Business Concepts and Financial Terms

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Questions and Answers

What does surplus indicate in a financial context?

The total expenditures of a business

The amount left after all expenses are met (correct)

The total revenue generated before expenses

The liabilities of a company

Which of the following correctly defines corporate income?

The profit after expenses, taxes, and costs (correct)

The amount spent on salaries and materials

The legal obligations of the business

The total revenue generated from sales

What is meant by unity of command in an organization?

Every employee should report to only one supervisor (correct)

Supervisors must delegate authority to all employees

Each employee may report to multiple supervisors

Employees are allowed to choose their supervisors

Which elements are part of the business concept?

Customer need and product idea Signup and view all the answers

Scarcity occurs when:

The demand for a resource exceeds its supply Signup and view all the answers

What is the main purpose of measuring external efficiency?

To assess market competition and customer satisfaction Signup and view all the answers

Which of the following best describes real capital?

Created assets such as buildings and machinery Signup and view all the answers

What role does human capital play in the factors of production?

Indicates the abilities and skills of the workforce Signup and view all the answers

What is one key advantage of operating as a sole trader?

Full control over business decisions Signup and view all the answers

Which legal form of enterprise has unlimited debt liability for its owners?

Sole trader Signup and view all the answers

What is a disadvantage of a partnership?

Potential for conflict between partners Signup and view all the answers

Which of the following is true about limited liability partnerships?

No minimum capital is required to start Signup and view all the answers

What is the primary responsibility of a franchisee?

To manage and operate the franchise location Signup and view all the answers

What is generally a characteristic of a public limited company?

Shares can be bought and sold publicly Signup and view all the answers

Which form of business allows for shared decision-making while also limiting liabilities?

Limited liability partnership Signup and view all the answers

What is a key disadvantage of being a sole trader?

Limited capacity to raise capital Signup and view all the answers

Study Notes

Surplus, Income, Expenditure, & Capital

Surplus: Excess of income over expenditure.
Income: Revenue generated before deducting expenses.
Expenditure: Total costs (salaries, materials, overheads).
Capital: Financial assets used for operations and growth (cash, machinery, buildings).
Corporate income: Profit after deducting expenses and taxes.
Revenue: Total income from sales before expenses (also called "top line").
Liability: Legal responsibility for debts or obligations.

Efficiency and Control

Control span: Number of employees a manager supervises.
Unity of command: Each employee reports to only one supervisor.
External efficiency: How well a company meets customer needs and competes.
Internal efficiency: Effective resource use within the company.

Business Concept and Entrepreneurship

Elements of a business concept: Customer need, customer group, product idea, and resources.
Factors of production: Human capital (abilities), natural resources (raw materials), real capital (created assets), economic capital (money), and enterprises (entrepreneurs).
Scarcity: Demand exceeding supply (e.g., fossil fuels).
Successful external business idea: Efficiently and cheaply produces a product demanded by the target audience.

Starting a Business: Forms of Business

Manufacturing companies: Process raw materials into goods.
Service companies: Sell services.
Trading companies: Sell other companies' goods.

Legal Forms of Enterprise

Sole trader: One owner with unlimited liability. No minimum capital needed. No legal person. Income taxed as personal income.
Partnership: Shared ownership, shared unlimited liability (solidarity). No minimum capital needed. No legal person. Income taxed as personal income.
Limited liability partnership (LLP): Limited liability for partners. No minimum capital needed. No legal person.
Limited company (public): Limited liability for shareholders. Minimum 500k SEK startup capital. Is a legal person. Income distributed as dividends.
Limited company (private): Limited liability for shareholders. Minimum 25k SEK startup capital. Is a legal person. Income distributed as dividends.
Co-operative/economic association: Collective ownership, shared profits based on contribution. Startup capital varies depending on structure. Not a legal person.
Franchise: Franchisee owns individual location, shares profits with franchisor. Startup capital defined by franchisor. Not a legal person.

Legal Forms: Advantages and Disadvantages

Sole trader: Advantages – simple to set up, full control, keeps all profits, low startup costs. Disadvantages – unlimited liability, limited capital raising, taxed as personal income, business continuity issues.
Partnership: Advantages – relatively easy to form, shared responsibility & expertise. Disadvantages – unlimited and joint liability, potential for conflict, difficult to exit, taxed as personal income.
Limited liability partnership: Advantages – limited partners have limited liability. Disadvantages - (Information incomplete in provided text).

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Description

This quiz explores key financial concepts such as surplus, income, expenditure, and capital, as well as efficiency in management and the essentials of business concepts related to entrepreneurship. Test your understanding of these fundamental business terms and principles.