business forms

• what is capital?

  money raised to start or develop a business
• what is unlimited liabilty?

  responsibility of all the debts of the business rests with the owner
• what is a dividend?

  money paid to a shareholder from the profits of a limited company
• what is a sole trader?

  business owned by one person
• what is a private limited company?

  business owned by at leat 2 shareholders
• what is a public limited company?

  a business owned by shareholders. shares in the business can be bought and sold on the stock exchange
• advantages of sole traders

  1. easy and cheap to set up 2) owner has complete control 3) keep all the profits 4) financial information is not shared
• disadvantages of sole traders

  1. unlimited liability 2) hours of work may be long 3) shortage of capital 4) skills shortage
• advantages of private limited companies

  1. limited liability 2) can raise more money 3) continuity 4) control over share sale
• disadvantages of private limited companies

  1. some financial information available 2) dividends 3) sale of shares is restricted 4) admin
• advantages of public limited companies

  1. ability to raise large capital 2) easier to borrow 3) limited liability
• disadvantages of public limited companies

  1. possibility of takeover 2) big businesses can be inefficient 3) financial information is available
• what is market capitalisation?

  represents the total market value of the issued share capital of the company.
• factors that affect a PLC's share price within the company

  1. financial performance 2) dividend policy 3) relationship with key investors 4) management reputation
• what factors affect a PLC's share price outside of the company's control

  1. state of the economy 2) general market sentiment 3) whether the company is a takeover target 4) alternative investment in the company's sector
• benefits of shares

  1. able to raise substantial funds if the business has good prospects 2) broader base of shareholders
• drawbacks of shares

  1. can be costly and time consuming 2) existing shareholders holdings may be diluted
• flotation

  shares issued on stock exchange for the first time
• rights issue

  fresh issue of new shares to existing share holders
• what is a share?

  individual part of the issued share capital of a company
• what are social enterprises?

  business that trade in order to benefit the community
• what is external constraint?

  something outside the firms control that can prevent it achieving its objectives
• what is a dividend cover?

  measures how well a firms dividends are covered by its profits for the year
• how to calculate market capitalisation?

  current share price x all shares
• what are real incomes?


  measures the amount of disposable income available to consumers
• factors that affect real incomes

  price inflation, wage growth, employment levels, interest rates
• what are interest rates?


  reward for saving and the cost of borrowing expressed as a percentage of money saved or borrowed
• what is equity finance?


  the finance that is provided by those who share the equity (ownership) of a company
• what is debt finance?


  finance provided by external finders who receive a return (interest) but do not own a share of the company
• what is profits warning?


  unexpected warnings indicating that market expectations will not be met resulting in a significant fall in share price
• what is a stakeholder?


  any individual who has an interest in the activities of a business