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iGCSE Edexcel Business > Unit 1 - Business Activity and influences on business > Flashcards

Unit 1 - Business Activity and influences on business Flashcards

Business things (74 cards)

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1
Q

Financial aims or objectives

5 aims

A

Survival
Profit
Sales
Market share
Financial security

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2
Q

Non-financial aims or objectives

4 aims

A

Social objectives
Personal satisfaction
Independence
Control

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3
Q

Entrepreneur

A

Someone willing to take a risk in starting up or running a business.

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4
Q

Types of business ownership

8 types

A

Sole trader
Partnership
Limited companies (private/public)
Public corporations
Franchises
Social enterprises
Multinationals

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5
Q

Why might objectives change as businesses evolve?

5 types

A

Market conditions
Technology
Performance
Legislation
Internal reasons

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6
Q

Sole trader

A

A single person who is the exclusive owner of the business.

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7
Q

2 advantages of being a sole trader

A

Any 2 of the following:
The owner keeps all the profit.
They are independent - owner has
complete control.
It is simple to set up with no legal
requirements.
Flexibility - for example, can adapt to
change quickly.
Can offer a personal service because they are small.
May qualify for government help.

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8
Q

2 disadvantages of being a sole trader

A

Any 2 of the following:
Have unlimited liability.
May struggle to raise finance - considered too risky by those that lend money.
Independence may be too much of a
responsibility.
Long hours and very hard work.
Usually too small to exploit economies of scale.
No continuity - the business dies with the owner.

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9
Q

Partnership

A

When between 2 and 20 people own a business together.

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10
Q

Deed of partnership and what does it state?

4 statements

A

This is a legal document that states partners’ rights in the event of a dispute. It states:
- how much capital each partner will contribute
- how profits (and losses) will be shared among the partners
- the procedure for ending the partnership
- how much control each partner has
rules for taking on new partners.

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11
Q

2 advantages of partnerships

A

Any 2 of the following:
Easy to set up and run - no legal formalities.
Partners can specialise in their area of expertise.
The job of running a business is shared.
More capital can be raised with more owners.
Financial information is not published.

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12
Q

2 disadvantages of partnerships

A

Any 2 of the following:
Partners have unlimited liability.
Profit has to be shared.
Partners may disagree and fall out.
Any partners’ decision is legally binding on all.
Partnerships still tend to be small.

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13
Q

Private limited companies (Ltd)

A

A firm that is privately owned by shareholders.

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14
Q

2 advantages of Ltds

A

Any 2 of the following:
Shareholders have limited liability.
More capital can be raised.
Control cannot be lost to outsiders.
Business continues if a shareholder dies.
Has more status - for example, than a sole trader.

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15
Q

2 disadvantages of Ltds

A

Any 2 of the following:
Financial information has to be made
public.
Costs money and takes time to set up.
Profits are shared between more
members.
Takes time to transfer shares to new
owner.
Cannot raise huge amounts of money,
like PLCs.

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16
Q

Public limited companies (PLCs)

A

A company that sells shares on the stock exchange.

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17
Q

2 advantages of PLCs

A

Any 2 of the following:
Large amounts of capital can be raised.
Shareholders have limited liability.
PLCs can exploit economies of scale.
May be able to dominate the market.
Shares can be bought and sold very
easily.
May have a very high profile in the
media.

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18
Q

2 disadvantages of PLCs

A

Any 2 of the following:
Setting up costs can be very expensive.
Outsiders can take control by buying
shares.
More financial information has to be made public.
May be more remote from customers.
More regulatory control owing to
Company Acts.
Managers may take control rather than
owners.

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19
Q

Public corporations

A

A business organisation owned and controlled by the state/government.

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20
Q

Reasons for public ownership

5 reasons

A

Avoid wasteful duplication
Maintain control of strategic industries
Saves jobs
Fills the gaps left by the private sector
Serve unprofitable regions

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21
Q

Reasons against public ownership

4 reasons

A

Cost to government
Inefficiency
Political interference
Difficult to control

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22
Q

Limited liability

A

A legal structure in which the assets of the owners are considered to be separate to those of the business. If the business is sued the owners cannot lose their own possessions.

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23
Q

Unlimited liability

A

Where owners are fully responsible for all debts incurred by the business.

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24
Q

Which types of business ownership do not have limited liability?

2 businesses

A

Sole trader
Partnership

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25
Franchise
When a franchisor gives permission for its brand name to be used by a franchisee.
26
2 advantages to **franchisor**
**Any 2 of the following:** Fast method of growth. Cheaper method of growth. Franchisees take some of the risk. Franchisees more motivated than employees.
27
2 disadvantages to **franchisor**
**Any 2 of the following:** Potential profit is shared with franchisee. Poor franchisees may damage brand's reputation. Franchisees may get merchandise from elsewhere. Cost of support for franchisees may be high.
28
2 advantages to **franchisee**
**Any 2 of the following:** Less risk - a tried and tested idea is used. Back-up support is given. Set-up costs are predictable. National marketing may be organised.
29
2 disadvantages to **franchisee**
**Any 2 of the following:** Profit is shared with the franchisor. Strict contracts have to be signed. Lack of independence - strict operating rules apply. Can be an expensive way to start a business.
30
Social enterprise
A business that aims to improve human or environmental well-being.
31
Not-for-Profit
A business that aims to cover their costs through the products or services they provide.
32
Multinationals
A large business with significant production or service operations in at least two different countries.
33
Benefits of becoming a multinational
Larger customer base Lower costs Higher profile Avoiding trade barriers Lower taxes
34
Benefits of multinationals to a country/economy
Increase in income and employment Increase in tax revenue Increase in exports Transfer of technology Improvement in the quality of human capital Enterprise development
35
Possible drawbacks of multinationals to a country/economy
Environmental damage Exploitation of less developed countries Repatriation of profits Lack of accountability
36
Factors affecting the appropriateness of different forms of ownership | 5 factors
Growth Size The need for finance Control Limited liability
37
What do businesses in the **primary sector** do?
Extract raw materials from the earth.
38
What do businesses in the **secondary sector** do?
Convert raw materials into finished or semi-finished goods.
39
What do businesses in the **tertiary sector** do?
Provision of a wide variety of services.
40
Shareholders
A person or organisation that owns shares in a company.
41
Stakeholders
Someone who has an interest in a business' activity and decision making.
42
Factors influencing the location of a business | 5 factors
Proximity to market Proximity to materials Proximity to labour Proximity to competitors Nature of business activity
43
Nature of business activity examples | 4 examples
Services Office-based businesses Manufacturing and processing Agriculture
44
Factors for E-commerce stores to consider
Lower business costs Cost and availability of labour Proximity to transport infrastructure Reliable IT infrastructure and power
45
Why would a business choose to be located in a **less** economically developed country?
Businesses enjoy lower costs as they have to meet fewer legal requirements. Labour can be paid very low rates as no minimum wages exists. Employees and customers have less opportunity to pursue legal action.
46
Why would a business choose to be located in a **more** economically developed country?
Good infrastructure Highly-skilled workers High standards of living
47
Trade bloc
Group of countries situated in the same region that join together and enjoy trade without barriers.
48
Major trade bloc examples
EU NAFTA ASEAN
49
Brownfield sites
Areas of land that were once used for urban development.
50
Greenfield sites
Previously undeveloped areas of land, usually on the outskirts of towns and cities.
51
Assisted areas
Areas that are designated by a government as having economic problems and are targeted to receive support in a variety of forms.
52
Viability studies
Careful study of how a planned activity will work, how much it will cost, and what income it is likely to produce.
53
Globalisation
The business and economic integration of different countries through increasing freedoms in the cross-border movement of people, goods, services, technology and finance.
54
Opportunities of globalisation | 4 opportunities
Large markets Economies of scale Labour Reduced Taxation
55
Threats of globalisation | 4 threats
Increased competition Increased need to develop a profitable niche Vulnerability to international takeovers Greater risk from external shocks
56
Exchange rates
The price of a currency in terms of another.
57
Calculation for exchange rates
Value of currency 1 x Exchange rate = Value of currency 2
58
What does SPICED stand for?
**S**trong **P**ound (means) **I**mports **C**heaper (and) **E**xports **D**earer
59
What impact does a **fall** in exchange rate have?
Price of imports - RISES Demand of imports - FALLS Price of exports - FALLS Demand of exports - RISES
60
What impact does a **rise** in exchange rate have?
Price of imports - FALLS Demand of imports - RISES Price of exports - RISES Demand of exports - FALLS
61
The government's macroeconomic objectives
Positive economic growth Low levels of inflation Low levels of unemployment A healthy balance of payments
62
Inflation
A general increase in prices and fall in the purchasing value of money over time.
63
If tax rates fall...
Customers will have more money available to spend on goods or services. Businesses will have more money available to invest, increase their product range, or hire new workers.
64
If tax rates rise...
Customers will have less money available to spend on goods or services Businesses will have less money available to invest, increase their product range, or hire new workers
65
If government spending falls...
Businesses will have less demand for their goods or services, and their profit may fall.
66
If government spending rises...
Businesses will have more demand for their goods or services, and their profit may rise.
67
Sources of tax revenue
Corporation tax Income tax Sales tax Import tax Excise tax
68
Corporation tax
A proportion of profit is paid by private limited companies and public limited companies.
69
Income tax
Paid by workers based on their earnings.
70
Sales tax
Applied to purchases of certain goods, e.g. VAT
71
Import tax
Applied to products purchased overseas.
72
Excise tax
Applied to some manufactured products such as alcohol, tobacco and fuel.
73
Grant
An amount of money given especially by the government to a person or an organisation for a special purpose.
74

iGCSE Edexcel Business (6 decks)

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