Questions and Answers
What is a primary characteristic of the establishment stage in the business life cycle?
Which of the following is NOT considered an internal influence within a business environment?
What is the role of the ASIC in the business environment?
What is a potential challenge businesses might face during the growth phase?
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Voluntary cessation of a business typically involves which of the following factors?
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What is the main intention when an independent administrator is appointed to operate a business?
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Which of the following best describes the contribution of SMEs to GDP?
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In which competitive situation do many firms sell similar products differentiated solely by price?
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What is a characteristic of external equity finance?
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What type of market is characterized by a few firms dominating the market?
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Study Notes
Administration and Liquidation
- Administration: An independent administrator manages the business aiming to resolve financial difficulties and stabilize operations.
- Liquidation: A liquidator is appointed to manage the sale of a company’s assets to pay creditors in a systematic manner.
Economic Contributions of SMEs
- GDP Contribution: SMEs are estimated to account for 50% of the GDP.
- Employment: SMEs employ approximately 8 million individuals.
- Balance of Payments (BOPs): SME exports are experiencing significant growth.
- Innovation and Invention: SMEs invest billions in research and development (R&D).
Market Structures
- Monopoly: Single firm dominates the industry.
- Duopoly: Two firms have significant control over the market.
- Oligopoly: A few firms dominate the market, influencing prices and competition.
- Monopolistic Competition: Numerous buyers and sellers, products differentiated mainly by pricing.
- Perfect Competition: SMEs sell similar products with price as the primary distinguishing factor.
Entrepreneurial Qualities and Financing
- Entrepreneur Characteristics: Innovative, resilient, and risk-taking individuals.
- Equity Finance: Funds provided by business owners for startup and expansion (shareholder’s equity).
- Internal vs. External Equity: Internal (retained profits) vs. External (ordinary shares, private equity).
Legal Regulations and Taxation
- Legal Compliance: Businesses must adhere to federal and state regulations and taxation policies, especially sole traders.
- Establishment Options: Evaluating advantages and disadvantages of starting new, buying existing businesses, or franchising.
- Workforce Downsizing Costs: Financial implications tied to reducing staff numbers.
Strategic Planning
- SWOT Analysis: Identifying strengths, weaknesses, opportunities, and threats to the business.
- Long-Term Goals: Establishing strategic aims which guide the business’s direction.
Organizing Resources - Marketing
- Market Segmentation: Classifying consumers for effective targeting.
- Promotion Strategies: Implementing methods to effectively market products and services.
- Product Strategies: Focus on branding and packaging to enhance market appeal.
- Pricing Methods: Includes cost-based, competition-based, and market-based pricing.
- Price Strategies: Techniques such as skimming, penetration, loss-leader, and setting price points.
Business Structures
- Partnership (Unincorporated): Operates under the Partnership Act 1982 (NSW), ranging from 2 to 20 people.
- Private Company (PTY LTD): Incorporation with 2 to 50 shareholders, offering limited liability.
- Public Company: Larger shareholder base, listed on the ASX, required to provide annual reports and a prospectus.
Legal Structure Considerations
- Business Size: Influences the number of employees and available services.
- Ownership: Affects workload distribution among owners.
- Finances: Allows pooling various financial resources including venture capital.
Industry Distinctions
- Quaternary Industry: Focus on information transfer and knowledge processing.
- Quinary Industry: Involves services traditionally performed at home.
- Economic and Political Influences: External factors affecting business operations.
Stakeholders and Regulatory Bodies
- Stakeholders: Individuals or groups with a vested interest (employees, managers, shareholders, customers).
- ASIC: Regulates company conduct, financial markets, and promotes market integrity.
- ACCC: Enforces competition law and fair trading, overseeing national infrastructure.
Business Life Cycle Stages
- Establishment Stage: Initial phase with high costs and low consumer interest.
- Incorporated vs. Unincorporated: Incorporated entities are recognized legally independent of owners; unincorporated structures include sole traders and partnerships.
Business Classification
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Size Categories:
- Small: Under 20 employees.
- Medium: 20-199 employees.
- Large: 200+ employees.
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Business Classification by Scope:
- Local: Serves nearby areas.
- National: Operates within one country.
- Global: Multinational operations across multiple countries.
Business Legal Structures
- Sole Trader: One owner fully responsible for business liabilities.
- Company Registration: Businesses must register under ASIC with a name separate from the owner's personal name.
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Description
This quiz covers the financial concepts related to the administration and liquidation of businesses, particularly focusing on small to medium enterprises (SMEs). You will explore their contributions to GDP, employment, and innovation. Test your understanding of these critical economic roles and the importance of SMEs in the economy.
