Theme 1 - 5.3 and 1 - 5.4 Business objectives and Forms of businesses Flashcards
What is sales maximisation ?
When businesses lower prices to gain market share
What is a sole trader ?
A person that sets up a business on its own , they can have employees but there is only one owner.
What is a public limited company (PLC) ?
Shares are floated on the stock market and can be bought by anybody.
What is a private limited company (LTD) ?
Shares can only be sold to friends and family.
What is a partnership ?
2-20 owners that set up a business as joint owners.
What is a franchisor ?
The person that sells the franchise.
What are the advantages of a sole trader ?
- Have full control over the business.
- all profits kept.
What are the disadvantages of a sole trader ?
- Unlimited liability.
- Don’t have economies of scale.
- more risky as you take on full burden of responsibility.
- Difficult to raise capital.
What are the advantages to a partnership ?
- Risk distributed on more people.
- Easier to raise capital.
- more ideas from multiple partners.
What are the disadvantages of a partnership ?
- loss of control of business.
- profits are shared.
- unlimited liability.
What are the advantages to a private limited company ?
- limited liability.
- more control over business as only family and friends can buy shares.
- share capital can easily be generated.
What are the advantages to a public limited company ?
- Limited liability.
- Share capital easily raised.
- Reduced risk.
What are the disadvantages to a public limited company ?
- cannot sell shares on stock exchange.
- Accounts cannot be kept private, public can see what capitals spent on.
What are the disadvantages to a private limited company ?
- Potential loss of control
- Short terminism ==> selling shares means that the company immediately can generate profits but in the long term they have lost some of the company.
