LO1

Cards (48)

  • Business activities- tasks completed by a business to achieve its objectives
  • Primary activity- extraction and harvesting raw materials. Includes mining, agriculture, fishing, oil and gas extraction
  • Secondary activity - purpose is to manufacture product, can be finished products sold to retail customers or components sold to business customers and used in production
  • Retail customers- customers who buy finished products
  • Business customers- businesses that purchase products or services from another business
  • Tertiary activity- the provision of services to the public and businesses
  • Public sector - responsible for providing a wide range of public service. Financed via taxation, council tax payments, business rates, licence fees, selling products and services
  • Third Sector - Organisations that do not aim to make profit and are not government owned. They rely on fundraising, grants, donations
  • Business aims - a summary of what the business wants to achieve in the future
  • Recession- A period of economic decline where demand and output fall.
  • Economies of scale- cost advantage gained when the size of the business increases.
  • Memorandum of Association -A document that states what the company has been formed to do
  • Unlimited liability- assets can be freezed or taken away.
  • Limited liability- assets are protected
  • Sole Trader- One owner, unlimited liability, makes own decisions
  • Partnership- two or more owners, unlimited liability, joint control, share profits
  • Private Limited Company- Owned by one or more shareholders, shares are only bought privately and the business is incorporated, limited liability
  • Shareholder- someone who has an interest in the business
  • A memorandum of association is an administrative requirement of a private limited company
  • A form 12 is a declaration that all legal requirements of the company registration have been complied with
  • Key feature of a public sector organisation- its funded by taxation
  • The Companies Act requires a public limited company hold a shareholders meeting at least once a year
  • Who’s responsible for day to day decision making in a public limited company - shareholders
  • Requirement of the Partnership Act - profits must be shared
  • Main business activity of a secondary sector organisation - manufacturing goods
  • A community interest company is a social enterprise
  • Unincorporated Business- Sole traders and partnerships do not have separate legal identity.
  • Advantages of being a sole trader
    • Owner makes all decisions
    • Only needs little capital to start
    • No co-owners to discuss ideas with
    • Easy to set up as few legal requirements
    • Owner has total control
    • Keeps all profits
    • Financial affairs private
  • Disadvantages of being a sole trader
    • Lack of more capital (difficult to expand)
    • Lack of continuity (if owner dies the business may close down)
    • Difficult to find cover for holidays/ sick days
    • Unlimited liability(owner responsible for business losses)
    • Have to do multiple jobs in the business
  • Reasons for business failure
    • Lack of demand
    • Lack of customers
    • Lack of funds to start the business
    • Supplier issues- can't deliver on time
    • changes in law
    • competition
  • Disadvantages of a Partnership
    • Profits are shared
    • Disagreements could affect the service
    • Unlimited liability (owners responsible for business losses)
    • No separate legal identity (owners could be sued)
  • Advantages of a partnership
    • Workload is shared
    • Have someone else to discuss ideas with
    • Cover for sickness/ holidays
    • More finance available for investment
    • Easy to set up as little legal requirements
    • Can offer different areas of expertise
    • Financial affairs private (except for tax purposes)
  • Incorporated business- the business is separate from the people who own it
  • Disadvantage of a private limited company
    • The process takes a long time
    • Shared profit
    • Taxed from the first one pound profit
    • Financial documents are published
  • Advantages of a private limited company
    • Raises capital
    • Corporation tax
    • Control over who buys shares
  • Public limited company - form of incorporated business owned by shareholders
  • Advantages of a public limited company
    • Flotations raise large amounts of capital that can finance expansion
    • Benefit from greater media exposure and may be seen as more prestigious or reputable
  • Disadvantages of a public limited company
    • The stability is vulnerable to changes in share price
    • Directors are accountable to thousands of shareholders
    • Attract the media so incidents and public relations are widely reported
  • Articles of association- internal rules over including what the directors can do and voting rights of the shareholders
  • Aim - Long term and provides overall direction and focuses on the purpose and why of a project