SECTION 1 Flashcards
(34 cards)
What are the 3 stages in which business activity was developed
i) Direct/ Subsistence production- attempting to make all ones needs and wants themselves
ii) Indirect production- specializing in producing what one is most skilled at and bartering any surplus made for other goods.
iii) Money – using something of value in exchange for goods and services
What is man’s economic problem
Mans unlimited wants
Limited Resources
Scarcity
Choice
- Opportunity Cost
What are the types of economic systems
- Free market/free enterprise/laissez faire
2.Planned/controlled/command
3.Mixed Economy
What is Free market/free enterprise/laissez faire economy
Most resource are privately owned. Everyone is free to use resources as they wish and choices are based on prices within the market.
What is Planned/Controlled/Command economy
All resources are government owned, choices are planned by government and the are is no
freedom of choice
What is Mixed Economy economic system
Combination of Mixed and Planned economy.Choices are based on both prices and government plans, resources are both privately and state owned and so
too are businesses
What are the two groups of mixed economies
Private and public enterprises
What are some private enterprises
1.Unit Trader
2.Sole trader
3.Partnerships
4.Multinational Company
5.Franchise
6.Holding Company
7.Conglomerate/Merger
8.Cooperative
9.Public Enterprises
What is a unit trader vs a sole trader
A one person owned and controlled business run from only one location while a sole trader is a one person owned and controlled business that is run from more than one
location[sole proprietorship for both]
1.What is the source of capital for a unit trader
2. What are the requirements to start the business
3. What are the characteristics of this business
- Owner’s savings or loans
- Registration of the business name
- Unlimited liability
What is the advantages of sole proprietorship
it is easy to start.
The owner enjoys all profits
Its affairs are private
The trader is its own boss
What is the disadvantages of sole proprietorship
The owner bears all losses
Unlimited liability for debts
Capital for expansion is limited
What is partnerships
An association of between two and twenty persons who contributed capital
to start a business.
What are the two types of partnerships called
Ordinary and limited
1.What is the source of capital for partnerships
2. What are the characteristics of this business
1.Savings of its partners and loans from financial institutions.
2.Active partners have unlimited
liability while limited partners have limited liability
What are the advantages of partnerships
It is easy to start
It requires little capital
Its affairs are private
Limited partners have limited liability
What are the disadvantages of partnerships
Active partners have unlimited liability
Profits have to be shared
Capital for expansion is hard to get
What is a Joint stock company and the types
an association of persons who have invested capital to
start a business.
Private limited Company (ltd)
Public Limited Company (plc)
What are the owners for Joint Stock Companies called
Shareholders
How much owners/shareholders are there for a plc and a ltd
[private limited company
]Ltd; two(2) and fifty (50)
[public limited company]Plc; a minimum
of seven (7).
What is the board of directors
The persons that are elected to control a company’s affairs
What are the 2 sources of capital of companies
Shares- issued for sale to investors in return for share of the profits. Its reward
is called dividends. Only the plc shares can be publicly sold.
Debentures- loans certificate which rewards the buyers with interest which must
be paid whether a profit is made or not.
What documents are needed for private limited companies
Memorandum of Association - document giving general company details
Articles of Association -document giving private company details
Statement of Nominal Capital- document stating the minimal amount of capital needed to
start the company.
Statutory Declaration- document in which founding share holders have agreed to start the
company
What documents are needed for public limited companies
Same as private limited companies but additionally;
Prospectus- a document giving the public details about the shares it intends to sell
