Topic 1: What is a Business

• Define Primary Sector 


  The extraction and production of raw materials
• Define Secondary Sector


  This refers to the part of the economy that transforms raw materials into finished goods through manufacturing, construction, or processing activities.
• Define Tertiary Sector


  Tertiary sector deals with providing services instead of making things. It includes jobs like teaching, banking, and healthcare.
• Quaternary Sector


  Quaternary sector focuses on knowledge-based services like information technology, research, and development.
• What does SMART stand for?

  • Specific

  • Measurable

  • Achievable

  • Realistic

  • Time-based
• Define Fixed Cost

  cost that doesn't change with the level of output
• Define Variable Cost/Direct Cost

  cost that change directly with the level of output
• Define Incorporated Business

  has a legal identity that is separate from the individual owners

  e.g. plc and ltds
• Define Unincorporated Business

  has no distinction in law between the individual owner and the business itself.

  e.g. sole traders and partnerships
• Define Limited Liability

  the owner of the business has no personal liability for the businesses debts as they have a separate legal identity
• Define Unlimited Liability

  is where the owner of the business is responsible for all of the debts within the business. There's no distinction between them.
• Define Private Limited Company (Ltd)

  is when the company's shares cannot be traded publicly and are owned by a limited number of shareholders
• Public Limited Company (Plc)


  is a type of company whose shares can be publicly traded on a stock exchange.
• Private Sector


  are owned/run by private individuals in an organisation; usually to make profit
• Public Sector


  are owned and operated by the government/local council. Their aim is to provide services and are funded by taxation. Their aim isnt to make profit
• Non Profit Organisation


  is a type of organization that doesn't distribute its surplus funds to owners or shareholders. Instead, it uses them to help pursue its goals or keep the organization running.
• Market Capitalisation


  the total value of all the company's shares.

  Calculated by share price x shares issued
• Stock Exchange


  is a marketplace where buyers and sellers trade stocks.
• Ordinary Share Capital


  money given to a company by shareholders in return for a share certificate that gives them part ownership of the company
• Profit maximisation


  is achieving the highest amount of profit in a given time period
• Added value


  is the increase in value of the product or service. The difference between the selling price and the cost of input to produce it
• Characteristics of LTD


  ㆍRaise capital through selling shares

  ㆍnot obligated to disclose their financial statements publicly

  ㆍrun by friends and families

  ㆍshares can not be brought on the stock market
• Characteristics of PLC


  ㆍShares are sold on the stock market

  ㆍstricter with following regulations

  ㆍfinancial statement must be public

  ㆍanyone can take over the company if they buy enough shares
• ordinary share


  represent ownership in a company. They give the shareholder a right to vote at the company's meetings and to receive any dividends declared.
• What are the factors that influence cost and demand?

  ㆍCompetition

  ㆍMarket Conditions

  ㆍIncomes

  ㆍInterest Rates

  ㆍDemographic Facgtors

  ㆍEnvironmental Issues and Fair trade
• Interest rate 


  is the cost of borrowing money or the earnings on a saved or invested amount.
• Advantage of Sole trader


  Easy to form

  Full control

  Quick Decision Making
• Disadvantage of sole trader


  a lot of workload

  difficult to raise finance

  limited expertise
• PLC's objective is to provide a return of investment for shareholders
• Advantage of PLC


  Raise large amount of capital through selling shares

  Has limited liability

  Value of shares is shown by market capitalisation
• Disadvantage of PLC


  Company directors are responsible for external shareholders so there may be conflict

  Risk of hostile takeovers

  Strict regulations to follow
• Advantage of LTD


  Shares are restricted on the stock market so there is less risk of conflict

  More control
• Disadvantage of LTD


  Limited opportunities for EOS

  Owners may not make all the decisions in the business
• Advantage of non-profit organisation


  Public support

  Tax exemption

  Purpose Driven instead of finance driven
• Disadvantage of non-profit organisation


  Rely on donations and grants

  No ownership

  Dependent on volunteers
• LTD's objective is to maximise profitability