Business Structures and Entities Quiz
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Questions and Answers

What is the main difference between incorporated and unincorporated companies in the private sector?

  • Incorporated companies have unlimited liability, while unincorporated companies have limited liability
  • Incorporated companies are not liable for any debts, while unincorporated companies are liable for any actions or debts of the company
  • Incorporated companies are always small businesses, while unincorporated companies are generally large corporations
  • Incorporated companies are considered separate from their owners, while unincorporated companies have no legal distinction between the company and its owners (correct)
  • What is the main characteristic of a sole trader in the private sector?

  • Complete financial responsibility and unlimited liability (correct)
  • Limited liability and shared financial responsibility
  • Separate legal status from the owner and limited liability
  • No financial responsibility and unlimited liability
  • Why might an unincorporated company be the best option for many businesses despite the personal risk of liability?

  • Lower tax obligations and reduced paperwork
  • Easier access to external funding and limited liability
  • Greater control over decision-making and financial flexibility (correct)
  • Ability to avoid legal regulations and unlimited liability
  • What does it mean when it is said that owners of an incorporated company are not liable for any debts over and above the amount they have paid for their share of the company or for any loans they have guaranteed?

    <p>Owners are not personally responsible for debts beyond their investment in the company</p> Signup and view all the answers

    What percentage of turnover do manufacturing SMEs receive from cross-border sources?

    <p>10-40%</p> Signup and view all the answers

    What percentage of total sales of SMEs in developing countries' manufacturing sector do direct exports represent?

    <p>7.6%</p> Signup and view all the answers

    What is the core objective of the private sector?

    <p>Making a profit to provide financial return to shareholders and capital for reinvestment</p> Signup and view all the answers

    What creates opportunities for SMEs according to the text?

    <p>Larger organizations outsourcing services</p> Signup and view all the answers

    What is an indicator of efficiency, resource allocation, and drives economic growth according to the text?

    <p>Profit</p> Signup and view all the answers

    What percentage of revenue do some multi-nationals have from overseas subsidiaries?

    <p>At least one-third</p> Signup and view all the answers

    What accounts for over half of the world's total trade according to the text?

    <p>The top ten traders in merchandise trade</p> Signup and view all the answers

    What creates opportunities for SMEs according to the text?

    <p>Larger organizations outsourcing services</p> Signup and view all the answers

    What has a significant impact on business profitability and return on investment according to the text?

    <p>Market share</p> Signup and view all the answers

    What is the role of multi-national corporations according to the text?

    <p>Have facilities and assets in multiple countries</p> Signup and view all the answers

    What is the impact of market share on profitability attributed to according to the text?

    <p>Economies of scale, market power, and quality of management</p> Signup and view all the answers

    What do SMEs form to pool resources and access technology and business skills according to the text?

    <p>Networks and clusters</p> Signup and view all the answers

    Which business structure does not have a separate legal identity from the owner?

    <p>Sole traders</p> Signup and view all the answers

    In which country can foreign nationals be sole traders?

    <p>United Arab Emirates</p> Signup and view all the answers

    What is a common use of the sole trader business structure?

    <p>Freelance designing</p> Signup and view all the answers

    What is an advantage of being a sole trader?

    <p>Easy setup and management</p> Signup and view all the answers

    What can partnerships share among partners?

    <p>All profits and losses</p> Signup and view all the answers

    Which type of incorporated company can have its shares traded on a stock exchange without the consent of owners?

    <p>Public limited companies</p> Signup and view all the answers

    What is a common characteristic of private limited companies?

    <p>Small organization</p> Signup and view all the answers

    Who administers the register of companies in the UK?

    <p>Registrar of Companies</p> Signup and view all the answers

    What does Figure 1.2 in the text show?

    <p>Abbreviations used in different countries for incorporated companies</p> Signup and view all the answers

    What is a disadvantage of partnerships?

    <p>Potential unfair profit distribution perceptions</p> Signup and view all the answers

    What can both types of incorporated companies raise capital through?

    <p>Shares</p> Signup and view all the answers

    What is a characteristic of sole proprietor enterprises in China?

    <p>Owned by Chinese nationals</p> Signup and view all the answers

    What does the cash flow statement show?

    <p>How cash has been utilized by the business during the accounting period</p> Signup and view all the answers

    What do investors assess when dividing the dividend per share by the price per share?

    <p>Risk and return from buying shares</p> Signup and view all the answers

    What is the most common type of shares in an incorporated company?

    <p>Ordinary shares</p> Signup and view all the answers

    What gives shares in a company value?

    <p>Expectation of future dividend payments</p> Signup and view all the answers

    What led to a sudden increase in the valuation and share prices of many small technology companies in the late 1990s?

    <p>Dot com boom</p> Signup and view all the answers

    What resulted in a general panic among speculators and a significant fall in share prices in the late 1990s?

    <p>Dot com bust</p> Signup and view all the answers

    How does the stock market affect the economy?

    <p>Through the wealth effect, impact on pensions, and a company's ability to raise finance by issuing more shares</p> Signup and view all the answers

    What has performance management by private sector organizations evolved to consider?

    <p>More multi-dimensional approaches beyond purely financial measures</p> Signup and view all the answers

    What is the key factor in determining the viability of an organization through cash flow analysis?

    <p>Ratios</p> Signup and view all the answers

    What do shares in a company represent?

    <p>Ownership</p> Signup and view all the answers

    What is the primary reason for making investment decisions in businesses, such as purchasing new machinery?

    <p>Expectation of additional profit</p> Signup and view all the answers

    What is the main factor that affects share prices?

    <p>Market perceptions of future dividend payments and company prospects</p> Signup and view all the answers

    What type of business entity provides legal identity separate from owners, allowing business continuity and potential sale value?

    <p>LLC</p> Signup and view all the answers

    What is the classification for 'small' and 'medium' enterprises according to the OECD?

    <p>Small: fewer than 50 employees, Medium: 250 or fewer employees</p> Signup and view all the answers

    What percentage of businesses in the UK in 2017 were micro, small, and medium-sized enterprises (MSMEs)?

    <p>99%</p> Signup and view all the answers

    What sector do most SMEs operate in, according to the text?

    <p>Service</p> Signup and view all the answers

    What is a common challenge for SMEs mentioned in the text?

    <p>Lack of access to finance</p> Signup and view all the answers

    What is the potential liability of owners in an incorporated company?

    <p>Limited to shares and loan guarantees</p> Signup and view all the answers

    What is the newer classification for small and medium-sized enterprises?

    <p>MSME</p> Signup and view all the answers

    What type of businesses were noted to contribute significantly to employment and turnover in the UK?

    <p>MSMEs</p> Signup and view all the answers

    What is the potential role of MSMEs in local economies as mentioned in the text?

    <p>Significant contribution</p> Signup and view all the answers

    What is a disadvantage of incorporation mentioned in the text?

    <p>More paperwork and controls</p> Signup and view all the answers

    What is the main characteristic of an incorporated company mentioned in the text?

    <p>Limited liability for owners</p> Signup and view all the answers

    What is the impact of technology advancement on the potential contribution of MSMEs in local economies?

    <p>Increased potential contribution</p> Signup and view all the answers

    What type of business entity provides legal identity separate from owners?

    <p>LLC</p> Signup and view all the answers

    What type of business entity offers credibility, permanence, and reduced risk for suppliers?

    <p>Ltd</p> Signup and view all the answers

    How is the owner's liability in an incorporated company limited?

    <p>To shares and loan guarantees</p> Signup and view all the answers

    What is a disadvantage of incorporation for businesses?

    <p>Higher setup and administrative costs</p> Signup and view all the answers

    How are SMEs classified based on size?

    <p>By number of employees</p> Signup and view all the answers

    According to the OECD, how many employees define a 'small' business?

    <p>Less than 50 employees</p> Signup and view all the answers

    In which sector do most SMEs operate?

    <p>Service</p> Signup and view all the answers

    What percentage of businesses in the UK were MSMEs in 2017?

    <p>99%</p> Signup and view all the answers

    What role do MSMEs play in local economies?

    <p>Significant role</p> Signup and view all the answers

    What are the challenges for SMEs according to the text?

    <p>Access to finance, management skills, and regulatory requirements</p> Signup and view all the answers

    What can hold smaller companies back according to the text?

    <p>Difficulty in obtaining start-up or expansion capital</p> Signup and view all the answers

    What does the cash flow statement demonstrate?

    <p>How cash has been utilized by the business</p> Signup and view all the answers

    How do investors assess the risk and return from buying shares?

    <p>By dividing the dividend per share by the price per share</p> Signup and view all the answers

    What is the most common type of shares in an incorporated company?

    <p>Ordinary shares</p> Signup and view all the answers

    What gives shares in a company value?

    <p>Expectation of future dividend payments</p> Signup and view all the answers

    What led to a sudden increase in the valuation and share prices of small technology companies in the late 1990s?

    <p>Dot com boom fueled by speculative buying and excessive venture capital funding</p> Signup and view all the answers

    What resulted in a general panic among speculators, leading to a significant fall in share prices in the dot com bust?

    <p>Excessive speculation and venture capital funding</p> Signup and view all the answers

    How does the stock market affect the economy?

    <p>Through the wealth effect, impact on pensions, and a company's ability to raise finance</p> Signup and view all the answers

    What has performance management by private sector organizations evolved to consider?

    <p>More multi-dimensional approaches beyond purely financial measures</p> Signup and view all the answers

    Why are revenue and profit considered to be less reflective of an organization's true financial health compared to cash?

    <p>Because cash reflects the true financial health of an organization</p> Signup and view all the answers

    What is the primary reason for investment decisions in businesses, such as purchasing new machinery?

    <p>In expectation of additional profit</p> Signup and view all the answers

    What is the key factor influencing share prices fluctuation?

    <p>Market perceptions of future dividend payments and company prospects</p> Signup and view all the answers

    What led to the sudden increase in the valuation and share prices of many small technology companies in the late 1990s?

    <p>Speculative buying and excessive venture capital funding</p> Signup and view all the answers

    What is the main purpose of market intelligence as outlined in the text?

    <p>To help plan negotiating strategy based on suppliers' strengths and weaknesses and market trends</p> Signup and view all the answers

    What are some key aspects that market intelligence research aims to gather data on?

    <p>Trends in technology and market niches</p> Signup and view all the answers

    What does market intelligence research enable organizations to do?

    <p>Create a competitive advantage through actionable information</p> Signup and view all the answers

    Why is it important to find facts and data about the suppliers in the market and their products?

    <p>To identify leverage points for driving out savings or other benefits</p> Signup and view all the answers

    What is an essential aspect of good contract management for developing meaningful key performance indicators (KPIs)?

    <p>Monitoring and reporting supplier delivery against contract terms</p> Signup and view all the answers

    What is a crucial factor for contract completion activities?

    <p>Renewal triggers</p> Signup and view all the answers

    What is a valuable way to achieve continuous improvement collaboratively with key suppliers?

    <p>Supplier relationship management (SRM)</p> Signup and view all the answers

    What is an important aspect of contract administration?

    <p>Change control</p> Signup and view all the answers

    What is crucial for contract performance?

    <p>Monitoring and reporting supplier delivery against contract terms</p> Signup and view all the answers

    What should contracts be subject to as circumstances change?

    <p>Renegotiation</p> Signup and view all the answers

    What is the primary purpose of spend analysis in sourcing strategy?

    <p>Identifying opportunities to save money and ranking suppliers for preferred status</p> Signup and view all the answers

    What is the main focus of field research in the context of sourcing strategy?

    <p>Providing additional insights beyond published information</p> Signup and view all the answers

    What is a crucial aspect of transparent and open-book communication for a good relationship between parties?

    <p>Service delivery costs</p> Signup and view all the answers

    What is a critical element of contract management for capturing opportunities for continuous improvement?

    <p>Development of key performance indicators (KPIs)</p> Signup and view all the answers

    What is the key tip for conducting effective field research?

    <p>Asking the right questions, talking to the right people, and avoiding leading questions</p> Signup and view all the answers

    What should a sourcing strategy include an analysis of?

    <p>Supply markets</p> Signup and view all the answers

    What is important for contract performance in terms of communication and benchmarking?

    <p>Clear communication</p> Signup and view all the answers

    What does Figure 1.8 illustrate in the context of sourcing strategy?

    <p>The supply positioning analysis process</p> Signup and view all the answers

    What is a valuable way to achieve continuous improvement collaboratively with key suppliers?

    <p>Supplier relationship management (SRM)</p> Signup and view all the answers

    What is a crucial aspect of good contract management for developing meaningful key performance indicators (KPIs)?

    <p>Transparent and open-book communication of service delivery costs</p> Signup and view all the answers

    What is a benefit of spend analysis in sourcing strategy?

    <p>Saving money, making better decisions, and identifying off-contract spending</p> Signup and view all the answers

    What is crucial for contract completion activities?

    <p>Opportunities for continuous improvement</p> Signup and view all the answers

    What is crucial for identifying opportunities to save money and ranking suppliers for preferred status in sourcing strategy?

    <p>Spend analysis</p> Signup and view all the answers

    What should be minimized to avoid creating bottlenecks in sourcing strategy?

    <p>Data collection workload</p> Signup and view all the answers

    What is important to consider for effective data collection in sourcing strategy?

    <p>Planning for effective data collection</p> Signup and view all the answers

    What is the main focus of desk research in sourcing strategy?

    <p>Examining published information such as market reports and official statistics</p> Signup and view all the answers

    What is the primary source for desk research in sourcing strategy?

    <p>Trade associations, trade publications, and official statistics websites</p> Signup and view all the answers

    What is the key purpose of field research in sourcing strategy?

    <p>Providing additional insights beyond published information</p> Signup and view all the answers

    What should the sourcing strategy document include?

    <p>A clear depiction of the current situation, the desired outcome, the plan, responsibilities, and performance measures</p> Signup and view all the answers

    What is an integral part of the sourcing strategy?

    <p>Risk analysis</p> Signup and view all the answers

    What does the procurement event involve?

    <p>Going out to the market and letting a contract that meets the sourcing strategy's requirements</p> Signup and view all the answers

    What does contract management ensure?

    <p>The delivery of goods and services complies with the terms of the contract</p> Signup and view all the answers

    What is essential in contract design for effective evaluation and selection of suppliers?

    <p>Outcome-focused specifications</p> Signup and view all the answers

    How should the contract allocate risk, service level, and value for money?

    <p>In a clear and balanced manner</p> Signup and view all the answers

    What should both parties be willing to adapt to?

    <p>Unforeseen circumstances</p> Signup and view all the answers

    What should be included in the contract to ensure the quality of service delivered?

    <p>Detailed agreement of required outputs and expected performance</p> Signup and view all the answers

    What should the payment mechanism and conditions of the contract enable the supplier to do?

    <p>Meet its business objectives</p> Signup and view all the answers

    What is the method used for strategic sourcing involving steps such as brainstorming, setting a target, and producing a proposal?

    <p>Situation-Target-Proposal (STP)</p> Signup and view all the answers

    What is depicted in a life cycle to ensure compliance with the terms of the contract?

    <p>Contract management</p> Signup and view all the answers

    What should be included in the sourcing strategy document to ensure clarity and effectiveness?

    <p>A clear depiction of the current situation, the desired outcome, the plan, responsibilities, and performance measures</p> Signup and view all the answers

    What are the two main factors used to analyze purchases in the Kraljic matrix?

    <p>Value of spend and commercial supply risk</p> Signup and view all the answers

    What is the focus of the strategic core quadrant in the Kraljic matrix?

    <p>High-risk and high-importance items</p> Signup and view all the answers

    What is the supply strategy for cleaning services based on the case study?

    <p>Leveraging purchasing power and competitive tendering</p> Signup and view all the answers

    What does the Kraljic matrix aim to capitalize on in the supply strategy?

    <p>Competitive market and cost pressure</p> Signup and view all the answers

    What does the Kraljic matrix segment based on, in addition to competition and ease of supplier substitution?

    <p>Market competition and substitution cost</p> Signup and view all the answers

    What is the focus of the tactical profit items in the Kraljic matrix?

    <p>Low risk and high competition items</p> Signup and view all the answers

    What is the primary aim of the Kraljic matrix?

    <p>To analyze purchasing portfolio</p> Signup and view all the answers

    What does the cleaning services case study highlight as a factor for the supply strategy?

    <p>High spend value and low substitution cost</p> Signup and view all the answers

    What is the focus of the tactical acquisition items in the Kraljic matrix?

    <p>Items requiring efficient buying processes</p> Signup and view all the answers

    What is the primary purpose of the Kraljic matrix?

    <p>To assess importance and supply risk</p> Signup and view all the answers

    What is the key focus of the Kraljic matrix?

    <p>Assessing importance and supply risk</p> Signup and view all the answers

    What is the primary characteristic of the strategic core quadrant in the Kraljic matrix?

    <p>High-risk and high-importance</p> Signup and view all the answers

    What does the Kraljic matrix assess to categorize purchases?

    <p>Importance and commercial supply risk</p> Signup and view all the answers

    What is the focus of the strategic core quadrant in the Kraljic matrix?

    <p>High-risk and high-importance items</p> Signup and view all the answers

    What is the primary strategy for reducing prices of tactical profit items?

    <p>E-auctions</p> Signup and view all the answers

    What does the cleaning services case study highlight as a factor for supply strategy?

    <p>High market competition and low substitution cost</p> Signup and view all the answers

    What is the aim of the supply strategy for cleaning services?

    <p>Leverage purchasing power and maximize efficiencies</p> Signup and view all the answers

    How can the Kraljic matrix be further segmented?

    <p>Based on competition and ease of supplier substitution</p> Signup and view all the answers

    What characterizes tactical acquisition items in the Kraljic matrix?

    <p>Low supply risk and low spend</p> Signup and view all the answers

    What is the primary focus of the Kraljic matrix in analyzing purchases?

    <p>Importance and commercial supply risk</p> Signup and view all the answers

    What is the primary factor for categorizing items in the strategic core quadrant of the Kraljic matrix?

    <p>High risk and high importance</p> Signup and view all the answers

    What is the primary characteristic of tactical profit items in the Kraljic matrix?

    <p>Low risk and high competition</p> Signup and view all the answers

    What is the primary focus of the tactical acquisition items in the Kraljic matrix?

    <p>Low spend and low supply risk</p> Signup and view all the answers

    What is the aim of the supply strategy for cleaning services according to the text?

    <p>Leverage purchasing power and maximize efficiencies</p> Signup and view all the answers

    What are the two main factors used to evaluate purchases in the Kraljic matrix?

    <p>Importance and commercial supply risk</p> Signup and view all the answers

    What is the focus of the strategic core quadrant in the Kraljic matrix?

    <p>High-risk and high-importance items</p> Signup and view all the answers

    What is the supply strategy for cleaning services, as per the case study mentioned?

    <p>Outsourcing and leveraging purchasing power</p> Signup and view all the answers

    What does the Kraljic matrix suggest for tactical profit items?

    <p>Utilizing e-auctions for price reduction</p> Signup and view all the answers

    What does the cleaning services case study highlight about the supply strategy?

    <p>Leveraging purchasing power and competitive tendering</p> Signup and view all the answers

    What is the main aim of the supply strategy for cleaning services?

    <p>Sustaining cost and quality pressure</p> Signup and view all the answers

    What does the Kraljic matrix segment based on, in addition to importance and supply risk?

    <p>Competition and ease of supplier substitution</p> Signup and view all the answers

    What is the focus of tactical acquisition items in the Kraljic matrix?

    <p>Low supply risk and low spend</p> Signup and view all the answers

    What is the primary characteristic of the tactical profit quadrant in the Kraljic matrix?

    <p>Low supply risk and high competition</p> Signup and view all the answers

    What is the key factor in evaluating purchases in the Kraljic matrix?

    <p>Importance and commercial supply risk</p> Signup and view all the answers

    What is the focus of the strategic core quadrant in the Kraljic matrix?

    <p>High-risk and high-importance items</p> Signup and view all the answers

    What is the supply strategy for cleaning services, as per the case study mentioned?

    <p>Outsourcing and leveraging purchasing power</p> Signup and view all the answers

    Study Notes

    Understanding Cash Flow, Return on Investment, and Stock Market Impact

    • Revenue and profit can be adjusted in profit and loss accounts, but cash reflects the true financial health of an organization.
    • The cash flow statement is a crucial document showing how cash has been utilized by the business during the accounting period.
    • Cash flow analysis, using ratios, demonstrates the viability of an organization.
    • Investors assess the risk and return from buying shares by dividing the dividend per share by the price per share.
    • Investment decisions in businesses, such as purchasing new machinery, are made in expectation of additional profit.
    • The ownership of an incorporated company is divided into shares, and the most common type is ordinary shares, which do not guarantee a dividend but provide a right to vote at the AGM.
    • Shares in a company have value due to the expectation of future dividend payments, and their trading is done via a stock exchange.
    • Share prices fluctuate based on market perceptions of future dividend payments and company prospects.
    • The dot com boom in the late 1990s led to a sudden increase in the valuation and share prices of many small technology companies, fueled by speculative buying and excessive venture capital funding.
    • The dot com bust resulted in a general panic among speculators, leading to a significant fall in share prices and rendering many small companies worthless almost overnight.
    • The stock market affects the economy through the wealth effect, impact on pensions, and a company's ability to raise finance by issuing more shares.
    • CIMA highlights that performance management by private sector organizations has evolved to consider more multi-dimensional approaches beyond purely financial measures.

    Strategic Sourcing and Contract Management in Procurement

    • Situation-Target-Proposal (STP) is a method used for strategic sourcing, involving steps such as brainstorming, setting a target, and producing a proposal.
    • An example of STP outlines a problem, situation, target, and proposal for reducing costs and improving quality in procurement.
    • The sourcing strategy document should include a clear depiction of the current situation, the desired outcome, the plan, responsibilities, and performance measures.
    • A Business Requirements Definition (BRD) and risk analysis are integral parts of the sourcing strategy.
    • The procurement event involves activities to go out to the market and let a contract that meets the sourcing strategy's requirements.
    • The transaction element of purchasing involves placing orders against the contract and ensuring compliance with its terms.
    • Contract management, depicted in a life cycle, ensures the delivery of goods and services complies with the terms of the contract.
    • Outcome-focused specifications are essential in contract design for effective evaluation and selection of suppliers.
    • Clear allocation of risk, service level, and value for money in the contract reduces future disputes and encourages innovation from suppliers.
    • Both parties should be willing to adapt to unforeseen circumstances, and the contract should not be so tight as to become inflexible.
    • Detailed agreement of required outputs and expected performance should be included in the contract to ensure the quality of service delivered.
    • The payment mechanism and conditions of the contract should be such that the supplier can make a reasonable profit and meet its business objectives.

    Supply Positioning Model: The Kraljic Matrix

    • The Kraljic matrix was developed by Peter Kraljic of McKinsey to analyze purchases based on their importance and commercial supply risk.
    • It assesses importance using factors such as value of spend, importance to the organization's product or service delivery, and universality.
    • Commercial supply risk is evaluated based on the complexity of buying from the market and the number of capable suppliers available.
    • The combination of importance and supply risk results in four main segments of a purchasing portfolio.
    • The strategic core quadrant focuses on high-risk and high-importance items, which are key for sourcing strategy.
    • Tactical profit items have low risk and high competition, making e-auctions an effective strategy to reduce prices.
    • Tactical acquisition items have low supply risk and low spend, requiring efficient buying processes or bundling strategies.
    • The matrix can be further segmented based on competition and ease of supplier substitution.
    • A case study on cleaning services demonstrates how the matrix is applied, considering factors like spend value, market competition, and substitution cost.
    • The cleaning services case study highlights the low service criticality, high spend value, high market competition, and low substitution cost.
    • The supply strategy for cleaning services includes leveraging purchasing power, competitive tendering, outsourcing, and maximizing efficiencies.
    • The strategy aims to capitalize on the competitive market, sustain cost and quality pressure, and maximize efficiencies through standard specifications and additional services.

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    Description

    Test your knowledge of business structures and entities with this quiz. Explore the characteristics of sole traders, partnerships, and incorporated companies, and learn about the different types of business entities and their impact on the private sector. From the advantages and disadvantages of each structure to the challenges faced by small and medium-sized enterprises, this quiz covers essential aspects of business organization and size classification.

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