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44 Cards in this Set
- Front
- Back
What is an organization and give an example |
It is a group of people who join together, each one with definitive task that must be completed in order to achieve the group's aims. Ex. Carrefour |
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What are the features of a sole trader |
-unicorporated/unlimited liability -ownership and control remain w sole trader -does not require high capital -direct contact w consumers -relatively easy to set up/ not alot of formalities |
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What are the characteristics of a normal Partnership |
It is a unincorporated business with unlimited liability. It is set up by 2 to 20 individuals who are involved in establishing a small-scale enterprise, and each partner is responsible for putting forward an amount of operating capital. |
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Why would have sold trader wish to expand their enterprise through a partnership |
Partnership are common for people who want to set up a bigger business than sole traders do but do not want to deal with many legal requirements operating capital. |
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What sort of conflicts with arise between partners and how would they be resolved |
Partners may disagree on who is entitled to receive more of the profits and who supplies more finance. Conflicts might also arise over decision-making and the tasks to be undertaken by each partner. These conflicts can be resolved by setting a deed of partnership the articulates the responsibilities and protection of each partner |
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Advantages of a sole Trader |
-Little capital is required to set up -the owner can establish and finance the business alone -Being self employed means control and management remains with the owner - the owner receives and manages 100% of the profit -the owner has freedom when making decisions -the owner will be able to interact directly with consumers this results in loyal customers -few legal formalities it required -high confidentiality since the financial records will not be shared |
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Disadvantages of sole trader |
-There's unlimited liability -problems are not shared -limited sources of Finance - Bank loans are expensive and require security -growth would be slow and mainly dependent on "ploughing back" profits into the business -the owner bears all the losses -no continuity -lack of specialization because the owner is responsible for all the major tasks - cannot achieve economies of scale |
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Advantages of partnership |
-Additional partners provide additional capital -responsibilities for running the business are shared -partners bring new ideas skills and specialization to the business -losses are shared -risk is spread out -the partners have ownership and control of the business |
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Disadvantages of partnership |
-Unlimited liability -conflict between partners might result in the collapse of the partnership -the profit is shared - there is no continuity and if any of the partners decide to leave a new deed of partnership will be needed -partners are held responsible for the actions of other partners -capital is limited by the number of partners and what they can afford to invest in business |
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What are dividends |
The financial returns from shareholders investments |
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What are the features of a private limited company |
-Private limited company has a minimum of 2 owners that are entitled to a share of the companies profit. -The owners of a private limited company have to deal with some legal formalities -has limited liability, however owners cannot sell share to the public, on the stock Exchange market. |
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What are some of the legal formalities involved with the private limited company |
The certificate of incorporation, the articles of association, and the memorandum of association |
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A)What does the memorandum of association include B)What does the articles of association include |
A)Info about the business such as objectives, share capital, name and shareholders. B)Rules of managing the company and the rights and duties of the directors |
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What are the benefits of a private limited company |
Running a private limited company allows the people who established the company to keep control of it, as long as they hold the majority of the shares. If the business goes bankrupt, the shareholders only lose the amount of money they invested in the business due to limited liability. |
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What are the drawbacks of a private limited company |
if shares are sold to a large number of people there will be a loss of control and shares cannot be sold without the agreement of all other shareholders |
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What are the main features of a public limited company |
A public limited company is a large organization with the minimum of 2 and unlimited maximum number of shareholders. It is quoted on the stock market: its shares and advertised and sold to the general public through the stock exchange. There is a divorce of ownership |
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What is meant by divorce of ownership |
The shareholders own the company while the managers and directors run it |
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What happens in the Annual General Meeting |
The shareholders elect a board of directors |
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Advantages of public limited company |
-Limited liability -shares can be advertised and sold to the stock exchange -large amounts of capital can be raised because there is no limit to the amount of shareholders -the business will have a higher status of the public limited company making easier to obtain loans and credit |
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Disadvantages of public limited company |
-Many legal documents which can be time consuming and demanding -expensive -no privacy t -there's a possibility that owners may lose control over the company |
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What is the main difference between incorporated and unincorporated businesses |
Unlike unincorporated businesses, incorporated companies benefit from limited liability meaning that the owners have a separate legal entity from the enterprise. |
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What is a joint venture |
A joint venture is established when two businesses decide to work together on a project. |
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Advantages and disadvantages of operating a joint venture |
A joint venture allows firms to divide commercial risk, management, and profits. This will lead to sharing the initial and operating cost, and the benefit from specific professional knowledge and skills. As for the disadvantages, profits are shared between the two firms and conflicts may occur relating to the different objectives and balancing control. |
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Main features of cooperative |
Cooperative are privately owned companies that are established by group of people who join forces in terms of resources and work. Each owner is a shareholder who is entitled to 1 vote only. they are not quoted on the stock exchange. |
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What is meant by franchising |
The process of selling an original product or service, usually under an established brand name, to other businesses who then sell the product to consumers |
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What is the difference between a franchisor and a franchisee |
Franchisee is the company that wants to sell the good or service to Consumers. The franchisor is represented by the company that has the original idea and that sets the standard and the procedures to be followed in the selling of the product |
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Benefits of a franchise to franchisor |
-Fast expansion is possible by increasing the number franchises -money is raised from each new company that joins as a Franchisee -the sale of the Franchise license provides a large profit -thr Franchisee is responsible for the outlet's management problems. |
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Benefits of a franchise to franchisee |
-Training and direction is provided by the Franchisor -a well-known trading name brand reduces the risk of failure -advertising/ promotion is usually paid for by the Franchisor -major decisions have already been made by the franchisor - all supplies are obtained from this franchisor or from appointed suppliers - it is easy to obtain financing from lenders because the brand is already recognized |
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Drawbacks of a franchise to franchisor |
-The bad management of one Franchiser might affect the reputation of the whole business |
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Drawbacks of a franchise to franchisee |
-Lack of freedom making decisions -often no choice where to buy equipment -training maybe poor or inadequate if the Franchisor is substandard -license fee is costly and the share of the profit may be lost to franchisor |
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What is a close corporation |
It operates like a private limited company but has a maximum of 10 shareholders |
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What is a non-profit organization |
An organization that uses surplus revenues in order to achieve its objectives, rather than distributing them as profit |
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What is the purpose of setting up a non-profit organization |
It exists to raise money for "good" causes and to draw attention to the needs of disadvantage groups in society. It uses surplus revenues in order to achieve said objectives, rather than distribute them as profit |
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What is a social enterprise |
An organization that applies commercial strategies in order to maximize improvements in human and environmental well-being, rather than maximizing profits for external shareholders. |
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What advantages does a social enterprise have |
-ability to raise capital at below market rates -easy to publicize purpose and objectives -labor costs are below average |
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What is meant by the public sector |
The part of the economy concerned with providing various government services. |
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Who controls and owns the public sector |
The central or local government |
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What is a public corporation and what are its objectives |
Industries owned and run by the state and local government. -to provide services for community -to keep prices low -provide jobs -reduce costs -increase effeciency -stop loss making services |
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What does it mean if a business is Nationalized |
The business was originally owned by private individuals but was purchased by the government |
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Benefits of nationalized corporations |
-Provision of essential services even in remote areas -Consumers are protected from monopoly -avoid duplication of services -safety reasons -rescue of private sector industries that face bankruptcy and could result in Regional unemployment |
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Drawbacks of nationalized corporations |
-inefficiency because profit is not motive -increased burden on taxpayers -lack of competition -increased government intervention -private sector is crowded out |
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How do the objectives of Public sector businesses differ from the objectives of private sector businesses |
The aim of public sector businesses is to provide services to the community, whereas private sector businesses have profit as thier main motive. |
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Name two types of public sector businesses |
Municipal undertakings and public corporations |
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What are municipal enterprises |
Public sector business that mostly provides free services financed by local taxes |