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Business Jan Exam > LO1 > Flashcards

LO1 Flashcards

1
Q

What are the 3 types of business activities

A

Primary
Secondary
Tertiary

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2
Q

What is the key purpose of the primary sector

A

It the source and extracting of raw materials which ranges from mining to gas extraction

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3
Q

What countries are suitable for the primary activity

A

Early stages of industrial development

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4
Q

What is the purpose of the secondary activity

A

Manufacture products. These can be finished products sold to retail customers or components sold to business customers and used in production for other products

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5
Q

What is a retail customer

A

Customers who buy finished products e.g frozen peas from a super market

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6
Q

What are business customers

A

Businesses that purchase products or services from another business

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7
Q

What counties suit secondary activities

A

Countries that are becoming more industrialised

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8
Q

What is the purpose of the tertiary activity

A

The provision of services. These can be to the public such as hairdressing, schools etc

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9
Q

What countries suit tertiary activity

A

More industrialised which have a demand for services which leads to growth in provision

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10
Q

What is the private sector

A

Businesses that operate and aim to make a profit. They range from large to small businesses

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11
Q

What is the third sector

A

Do not aim to make a profit and are not government owned. They rely on donations , fundraising & grants and they are to help people

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12
Q

What is a sole trader

A

Owned by one person, the owner can employ others to work along side and most common form of ownership in the UK

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13
Q

What are the advantages of a sole trader?(6)

A
  • often start a business with limited finance
  • few legal requirement when’s starting up
  • solely responsible for decision making
  • choose own working hours and holidays
  • likely relation is built with customers as they deal with them directly
  • do not have to share profits with other owners
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14
Q

What are the disadvantages of a sole trader?(4)

A
  • have unlimited liability
  • do not have co owners to discuss decisions with
  • work long hours and take few holidays
  • lack of finance may effect business
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15
Q

Who is a sole trader most suitable for?

A

Individuals who have an entreprinising business idea or people wishing to start a business along employed work.

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16
Q

What is a partnership?

A

A business with a minimum of two partners, best set up using a deed of partnership. Different partners have different liabilities

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17
Q

What are the advantages of a partnership?(4)

A
  • others to discuss making decisions with and cover sickness/holidays
  • more finance available
  • partners have different areas of expertise which is beneficial to the business.
  • few legal requirements for starting a business
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18
Q

What are the disadvantages of a partnership?(6)

A
  • decision making may take longer
  • disagreements could cause arguments which effect service
  • all profits shared
  • unlimited liability
  • unequal work time / holidays may call resentment
  • business does not have a separate legal identity so if a partner dies the partnership would end
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19
Q

What is a partnership most suited for?

A

Commonly used for professional services such as doctors surgeries & solicitors

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20
Q

What is a ltd?

A

Private limited company

21
Q

What is a plc

A

Public limited company

22
Q

What is a private limited company

A

Separate legal identity to owners. Shares in the business are sold to raise finance. People purchasing friends are either family or friends of the business

23
Q

What are the advantages of a private limited company?(4)

A
  • company is separate legal identity so owners and shareholders have limited liability
  • shares can be sold to raise additional fund
  • owners can choose to whom shares are sold
  • owner can keep in control of business as long as they limit the number of shares sold to others
24
Q

What are the disadvantages of a private limited company?(3)

A
  • becoming a limited company can be expensive and lengthly by processing the legal documents and sent to registrar of companies who issue a certificate of incorporation
  • shares cannot be sold to the general public which limits finance
  • shares cannot be transferred or sold unless permission gained from other shareholders
25
Q

Who is a private limited company most suited to?

A

A small business becoming a limited company which provides less risk to the owners. Some big businesses such as Coca Cola are still a private limited company taking the benefits of limited liability and control over decision making

26
Q

What is a public limited company?

A

Separate legal identity and shares are sold publicly via the stock market. Business must have a share capital of more than £50.000, at least 2 directors, at least two share holders and a qualified secretary

27
Q

What are the advantages of a public limited company?(4)

A
  • shareholders benefit from limited liability
  • as shares can be sold on the stock market large amounts of capital can be raised if required
  • shares can be bought, sold and transferred easily
  • a plc has a high profile so may find it easier to attract new customers and reliable suppliers and banks may be willing to lend them more money
28
Q

What are the disadvantages of a public limited company?(6)

A
  • accounts are in public domain so anyone even competitors can view them
  • decision making may be lengthly
  • legal process is lengthly and costly
  • issuing further shares can be costly and includes legal costs
  • original owners are unlikely to retain full control over decision making
  • greater risk of take over
29
Q

What are public limited company’s most appropriate for?

A

Businesses that raise large amounts of capital

30
Q

What is a state/government is owned business?(public sector)

A

Owned by government such as BBC, and government identifies its aims and objectives and appoints a board of directors to run it.

31
Q

What are the advantages of state/government owned businesses?(3)

A
  • support from the government ensures they survive
  • some industries would be inefficient to have more than one provider
  • government can support large businesses struggling to survive e.g northern rock
32
Q

What are the disadvantages of state/government owned businesses?(2)

A
  • businesses that are not answerable to shareholders to regarding profits therefore don’t prioritise cost control
  • these businesses can be used for political gain which increase cost and inefficiency
33
Q

What is best suitable for state/government owned businesses?

A

Large organisations that provide a vital product or service to the population

34
Q

What is a charity / non profitable business?

A

This is voluntary work and community groups. They have charitable aims , they make a profit but invest it into supporting their cause

35
Q

What are the advantages of charities?(3)

A
  • the same as sole traders
  • quick and easy to set up
  • same advantages as limited company
36
Q

What are the disadvantages of a charity?(6)

A
  • same disadvantage of sole trader
  • depend on volunteers
  • same disadvantages as limited company
  • expensive to set up
  • annual accounts must be provided
  • some use aggressive commercial tactics
37
Q

What is a community interest company?(CIC)

A

A limited company that aims to benefit the communities or trade with a social purpose rather than high profits

38
Q

What are the advantages of a CIC?(2)

A
  • company has its own separate legal identity

- reputation of the business may be enhanced

39
Q

What are the disadvantages of a CIC?(2)

A
  • Documents must be completed and sent to registrar of companies
  • tax must be paid on profits
40
Q

What is a CIC best suited for?

A

Companies of all sizes that social/communal benefits at heart

41
Q

What is having a separate legal identity to owners and who has it?

A

It means the business rather than the owner would be sued therefore it will be for limited companies or charities not sole traders and partnerships

42
Q

What do a public limited company do to control decision making?

A

Shareholders elect a board of directors

43
Q

What Happens when a PLC is set up what needs to be done legal administrative wise?

A

PLC must produce and publish audited accounts and submit them to companies house

44
Q

What happens administrative wise once a sole trader is set up and trading?

A

They complete an income tax self assessment form

45
Q

What are the main 5 business aims and objectives

A 
Financial
Growth 
Survival 
Reputation 
Being enterprising
46
Q

What is the difference between an aim and a objective?

A

Aims are long term targets

Objectives will help you achieve your aim

47
Q

What helps a business have a good reputation?

A

Having a USP

48
Q

What is it meant by being enterprising?

A

Try and identify gaps in the market and remain competitive

Business Jan Exam (4 decks)

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