PR1

• The four factors of production

  Land, Labour, Capital and Enterprise/Entrepreneur
• Land


  Natural Resources, anything from in or on the earth.
• Labour


  People who provide their physical or mental labour.
• Physical Labour


  Labour which requires the use of a physical skill.

  eg Diggers.
• Mental Labour


  Labour which require the use of mental skills.

  eg Technicians.
• Capital


  Finance used to fund businesses and purchases. This also includes assets such as machines and equipment.
• Fixed Capital


  Assets used regularly by a business or investments with the purpose of being sold later on.
• Working Capital


  Raw materials and cash continuously used and renewed by a business.
• Enterprise/Entrepreneur


  The person or people who organises all four factors of production to successfully run a business.
• Business Enterprise


  Any operation established to produce or supply goods/services desired by consumers generally with a view to making a profit.
• Adding Value 1/2


  A business will add value to raw materials used in its production process so that there will be a significant difference between the cost of purchasing raw materials and the selling price of the finished article
• Adding Value 2/2


  Can also refer to 'extra' features of a product or service that go beyond the standard expectations and provide something 'more' while adding little or nothing to its cost.
• Types of Business Ownership

  - Sole traders

  - Partnerships

  - PLC (public limited companies)

  - Ltd (private limited companies)
• Sectors of Business


  Private sector

  Public sector

  Voluntary
• Advantages of being a Sole trader


  - Quick decision making

  - Owner keeps all profit

  - Cheap and easy to set up

  - Choose your own hours

  - Be your own boss
• Disadvantages of being a Sole trader


  - Stress as sole owner has to deal with everything

  - Illness or holidays can cause problems

  - No one to help with decision making or the work load

  - Unlimited Liability
• Where do sole traders get starting capital?


  - Savings

  - Grants from the government

  - Bank loans

  - Loans from friends or family
• How many 'partners' are needed in a partnership?


  At least 2 partners.
• Sleeping/Silent partner


  Invests capital in a business and makes profit, but does not get involved in the day to day running of the business.
• What legal document is signed in a partnership?

  Deed of Partnership
• Deed of Partnership


  A binding legal document which states the formal rights of partners in the business. responsibilities, profits, working hours etc are split.
• Advantages of a partnership


  - More skills in the business

  - More capital being invested

  - Workload can be shared

  - Fresh ideas

  - Easier to manage illness/holidays
• Disadvantages of a partnership


  - Profits must be shared

  - Disagreements may occur

  - One dishonest partner can affect everyone.

  - Unlimited liability
• Unlimited Liability


  if the business owner(s) do not have enough money to cover their debts the owner(s) will have to use their own money to ensure the debts are paid.
• Limited Liability


  Each shareholder is only liable for the original amount of money invested in the business.
• Limited Company


  A business organisation which has a separate legal entity from those of its owners. The liability of the members of the company is limited to what they have invested in the company.
• Ltd

  Private Limited Company
• PLC

  Public Limited Company
• How are limited companies owned?


  Ownership is divided into shares.
• Where can shares be traded?


  The stock exchange/market.
• Shareholders


  Investors who have a bought a share in the company.
• How do shareholders make profits?

  Dividends or selling shares for more than they cost to buy.
• Dividend


  The portion of corporate profits paid out to shareholders
• Types of shares

  Ordinary shares and Preference shares
• Ordinary Shares


  Shares which entitle the owner to a vote on which director should be elected, with no guaranteed dividend.
• Preference Shares


  Typically more expensive shares which don't allow the owner to vote but guarantee a dividend.
• Who manages limited companies?

  Board of directors.
• Who elects a board of directiors?

  Shareholders.
• Who is at the very top of a limited company?

  The managing director, other managers make day to day decisions.
• What legal documents are signed in a limited company?


  Memorandum of associations and Articles of associations.