Business Concepts and Structures
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Questions and Answers

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.

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.

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?

<p>Goods are tangible items that can be seen and touched, while services are actions performed for people.</p> Signup and view all the answers

List three examples of services a business might provide.

<p>Taxi services, hairdressing, and holiday booking are all examples of services provided by businesses.</p> Signup and view all the answers

What is the primary characteristic that distinguishes local businesses from national businesses?

<p>Local businesses operate only in one area, while national businesses have locations across the entire country.</p> Signup and view all the answers

Provide an example of a multi-national business and explain its global presence.

<p>McDonald's is an example of a multi-national business as it operates in many countries around the world.</p> Signup and view all the answers

How do the sizes of businesses typically compare between local and multi-national operations?

<p>Local businesses are usually small, whereas multi-national businesses are large and operate in multiple countries.</p> Signup and view all the answers

What common feature do national businesses share regarding their locations?

<p>National businesses have shops or offices that are distributed all over the country.</p> Signup and view all the answers

Identify a typical characteristic of local businesses and provide an example.

<p>Local businesses typically focus on a specific community or area, such as Baltic Book Shop.</p> Signup and view all the answers

What is the primary goal of charities as opposed to social enterprises?

<p>Charities primarily aim to help a cause and do not seek to make a profit, while social enterprises focus on tackling social problems and making a difference.</p> Signup and view all the answers

Describe how charities fund their activities.

<p>Charities fund their activities through donations and fundraising events such as sponsored walks and coffee mornings.</p> Signup and view all the answers

What happens to the profits made by social enterprises?

<p>Profits made by social enterprises are reinvested back into the business or used to benefit the local community.</p> Signup and view all the answers

Explain the role of Directors in a charity.

<p>Directors in a charity are responsible for managing the organization and ensuring it fulfills its mission to help a cause.</p> Signup and view all the answers

How do social enterprises balance the need for profit with their social objectives?

<p>Social enterprises balance profit with social objectives by making their money from sales and reinvesting any profits to further their social mission.</p> Signup and view all the answers

What is the primary legal advantage of a private limited company regarding owner liability?

<p>Limited liability protects the personal belongings of owners from being used to pay off business debts.</p> Signup and view all the answers

How does the management structure of a private limited company typically function?

<p>The business is managed by Directors chosen by the shareholders, often family members.</p> Signup and view all the answers

Identify one disadvantage of operating a private limited company concerning profit distribution.

<p>Profits must be shared among the shareholders.</p> Signup and view all the answers

Why might a private limited company have an easier time obtaining loans compared to a sole trader?

<p>Private limited companies are often perceived as more stable and credible, improving their borrowing capacity.</p> Signup and view all the answers

What is the main advantage of a sole trader in terms of decision-making?

<p>The sole trader has complete control over all decisions.</p> Signup and view all the answers

What restrictions exist regarding the sale of shares in a private limited company?

<p>Shares can only be sold to specific individuals, typically within the family or select parties.</p> Signup and view all the answers

What is meant by unlimited liability in the context of a sole trader?

<p>Unlimited liability means the owner is personally responsible for all business debts.</p> Signup and view all the answers

Name two sources of finance available to a sole trader.

<p>A sole trader can finance their business through personal savings or bank loans.</p> Signup and view all the answers

What is one potential disadvantage regarding time for a sole trader?

<p>It can be difficult for a sole trader to take time off from the business.</p> Signup and view all the answers

How does the profit retention of a sole trader compare to other business structures?

<p>A sole trader keeps all the profits generated by the business.</p> Signup and view all the answers

What is a primary advantage of a public limited company regarding liability?

<p>Shareholders benefit from limited liability, meaning they are not personally responsible for the company's debts.</p> Signup and view all the answers

How does a public limited company typically raise capital?

<p>A public limited company raises capital by selling shares to the public on the stock market.</p> Signup and view all the answers

What is a disadvantage faced by public limited companies in terms of profit distribution?

<p>Public limited companies must share profits among their shareholders, which can reduce individual returns.</p> Signup and view all the answers

Identify one risk associated with being a public limited company related to ownership.

<p>There is a takeover risk, as anyone can buy shares and potentially gain control of the company.</p> Signup and view all the answers

What is a challenge regarding transparency for public limited companies?

<p>Public limited companies must disclose their financial statements, which can be scrutinized by competitors and the public.</p> Signup and view all the answers

What distinguishes a private sector organization from a public sector organization?

<p>Private sector organizations are owned by individuals and aim to make a profit, while public sector organizations are government-owned and provide services without the goal of profit.</p> Signup and view all the answers

How do private sector organizations typically finance their operations?

<p>Private sector organizations usually finance their operations through owners' savings and bank loans.</p> Signup and view all the answers

What is the main source of funding for public sector organizations?

<p>Public sector organizations are primarily funded by government revenues collected through taxes paid by the public.</p> Signup and view all the answers

Provide an example of a private sector organization and describe its primary aim.

<p>An example of a private sector organization is McDonald's, whose primary aim is to generate profit through food sales.</p> Signup and view all the answers

What role do public sector organizations play in society?

<p>Public sector organizations provide essential services to the community, focusing on public welfare rather than profit.</p> Signup and view all the answers

Flashcards

Businesses

Organisations that aim to generate profit by creating goods or providing services for customers.

Goods

Tangible items produced by businesses, such as cars, magazines, or crisps. They are physical items that can be touched.

Services

Actions performed by businesses for customers, such as taxi services, hairdressing, or financial consultancy.

Durable goods

Goods designed to be used repeatedly over a long period of time, like a computer or a washing machine.

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Non-durable goods

Goods that are used once or a few times, such as a bottle of water, a pizza, or a newspaper.

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Charities

Organizations that focus on a specific cause and do not aim to make a profit.

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Social enterprises

Organizations that combine social goals with commercial activities, aiming to improve lives, the environment, or address social problems.

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Local businesses

Businesses that operate within a single local area, often small businesses like independent shops and restaurants.

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National businesses

Businesses that operate across a whole country, reaching a larger customer base.

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Multi-national businesses

Businesses that operate in multiple countries globally, reaching a vast customer base.

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Private Limited Company

A type of business owned by a group of shareholders, typically family members, with limited liability and control retained by the shareholders.

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Limited Liability

The legal protection that shields owners of a Private Limited Company from personal liability for company debts.

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Shareholders in a Private Limited Company

In a Private Limited Company, the owners of the business are called shareholders.

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Directors in a Private Limited Company

In a Private Limited Company, the people responsible for managing and running the business, often selected by shareholders.

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Sole Trader

A single person owns and operates the business, making all decisions and keeping all profits.

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Unlimited Liability

The situation in a Sole Trader business where the owner's personal assets can be used to pay off business debts.

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Public Limited Company

A type of business owned by shareholders who have purchased shares in the company on the public market.

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Raising Capital in a Public Limited Company

The process of selling shares to the public, allowing a Public Limited Company to raise large amounts of capital.

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Shareholders in a Public Limited Company

The individuals who have purchased shares in a Public Limited Company.

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Directors in a Public Limited Company

In a Public Limited Company, the people responsible for managing and running the business, usually elected by shareholders.

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Private Sector

The sector consisting of businesses owned by private individuals with the goal of making a profit.

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Public Sector

The sector consisting of organizations owned and controlled by the government, providing services and not aiming to profit.

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Takeover Risk

The process of a company being acquired by another company, often a rival, which can happen with Public Limited Companies.

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Public Accounts

The responsibility of shareholders in a Public Limited Company to disclose financial information to the public.

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Financial Reporting

The process of preparing and sharing financial statements to reflect the performance of a Private Limited Company.

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Selling Shares in a Private Limited Company

Selling shares to specific individuals or entities, often used as a way to raise funding by private limited companies.

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Securing Financing for a Sole Trader

The potential difficulty for a sole trader to secure loans due to their limited financial resources and potential risk for lenders.

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Securing Financing for a Private Limited Company

The ease with which a Private Limited Company can access bank loans compared to sole traders due to their limited liability and potential for growth.

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Sole Trader Decision-Making

The ability for a Sole Trader to make all decisions, as they are the sole owner and operator of the business.

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Taking Time Off as a Sole Trader

The challenge for a Sole Trader to take time off from the business without disrupting operations, as they are the only person responsible.

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Profit Sharing in a Public Limited Company

The requirement for a Public Limited Company to share profits among shareholders, who have invested their money in the company.

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Control in a Private Limited Company

The ability of a Private Limited Company to retain control as shares are not publicly traded, allowing family members to maintain ownership and influence.

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Sole Trader Profit

The ability of a Sole Trader to keep all profits they generate, as they are the sole owner of the business.

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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.

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