usually differentiated by size. Enables them to manage and tailor relationships to the client better. Also helps with portfolio management in terms of value for the bank.

Question 4

Name 3 advantages of being a sole trader

Answer 4

• independent and responsible for their own decisions
• easy to set up business and few formalities involved
• all profits go to the proprietor
• no annual returns required, little information in the public domain

Question 5

Name 3 disadvantages of being a sole trader

Answer 5

• personally liable for the business debts and actions of the employees
• pay tax on the profit a business makes like income tax
• may be difficult to get credit from banks as little information in the public domain
• if the proprietor dies the business dies with them

Question 6

What rules govern a partnership act if there is no partnership agreement?

Answer 6

Partnership act 1890

A partnership agreement typically outlines debt and profit sharing ratios amongst the partners

Question 7

disadvantages of a partnership?

Answer 7

partners personally liable for whole partnership debts

complications arise if untimely death or exit of a partner

Question 8

Detail the three key documents for companies?

Answer 8

Certificate of incorporation - bit like its birth certifcate, details when and who founded it -issued by registrar of companies

• memorandum of association-location of office etc
• articles of association-regulates the internal operations such as borrowing power of the directors

Question 9

Differences between Public and Private limited companies

Answer 9

public - have shares that can be transferred without restriction

• public - unlike private can be traded on a stock exchange(not essential to quote on exchange)
• Public must have authorised share cap of more than 50,000 with at least 50,000 issued.
• public limited co need a trading certificate