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Questions and Answers
What is the primary purpose of businesses?
What is the primary purpose of businesses?
The primary purpose of businesses is to create goods or provide services for customers and generate profit for the owners.
Define durable goods and provide an example.
Define durable goods and provide an example.
Durable goods are items that can be used repeatedly, such as a computer.
Give two examples of non-durable goods and explain why they are classified as such.
Give two examples of non-durable goods and explain why they are classified as such.
Examples of non-durable goods include a bottle of water and a pizza; they can only be used once or a few times.
What differentiates goods from services in a business context?
What differentiates goods from services in a business context?
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List three examples of services a business might provide.
List three examples of services a business might provide.
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What is the primary characteristic that distinguishes local businesses from national businesses?
What is the primary characteristic that distinguishes local businesses from national businesses?
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Provide an example of a multi-national business and explain its global presence.
Provide an example of a multi-national business and explain its global presence.
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How do the sizes of businesses typically compare between local and multi-national operations?
How do the sizes of businesses typically compare between local and multi-national operations?
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What common feature do national businesses share regarding their locations?
What common feature do national businesses share regarding their locations?
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Identify a typical characteristic of local businesses and provide an example.
Identify a typical characteristic of local businesses and provide an example.
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What is the primary goal of charities as opposed to social enterprises?
What is the primary goal of charities as opposed to social enterprises?
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Describe how charities fund their activities.
Describe how charities fund their activities.
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What happens to the profits made by social enterprises?
What happens to the profits made by social enterprises?
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Explain the role of Directors in a charity.
Explain the role of Directors in a charity.
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How do social enterprises balance the need for profit with their social objectives?
How do social enterprises balance the need for profit with their social objectives?
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What is the primary legal advantage of a private limited company regarding owner liability?
What is the primary legal advantage of a private limited company regarding owner liability?
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How does the management structure of a private limited company typically function?
How does the management structure of a private limited company typically function?
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Identify one disadvantage of operating a private limited company concerning profit distribution.
Identify one disadvantage of operating a private limited company concerning profit distribution.
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Why might a private limited company have an easier time obtaining loans compared to a sole trader?
Why might a private limited company have an easier time obtaining loans compared to a sole trader?
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What is the main advantage of a sole trader in terms of decision-making?
What is the main advantage of a sole trader in terms of decision-making?
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What restrictions exist regarding the sale of shares in a private limited company?
What restrictions exist regarding the sale of shares in a private limited company?
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What is meant by unlimited liability in the context of a sole trader?
What is meant by unlimited liability in the context of a sole trader?
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Name two sources of finance available to a sole trader.
Name two sources of finance available to a sole trader.
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What is one potential disadvantage regarding time for a sole trader?
What is one potential disadvantage regarding time for a sole trader?
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How does the profit retention of a sole trader compare to other business structures?
How does the profit retention of a sole trader compare to other business structures?
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What is a primary advantage of a public limited company regarding liability?
What is a primary advantage of a public limited company regarding liability?
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How does a public limited company typically raise capital?
How does a public limited company typically raise capital?
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What is a disadvantage faced by public limited companies in terms of profit distribution?
What is a disadvantage faced by public limited companies in terms of profit distribution?
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Identify one risk associated with being a public limited company related to ownership.
Identify one risk associated with being a public limited company related to ownership.
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What is a challenge regarding transparency for public limited companies?
What is a challenge regarding transparency for public limited companies?
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What distinguishes a private sector organization from a public sector organization?
What distinguishes a private sector organization from a public sector organization?
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How do private sector organizations typically finance their operations?
How do private sector organizations typically finance their operations?
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What is the main source of funding for public sector organizations?
What is the main source of funding for public sector organizations?
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Provide an example of a private sector organization and describe its primary aim.
Provide an example of a private sector organization and describe its primary aim.
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What role do public sector organizations play in society?
What role do public sector organizations play in society?
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Study Notes
Businesses
- Businesses create goods or provide services for customers
- Goal is to generate profit for owners
- Goods are tangible things (cars, magazines, crisps), Services are actions (taxi, hairdressing)
- Durable goods are used repeatedly (computer)
- Non-durable goods are used once or a few times (bottle of water, pizza)
Third Sector
- Organizations like; charities, social enterprises, community groups
- Charities do not aim to make a profit
- They help a cause and are run by Directors
- Funding comes from donations and fund-raising (charity shops, sponsored walks, events)
- Social Enterprises tackle social problems, improve lives, improve the environment
- They make money from selling goods/services
- Any profit goes back into the business or the local community
- Employ paid staff and have volunteers
Business Sizes
- Local Businesses operate in a single area, often small businesses (KJ MacDonalds, Baltic Book Shop)
- National Businesses operate across the country (Argos, Boots, Superdrug)
- Multi-national Businesses operate globally (McDonald's, Ford Cars, Shell)
Private Limited Company (e.g. Baxters Ltd)
- Ownership: Shareholders own the business, typically family members
- Management: Directors run the business, often chosen by shareholders
- Financing: Finance is sourced from selling shares (to specific people), bank loans, or government grants
Advantages
- Limited Liability: Owners' personal belongings are safe from business debts
- Control: Family members retain company control as shares are not sold to the public
- Easier access to loans: Easier to secure bank loans than sole traders
Disadvantages
- Shared Profits: Profits are shared amongst shareholders
- Financial Reporting: Final accounts are prepared and shared
- Restricted Share Sales: Shares can only be sold to specific individuals
Other Note
- Limited Liability protects owners from being responsible for company debts, their assets are safe
Sole Trader
- One person owns and runs the business
- Owner makes all the decisions and keeps all the profits
Advantages
- Owner makes all decisions
- Owner keeps all profit
- Easy to set up
- Finance can be from owner's money, bank loan, or government grant
Disadvantages
- Difficult for owner to take time off
- May be difficult to secure financing
- Unlimited Liability: Owner's personal belongings can be used to pay off business debts
Public Limited Company (e.g. Superdrug PLC)
- Ownership: Shareholders own the business
- Shares: Shares are sold to the public
- Management: Directors elected by shareholders run the business
- Financing: Funding is sourced from selling shares, bank loans, and government grants
Advantages
- Limited Liability: Shareholders are not responsible for the company's debts
- Raising Capital: Sell shares to the public to raise large amounts of money
Disadvantages
- Profit Sharing: Profits shared between shareholders
- Public Accounts: Financial statements must be publicly disclosed
- Takeover Risk: The company may be taken over by a rival company
- Setup Complexity: Setting up a PLC is expensive and complicated
Business Sectors
- Every organization belongs to one of the following sectors:
1. Private Sector
- Businesses owned by private individuals
- Aim to make a profit
- Money comes from owners' savings or bank loans
- Examples: Marks & Spencer, Boots, Vodafone, Argos
2. Public Sector
- Organizations owned and controlled by the government
- They provide a service and do not need to make a profit
- Money comes from the government (funded by public taxes)
- Examples: Library, Sports Centre, Hospitals, NHS Scotland
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Description
This quiz explores essential business concepts, including the differences between goods and services, types of organizations in the third sector, and the sizes of businesses. Test your knowledge on how various business entities operate, their goals, and funding structures.