Busimess Ownership And Growth Amd Aims Flashcards
(35 cards)
What is a sole trader?
A sole trader is a business owned and operated by one person. It is easy to set up but has unlimited liability.
What are the advantages of being a sole trader?
Sole traders have full control, keep all profits, and have simple setup procedures. It’s ideal for small, low-risk businesses.
What are the disadvantages of being a sole trader?
They face unlimited liability, limited capital, and may struggle with workload and business continuity.
What is a partnership?
A partnership is a business owned by two or more individuals who share responsibilities, profits, and risks.
What are the pros and cons of partnerships?
Pros: shared workload, more capital, combined expertise. Cons: shared profits, potential conflicts, and joint liability.
What is a private limited company (Ltd)?
An Ltd is a business owned by shareholders with limited liability. Shares are not publicly traded and are often owned by family or close associates.
What are the benefits of operating as a Ltd?
Limited liability, separate legal identity, easier to raise capital than sole traders or partnerships.
What is a public limited company (PLC)?
A PLC is a company whose shares can be sold to the public on the stock market. It requires at least £50,000 in share capital.
What are the disadvantages of a PLC?
Costly to set up, more regulation, risk of loss of control through share ownership, and public scrutiny.
What is the difference between the public and private sector?
The public sector is government-owned and funded (e.g. NHS), while the private sector consists of privately owned businesses aiming for profit.
What are not-for-profit organisations?
Not-for-profit organisations aim to achieve social or charitable goals. Any surplus is reinvested into the organisation rather than distributed as profit.
What are business aims and objectives?
Aims are long-term goals (e.g. growth), while objectives are specific, measurable steps to achieve those aims (e.g. increase sales by 10% in a year).
Why do business aims and objectives change over time?
They change due to market conditions, business performance, competition, new ownership, or economic/environmental factors.
What are economies of scale?
Economies of scale are cost advantages gained as production increases. Larger businesses can reduce average costs through bulk buying, specialisation, and efficient use of resources.
What are the risks of business growth?
Risks include loss of control, diseconomies of scale, cash flow issues, cultural clashes, and overtrading.
Evaluate the impact of limited liability on a business owner’s decisions.
Limited liability reduces personal financial risk, encouraging investment and risk-taking. However, it may reduce personal responsibility, and lenders may demand personal guarantees or collateral.
To what extent does business growth lead to increased profitability?
Growth can lead to economies of scale, brand strength, and market power. However, it may also cause diseconomies of scale, culture dilution, or financial overreach, harming profitability if poorly managed.
What are diseconomies of scale and how do they affect large firms?
Diseconomies of scale occur when a firm grows too large and unit costs rise. Causes include communication breakdowns, coordination problems, and decreased employee motivation.
Assess the advantages and disadvantages of becoming a PLC.
Advantages: access to capital, credibility, liquidity for investors. Disadvantages: costly floatation, regulatory requirements, pressure for short-term performance, and risk of takeover.
How do stakeholders influence business aims and objectives?
Owners may prioritise profit, while employees seek job security, and customers value quality. Objectives may shift to balance these interests, especially in public or ethical businesses.
What are internal and external causes of business growth?
Internal: reinvested profits, increased demand, innovation. External: mergers, acquisitions, franchising. Growth method affects speed, cost, and control.
How might business objectives differ between public and private sector organisations?
Private businesses focus on profit and growth. Public sector bodies prioritise service provision, efficiency, and public interest. Objectives are shaped by funding sources and stakeholder expectations.
Why might a business remain small rather than pursue growth?
To maintain control, reduce risk, keep flexibility, or serve a niche market. Some businesses value lifestyle over expansion, especially where growth adds complexity.
Explain the strategic considerations in choosing a business ownership structure.
Ownership affects control, liability, capital access, tax treatment, and legal complexity. Start-ups may favour sole trader status; larger firms may incorporate to access equity funding.
