OCR Cambridge technical level 3 business studies unit 1

• Primary activity


  - extract raw materials

  - e.g. mining, farming, fishing, extraction (gas, oil, mineral water)
• Secondary activity


  - manufacturing products

  - e.g. factories, mills, construction
• Tertiary activity


  - provides a service

  - e.g. retailers, personal services, business services
• Private sector


  - owned by individuals

  - e.g. TESCO PLC, Coca-cola Enterpises LTD
• Public sector


  -owned by the state/government

  - e.g. NHS, Ofsted, The British Army, BBC, Local authority refuse collection
• Third sector


  - run for social benefit that are not owned by the government

  -The British Red Cross, The Salvation Army, RSPB
• Sole trader


  - one owner

  - unlimited liability

  - full control over business

  - private sector

  - financial affairs are private
• Partnership


  - two or more owners

  - unlimited liability

  - joint control over the business

  - private sector

  -owners may disagree

  - profits must be shared

  - shared work load

  - another person to discuss ideas with

  - capital from each partner

  - financial affairs are private
• Private limited companies LTD


  - owned by one or more shareholders

  - bought and sold privately

  - incorporated

  - limited liability

  - directors control the business

  - private sector

  -can raise funds by selling shares

  - can control who shares are sold to

  - business continuity if shareholder dies

  - financial accounts not kept private

  - dividends need to be paid to shareholders

  - complex legal/ administrative requirements
• Public limited company PLC


  - two or more shareholders

  - bought and sold on the stock exchange

  - incorporated

  - limited liability

  - directors run the company on behalf of the shareholders

  - private sector

  - dividends need to be paid to shareholders

  - original owner are likely to lose come control

  - can raise large amounts of capital

  - business continuity if a shareholder dies

  - expensive legal process to set up

  - financial accounts must be published

  - owners play no part in day-to-day running
• State-/government owned organisations


  - controlled by the government

  - public sector

  - aims and objectives are set by government

  - inflexible procedures

  - slow decision making

  - bureaucratic

  - slow to change

  - no shareholders to please

  - business continuity

  - availability of funds e.g. from taxes

  - is not driven by the need to make a profit

  - public provision
• Registered charities/ not for profit


  - charitable aims

  - third sector

  - registered charity is a legal entity and has protection of limited liability

  - it does not have owners in a way that a business does. It is controlled by trustees

  - financial accounts not private
• Community interest companies (CIC)


  - set up by private individuals to benefit society, rather than to make a profit

  - A CIC can be limited by shares or by guarantee. All monies made are ploughed back into the business

  - incorporated

  - owners have limited liability

  - third sector

  - financial accounts not private
• Legal status


  sole traders do not have a separate legal identity. Incorporated businesses, such as copmanies and charities , do have a separate legal identity. Being a separate legal identity means that the business can sue, and be sued, in its own right
• Liability


  Owning a business which has unlimited liability puts at risk the personal possessions of the owners if the business gets into financial difficulty.
• Funding


  A public sector organisation may be financed from taxation. A third sector organisation may receive grants and donations. A private sector organisation is more likely to secure funds by borrowing or by taking on additional owners.
• Control/ decision making


  the form of ownership will affect the control and decision making
• Legal/ administrative requirements


  a sole trader, requires very little paperwork. A public limited company requires a great deal of paper work
• Deed of partnership


  A document detailing the rights and responsibilities of each partner
• Memorandum of association


  A document which states what the company has been formed to do
• Articles of association


  A document which governs the internal rules of how the company is to be run
• Sole trader


  paperwork to start business: register with HMRC for income tax

  paperwork once trading: Annual tax return to HMRC
• Partnership


  Paperwork to start business: Register with HMRC for income tax and deed of partnership advised

  paperwork once trading: Annual tax return to HMRC
• Private limited company LTD


  Paperwork to start business: Memorandum of association, articles of association, form 10, form 12

  Paperwork once trading: lodge financial accounts at companies house, pay corporation tax
• Public limited company PLC


  paperwork to start business: memorandum of association, articles of association, form 10, form 12, must await issue of certificate of incorporation before trading can begin

  paperwork once trading: lodge audited financial accounts at companies house, publish audited accounts, pay corporation tax
• Community interest companies (CIC)


  paperwork to start business: memorandum of association (showing purpose is to benefit society in some way), articles of association, form 10, form 12

  paperwork once trading: lodge financial accounts at companies house, pay corporation tax
• Registered charities


  paperwork to start business: Memorandum of association (showing charitable aims) , articles of association,form 10, form 12, charitable test

  paperwork once trading: lodge financial accounts at companies house and the charity commission, additional charity commission regulatory documentation, tax exemption documentation - in most cases, registered charities are not taxed.
• Business aims and objectives


  -survival

  -being enterprising

  -growth

  -reputation

  -financial
• survival


  - earning enough revenue to cover costs
• financial aims


  - to break even -- where a business aims to cover its costs. This may allow the business to survive until it makes a profit

  - to increase revenue -- to increase the amount of money brought in from sales. In general, this can be done in two ways - either selling more at the same price, or reducing the price so that more is sold

  - to reduce costs -- to lower the expenses involved in running the business. For example, reducing the electricity bill, finding a cheaper supplier or paying lower rent

  - to make a profit -- once a business has covered its costs, any additional revenue will lead to profit. Profit can be increased in two main ways: either by increasing revenue or reducing costs.
• Growth


  - opening a second branch of a shop, extending a factory or employing more staff.

  - securing more sales so that it increases its market share

  -business wanting to extend the range of products it sells or the range of services it offers
• Reputation


  - many businesses aim to build a particular reputation

  e.g. quality value for money or for being ethical and having a social conscience
• Being enterprising


  Business needs to think of how it can compete with other businesses
• Aims and objectives


  What a business is trying to achieve
• Revenue


  The money a business gets when payments is made for the goods and services it provides
• Profit


  The amount left over when all expenses have been paid
• Break-even


  making just enough to cover costs
• Marketshare


  the proportion of the total market the business sells to
• Functional area


  the division of work into separate areas to expertise
• Financial forecasts


  the prediction of the business' future financial situation