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Running a Business Flashcards

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1
Q

Advantages of setting up a business

A

Has the freedom to set up businesses as they desired
Able to determine the pace of growth and change
Cheaper to establish
Flexible location, target market, range of products

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2
Q

Disadvantages of setting up a business

A

High risk of uncertainty
Costumers are harder to attract
Profits may be slower to generate

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3
Q

Advantages of purchasing an existing business

A

Sales to existing costumers will generate instant income.
A good business history

Need to determine the value of the business

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4
Q

Disadvantages of purchasing an existing business

A

Staff are resistent to change
Possible negative word of mouth
Succsess of business may be due to owners personality and contacts

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5
Q

Franchising advantages

A

Franchisee doesn’t have to have previous business experience
The invesent risk may be lower
There is immediate benefit from the franchisor’s good will

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6
Q

What is an entrepreneur?

A

An individula who starts, operates and assumes the risk of a new business.
Motivation to make proift

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7
Q

What are the advantages of being self employed

A

Being your own boss (mkaing your own hours)
possibiity of making a profit
Challenge and reward
Develop of your own ideas

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8
Q

Disadvantages of being self employed

A

Hard work and long hours at the start (less employees, more efofrt to make profit)
Dealing with suppliers and customers
Unstable income (flucuation)
Failure
Mental and emotional stress

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9
Q

Three qualities of an entrepreneur

A

Seeking and taking advantaged of an oppurtunity
Establishing a shared vision
Demonstrating innovation resilience and initiative

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10
Q

What is Seeking and taking advantage of an opportunity

A

Finding a gap in the market where your idea would thrive in due to lack of competitors. Try to select a business that suits your strengths or personality.
An example of this is selling shows for women with big feet. Why?
becuase it is unlikely that popular shoe brands sell shoes for women with large feet.

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11
Q

WHat is establishing a shared vision

A

The ability to set objectives and have a vision for the future. Vision refers to a clear sense of direction that allows people to achieve a common goal.
Example is when two friends built a business and set a goal to make 49,500 over year and create an authentic business.

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12
Q

Demonstrating initiative, innovation and resilience

A

Initiative - resourceful and make smart quick decisions
Resilience - cope with ups and downs, adapt to change
Innovation - creating a new or significantly improves product

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13
Q

What investigations need to take place when a business opp has been identified?

A

Market Research
Demogrpahics
Competiton
Target Market
Location

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14
Q

What does market research include? Example

A

Collecting and analysing information about customers and business opportunities available
Helps to make better decisions based on consumer behaviour
Failure risk is reduced
EXAMPLE : Flybuys and loyalty cards help collect consumer behaviour making it easier to target them with certain products

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15
Q

Three steps of the market research process?

A

Problem is clearly stated to determine what needs to be measuerd
Primary info (facts, stats) Secondary (census data)
^This info needs to be analysed and interpreted

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16
Q

Why is location important?

A

When choosing a location you need to choose the place that will maximise revenue and minimise costs.
For example locating a store that products target teenagers will be in large popular shopping areas (Bondi Junction) this is reasonably close to suppliers which minimises delivery costs.

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17
Q

What are demographics?

A

Demo factors are population, characteristics that affect a consumers spending this includes age, gender, ethnicity, family size and income.
Examining a regions demographics pattern will provide a clear picture of possible costumers

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18
Q

What is competition?

A

The rivalry amongst businesses that try t supply needs and wants of a market.
Be mindful of the actions and strategies implemented by their competitors ad well as newcomers

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19
Q

What is a target Market?

A

A specific group of consumers that your business intends to sell its products or services. Businesses concentrate its marketing activities (ads) on that group.

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20
Q

What are the five types of legal ownership structures?

A

Sole trader, Partnership, Private company, public company, incorporated association

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21
Q

What are the two categories that the 5 entities can be seperated into.

A

Incorporated business entities
unincorporated business entities

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22
Q

What is a Incorporated business entities? what ownerships does it include.

A

The process that companies go through to be a separate legal entity. Meaning is the business exists in it own own rights. Whatever happens to the individual owners the business will still exist.
Private company
Public company
Incorporated association

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23
Q

What is an unincorporated business entities. What ownerships does it include.

A

Has no separate legal existence. The owner and business are one.
Sole trader
Partnership

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24
Q

What is a sole trader? Example

A

Is operated and owned by one person. Simplest and cheapest to establish (no employees)
Receives all profits and losses.
Unlimited liability, meaning they can be forced to sell personal assets to pay for business debts.
Tradesmen, Florists, Bakers

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25
What is a partnership? example
Owned and operated by 2-20 partners. Share all profits and losses. Unlimited liability, meaning the owner are responsible for business debts. Lawyers, Doctors
26
What is a private company? Example
2-50 shareholders. Small - medium in size and tend to be family owned. A private company must have Pty Ltd (proprietary limited Limited liability, cannot pay its debts, shareholders only loose money that they invested into the business. Example Retail, Food, Hospitality
27
What is a public company? Example
A public company can have unlimited number of shareholders and they are listed in the ASX (aus security exchange). Limited liability (Ltd) after its name. Example Netflix, Apple, Woolies
28
What is an incorporated association?
5 or more people that form an association. Small non-profit that can only conduct in the state it registered in. Simple and affordable type of structure. Youth Groups, Sports Clubs (Randwick Rugby)
29
One Advantage and Disadvanteged of each business category
Sole trader - keep profits Pay more tax Partnership - Shared control Split income IA - No personal liabilities Increase costs PC - Freedom and control, Personal liability Public company - Good publicity, Expensive
30
What is a loan (debt)
Loans come from external sources like Banks or Trade suppliers. Advantages Funds can be accessed easily Increased funds increase earning Interest payments are tax deductible
31
adv of loans
Advantages Funds can be accessed easily Increased funds increase earning Interest payments are tax deductible
32
dis of loans
Increased risk becuase of bank charges or intrest. Regular payments have to be made (starting a business has flucuating income)
33
What is equity?
COmes from within the business
34
Adv of Equity
Cheaper than other sources (no intrest) Owners that contribute retain control over how the finance is used Less risk
35
Disadvantages of Equity
Lower profits and lower return Long, expensive process to obtain funds
36
WHat is a loan?
Agreement to borrow a set of money that need sot be returned within a certain period of time.
37
two types of intrest rates?
Fixed - Locked amount for the term, if you want to make extra payments you will have to pay additional fees Variable - amount fluctuates over the term and if you want to make extra payments you don't have to pay extra.
38
What is a secured loan
Where the borrow offers an asset (house, car) that can be sold if money is not repaid. Lower interest rate
39
What is an unsecured loan
Borrower doesn't need to offer an asset but interest is higher.
40
4 key things to consider when running a small business
1. Regulations that affect the business’ operations 2. Marketing strategies to promote business 3. Ethical decisions and corporate social responsibility 4. Incorporate organisations that support small business
41
What state regulations and obligations include?
Abiding by work health and safety regulations Adequate and non – deceptive labelling of all foodstuffs and clothing. Taking out workers compensation insurance (if injured businesses are required to help said employee)
42
What business activities does the local government have control over.
Determining land zoning and approving new development applications Fire regulations and prevention facilities Size, shape and location of business signs Parking spaces and regulations
43
Three major regulations affecting business operations
Work healthy and safety Taxation Environmental regulations
44
What is the NSW law regarding WHS?
Ensure health, safety and welfare at work for employees by providing a safe system of work Employees must ensure the machinery or substances are handled, stored and transported safely All employers must take out workers compensation insurance
45
Three types of taxes affecting business
Income tax Company tax Fringe benefits tax
46
what is company tax?
Tax based on companies’ earnings and a rate of income tax for businesses
47
What are fringe benefits?
Benefits paid by employers that is provided ontop of a salary or wage.
48
What are goods and services tax?
A broad-based tax of 10% on the supply of most goods and services in Australia. Any business with a 75000-dollar turnover operating in AUS must register for GST.
49
What does the EPBC act of 1999 focus on and what does it stand for?
FEDERAL GOVERNEMNT The environmental protection and biodiversity conservation act protect the nine matters of national significance these include. Threatened species World heritage sites Coal seam gas developments The GBR marine park
50
What is NSW main law regarding environmental protection and what do they do?
The protection of environment operations acts 1997 (POEO act), They partner with business’, governments and community to reduce pollution, waste and protect human health to prevent the degration of the environment
51
What are the EPA’s responsibilities?
They are the overall environmental protection agency responsible for issuing and monitoring environmental protection licenses and have the power to fine or sue businesses and individuals who break the law
52
What is public relations as a form of advertising
Activities that create maintaining favourable relation between businesses and its customers
53
What is personal selling?
A sales representative directed to a costumer to make a sale.
54
What is relationship marketing?
Long term, cost effective and strong relationships with costumers (good cs)
55
What is sales promotion?
Activities and materials use to attract customers or interest discount, sample, coupons)
56
What is corporate social responsibility?
the way that a business considers the financial, environmental and social impacts of its decisions.
57
How can a business be socially responsible?
Avoid conflicts of interest Minimise pollution and waste Deal with employees honestly and fairly Become involved in the community Ensure fair prices are paid for al materials
58
What are the benefits of corporate social responsibility?
Improvement in staff turnover and absenteeism Employee productivity Improved reputation Increase in sales as a reward for social responsibility
59
What are some organisations that provide support and advice for small businesses?
Accountants Solicitors Bank managers ABS
60
How do financial records help make informed decision-making?
Finance records show an increase or decrease of sales, expenses that are due, stock amount and data on what items are selling businesses can use this information to make decisions on product price, increase or decrease in stock etc.
61
How do finance records help fulfil legal requirements?
Law requires all businesses to keep a range of records such as business registration documents, leases, contracts, expenses records, employment records and insurance documentation.
62
How do finance records help meet tax obligations?
Without accurate records to prepare businesses activity statements and annual income tax return owners may under-pay or overpay
63
How do financial records help obtain funding for a loan?
Lenders and investors want to see accurate financial records such as a balance sheet and income statements. so they are informed of your current financial situation (helping to demonstrate whether you can afford a loan)
64
How do financial records enable business owners to manage cash flow
IT can allow owners to see how much money they have available and whether this will be enough to meet their obligations when they are due.
65
How many years do sole traders and partnerships need to keep records?
5 years
66
How long do public and private companies need to keep records for?
7 years
67
What is an income statement?
A summary of the income earned, and the expenses incurred over a period of trading.
68
why are profit and loss statements important?
It allows business owners to see exactly how much money has come into the businesses as revenue how much has gone out as expenditure and how much has been derived as profit.
69
What is a balance sheet?
A statement of financial positions that show the financial position of a business
70
What are the three different sets of accounts in a balance sheet?
Value of assets Value of liabilities Proprietorship or owners’ equity
71
What is value of assets?
Items of value owned by a business. The assets at a diner may include, cash at the back, equipment, motor vehicle.
72
What is value of liabilities?
Liabilities are the debts owed by a business to others. Non-current liabilities need to be paid in longer than a year (bank loan)
73
What is owners’ equity?
Represents the value of the business to the owners. Also known as the capital as it represents the money the owner had invested in the business.
74
What are cash flow statements?
They indicate the movement of cash receipts (inflows and cash payments (outflows) helping businesses calculate it’s surplus or deficit.
75
What are 4 categories of taxation records?
Payments the business has received Expenses related to the payments the business has received Records relating to the purchase or sale of assets Tax deductible gifts, donations and contributions
76
What steps are used to prepare a profit and loss statement?
Step 1: record income earned Step 2: Record the cost of goods sold Step 3: revenue minus goods sold Step 4: Total expenses (wages, salaries) Step 5: Net profit/loss (gross product – expenses)
77
What does the federal government have control over?
Not engaging in misleading or deceptive advertising Registration of the business name unless the business carries the name of the owner (PAYG) income tax and fringe benefit tax supply employee superannuation
78
Factors that lead to success?
Prior work experience in the field Knowledge of the business Ability to learn from mistakes
79
Factors that lead to failure?
Not enough time or energy is invested Negative cash flow Inaccurate record keeping
80
What do you need inorder to value a business properly?
Business history including: Financial statements for the past few years Details of any assets the business owns legal documents e.g leases and insurance policies, registration papers Sales information as well as staff, supplier and customer information
81

Commerce (4 decks)

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