Business Activity

Question 1

What is a sole trader?

Answer 1

A sole trader is a business owned by one person who’s unlimited liability.

Question 2

What is a partnership?

Answer 2

Partnerships are business owned by two or more people who generally have unlimited liability.

Question 3

What is a public limited company? (PLC)

Answer 3

Public limited companies are companies owned by shareholders who have limited liability.
Their shares are available for the general public to buy through the stock exchange.

Question 4

What is a private limited company? (LTD)

Answer 4

Private limited companies are companies owned by shareholders who have limited liability.
Their shares are not available others except with the agreement of other share holders.

Question 5

What are the advantages of being a sole trader?

Answer 5

They can keep all the profits.
They can make decisions by themselves.
They have full control over the business.
It’s easy to set up.

Question 6

What are the disadvantages of being a sole trader?

Answer 6

You have unlimited liability.
You have to raise all capital which can be hard.
Having full control over the business means high pressure.
Huge workload.

Question 7

What are the advantages of being a part of a partnership?

Answer 7

You have shared workload.
You have to raise less capital as the cost of capital is divided between the partners.
Less of a risk of losing money as debts are divided between the partners.
You limited liability.
More expertise.

Question 8

What are the disadvantages of being a part of a partnership?

Answer 8

You have to share the profits.
You have to consult with partners before making decisions which can make decision making harder and longer.
Arguments can happen between partners which can have a negative affect on the business.

Question 9

What are the advantages of being a part of a public limited company?

Answer 9

Better access to capital.
Spreading the risk of losing money across the shareholders.
Have a more flexibility of transferring and selling shares as opposed in a private limited company.
They have limited liability.

Question 10

What are the disadvantages of being a part of a public limited company?

Answer 10

harder to set up more forms to fill in = longer application process.
Control can be lost as anyone can buy shares and could even lead to a business takeover.

Question 11

What are the advantages of being a part of a private limited company?

Answer 11

More control over shares as opposed to a public limited company.
They have limited liability.
More credibility - easier to get loans from banks as they are well known.
Less tax compared to a sole trader.

Question 12

What are the disadvantages of being a part of a private limited company?

Answer 12

Harder and expensive to set up.
Hard setting up and closer.
More legal requirements.

Question 13

What is primary production?

Answer 13

The production/extraction of raw materials e.g. gold

Question 14

What is secondary production?

Answer 14

The manufacture of goods and services from the raw materials produced through primary production. E.g. food processing.

Question 15

What is tertiary production?

Answer 15

Tertiary production refers to the commercial services that support the production and distribution process. E.g Transportation.

Question 16

Why do people want to start up a business?

Answer 16

To fill a gap in a specific market.
To become independent.
To make a profit.
To have a secure job.
To combine work with hobbies - to make money doing the stuff you love.
Wanting a greater share of the rewards from the effort being put in.

Question 17

What are some aims for a business?

Answer 17

survival
increased profit
growth
increasing market share

Question 18

What is an aim?

Answer 18

An aim is a long term goal for a business this is usually unrealistic.

Question 19

What is an objective?

Answer 19

An objective is a short term goal for a business this is more realistic and can be something as simple as making a profit.

Question 20

What is a SMART target?

Answer 20

Specific: clearly state what is to be achieved, eg increased profits.
Measurable: the desired outcome is a number value that can be measured, eg increase profits by 10%.
Agreed: all staff are involved in discussing and agreeing an aim.
Realistic: the target is possible given the market conditions and the staff and financial resources available.
Timed: the target will be met within a given period of time, eg 12 months.

Question 21

What is internal growth?

Answer 21

Internal (organic) growth is when the business grows by hiring more staff and equipment to increase its output.

Question 22

What is external growth?

Answer 22

External growth is where a business merges with or takes over another organisation. Combining two firms increases the scale of operation.

Question 23

What is a franchise?

Answer 23

A franchise is an existing business that grants permission to another individual to sell the products and operate under the name of the existing business.