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BEV UNIT 2 Pg7. > Types of businesses > Flashcards

Flashcards in Types of businesses Deck (28):
1

Explain the terms "Primary", "Secondary", and "Tertiary" industries.

P- This refers to firms/industries involved in the extraction of natural resources.
S- This refers to firms/industries involved in the conversion of raw materials obtained from the primary into manufactured components or finished goods.
T- This refers to firms involved in the provision of supporting services to any industry or to final consumer.

2

Identify the appropriate industry for each of the following business activities:
building | selling concert tickers | public transport |
cloth making | food manufacturing | orange growing |

Building - S
Selling concert tickets - T
Public transport - T
Cloth making - S
Food manufacturing - S
Orange growing - P

3

Generally, what are the factors considered in the determination of a business unit as a Small and Medium Enterprise (SMEs) ?

An SME is defined as an enterprise with an annual sales turnover under $100 million, or an enterprise with an employment size below 200.

4

Describe the features of a Small and Medium Enterprise.

Must know all 6.

Owner managed
- Normally managed and controlled by the owner himself.
- Relationship between owner and the employee is closer and less formal than in a large organisation.

Limited Capital

5

Features of Local Small and Medium Enterprise

Describe owner managed.

- Normally managed and controlled by the owner himself.
- Relationship between owner and the employee is closer and less formal than in a larger organisation.

6

Features of Local Small and Medium Enterprise

Describe Limited Captial.

- Financed by either personal savings or loans from relatives and friends.
- More difficult to obtain finance from commercial banks and other financial institutions because collateral is needed.
- Financing is a main problem for SME.

7

Features of Local Small and Medium Enterprise

Describe Small Numbers of Workers.

- Most employ small number of workers, mainly family members or relatives.
- Owner-manager often plays multiple roles such as that of production manager all the way to deliveryman.

8

Features of Local Small and Medium Enterprise

Describe Neighbourhood-based.

- Small business such as provision shops, pastry shops and clinics.
- Serving the neighboring community.
- Have a friendly and close relationship with their customers.

9

Features of Local Small and Medium Enterprise

Describe Inadequate Bookkeeping.

- Do not keep proper business accounts; therefore they have difficulties in computing real profit made.

10

Features of Local Small and Medium Enterprise

Describe Indispensable Owner Management.

- The owner is indispensable as he/she is the only person who
knows the details of operation. It is common to find changing ownership upon the retirement or death of the founder owners.

11

Explain the following terms:
holding company, subsidiary company, franchises, takeover.

Holding company
- A holding company is formed for the sole purpose of acquiring a controlling ownership in two or more competing corporations within an industry.
- The holding company has voting and management control in there acquired companies.

Subsidiary company
- A subsidiary company is one that effectively controlled through either partial or complete ownership of its voting stock by another company.
- The controlling entity is called its holding company.

Associate Company
- This fears to a business relationship between two companies where one company owns substantial interest, but less than a majority of the voting stock (between 20% - 50%) of another company.
- When two companies are related because they are both subsidiaries of a holding company; they are associates.

12

Terms used in Large Businesses.

Explain Holding company.

Holding company
- A holding company is formed for the sole purpose of acquiring a controlling ownership in two or more competing corporations within an industry.
- The holding company has voting and management control in there acquired companies.

13

Terms used in Large Business

Describe Subsidiary company.

Subsidiary company
- A subsidiary company is one that effectively controlled through either partial or complete ownership of its voting stock by another company.
- The controlling entity is called its holding company.

14

Terms used in Large Business.

Explain Associate Company.

Associate Company
- This fears to a business relationship between two companies where one company owns substantial interest, but less than a majority of the voting stock (between 20% - 50%) of another company.
- When two companies are related because they are both subsidiaries of a holding company; they are associates.

15

Terms used in Large Business.

Explain Franchises.

- Franchising refers to the methods Of practicing and using another person's philosophy of business. The franchisor grants the independent operator the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee.
- Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor.

16

Terms used in Large Business.

Explain Management buy-outs.

- A management buyout (MBO) is a form of acquisition where a company's existing managers acquire a large part or all of the company.
- The mangers and/or executives of a company purchase controlling interest in a company from existing shareholders.
- In most cases, the management will buy out all the outstanding shareholders and then take the company private because it feels it has the expertise to grow the business better if it controls the ownership. Quite often, management will team up with venture capitalist to acquire the business *because it is a complicated process that requires significant captial*.

17

Terms used in Large Business.

Explain Takeovers and mergers.

- A merger involved the mutual decision of two companies to combine and become one entity; it can be seen as a decision made by two "equals". The combined business, through structural and operational advantages secured by the merger, can cut costs and increase profits, boosting shareholders values for both groups of shareholders.
- A takeover, or acquisition, on the other hand, is characterized by the purchase of a smaller company by a much larger one. This combination of "unequals" can produce the same benefits as a merger, but it does not necessarily have to be a mutual decision. A larger company can initiate a hostile takeover of a smaller firm, which essentially amounts to buying the company in the face of resistance from the smaller company's management.

18

List three advantages each of a sole proprietorship, partnership and company.

Advantages of sole proprietorship, 7
Ease of formation, Full Control of business, flexibility, Direct reward, Savings in taxes, Secrecy, Ease of dissolution.

Advantages of partnership, 6
More funds available, Enhanced credit, increased specialization of management skills, possibility of growth, freedom of regulation, saving in taxes.

Advantages of private limited company. 5
More source of funds, perpetual life, specialized management skills, transferability of ownership, limited liability.

19

Distinguish between private and public sector organizations.

Wait

20

Three types of public enterprises:

Explain Ministries.

Ministries, which set the strategic and policy & direction for the various sectors. It overseas the development and regulation of the various sectors under its purview. For example, Ministry of Defence (MINDEF) and Ministry of Education (MOE).

21

Three type of public enterprises, involved in various economic activities.

Explain Statutory Boards.

Statutory Boards, established by an Act of Parliament, specialize in carrying out specific plans and policies of the Ministry with higher autonomy. For example, Institute of Technical Education (ITE) and Economic Development Board (EDB).

22

In Singapore, the public sector a.k.a government is involved in various economic activities through the following
Three types of public enterprises.
Explain Government-linked companies.

Government-linked companies, incorporated under the Companies Act, engage themselves heavily in diverse sectors of the national economy. The Government may wholly or partially own most of these companies. For example, Singapore Airlines (SIA), Singapore Technologies Engineering Ltd, Development Bank of Singapore (DBS).

23

Explain Private Sector Organisations.

The private sector is made up of organizations that are owned and run by private individuals to further their own interest. Usually, this would be to earn maximum profits for their owners and achieve the best possible return on the money they have invested.
Scale of business in the private sector ranges from the very small one-man operated business to a very large businesses that have thousands of owners (shareholders). For example, sole proprietorships and private limited companies.

24

Explain Public Sector Organizations.

Public sector organizations or state owned enterprises are directly or indirectly owned by the government and provide a broad range of goods and services to the community. For example, a legal system of laws and courts to settle disputes, the monetary system and the national defence system to protect our resources.

Scale of business in the public sector are generally large.

25

UNINCORPORATED BUSINESSES.
Sole Proprietorship.
Partnership, limited partnership.

INCORPORATED BUSINESSES.
Private Limited Company.
Public Limited Company.

UNINCORPORATED BUSINESSES.
Are businesses not recognized as legal corporation. Here the business is not seen as separate from its owner; in fact, the eyes of the law only see the owners.

INCORPORATED BUSINESSES.
Incorporation is equivalent to a legal form of birth for a company; a corporation is a legal personality, usually used to conduct business. Pte ltd co. Ltd co.

26

Features of Sole Proprietorship. (5)

1. A business owned and controlled by just one person although it may have many employees.
2. Oldest and most common form of business ownership.
3. Easiest form of business to start with limited funds. He is only required to register his business under the Business Registration Act by making an application to the Accounting and Corporate Regulatory Authority (ACRA) before commencement of his business.
4. Most are in retail and wholesale trading, building and construction, and service industries, e.g. Hair dressing salons, boutique, sundry shops and restaurants. Scale of operation is usually small.
5. There is no legal distinction between the personal property of the owner and the assets of the business. In the event of a business failure, his liability is unlimited and will extend to his personal properties.

27

Advantages of Sole Proprietorship. (7)

1. Ease of formation
Any person with legal status to act for oneself may start a business. Once the registration is approved by the Accounting and Corporate Regulatory Authority, ACRA, the owner can begin to do business. This can be done with a very little capital and without proper offices.
2. Full control of business
The owner decides how and when he wants to work. He has full control of the business.
3. Flexibility
The owner can make quick decisions and respond to changing situations.
4. Direct reward
The sole proprietor is rewarded directly from his own effort. His reward are proportionate to the effort put into the business.
5. Savings in tax
No tax is imposes on the proprietorship as a business organization. However, the proprietor must pay personal income tax in the net profit of the business as well as the salary he must pay himself. Personal income tax is on a graduated scale.
6. Secrecy
As the proprietor is doing business for himself, he does not share confidential information with anyone. This is especially useful if success of the business depends on a secret formula or special techniques known only to the owner.
7. Ease of dissolution
Should the owner decide to end the business, all he needs to do is to sell his inventory, pay his debts and de-register his business.

28

Disadvantages of Sole Proprietorship. (5)

1. Unlimited Liability.
The owner is personally liable to an unlimited extent for his business debts. There is no distinction between his personal and commercial assets. If his business f