Types and Structures of Companies

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Questions and Answers

What is the primary characteristic of a sole trader?

Operated by one individual (correct)

Must be registered with the stock market

Requires multiple owners

Has limited liability

What distinguishes a public limited company from a private limited company?

Owned by a single individual

Has to publish financial data publicly (correct)

Less complex legal requirements

Must maintain a private bank account

Which of the following best describes limited liability?

Owners are personally liable for all business debts

Risk to personal assets is protected (correct)

Only applicable to sole proprietorships

Applies to all types of business entities

What type of company is typically easier to set up?

Sole proprietorship (A) Signup and view all the answers

What is a key legal requirement for a private limited company?

Must have at least one named director (A) Signup and view all the answers

In what scenario would a holding company typically be established?

To own and manage other companies (B) Signup and view all the answers

Which statement is true regarding general partnerships?

No minimum capital is needed to form one (B) Signup and view all the answers

What is one of the first steps to setting up a company?

Register the company name in the business registry (B) Signup and view all the answers

What is the formula to calculate Expected Value (EV)?

EV = ∑ (Payoff × Probability) (D) Signup and view all the answers

Which production type is used for high-volume, continuous products?

Flow Production (B) Signup and view all the answers

Which statement best describes the concept of Just in Time (JIT)?

Delivering goods only when needed (B) Signup and view all the answers

What is NOT a characteristic of services compared to goods?

Standardized and mass-produced (B) Signup and view all the answers

Which of the following is true about hygiene factors according to Herzberg’s theory?

They prevent dissatisfaction when present (D) Signup and view all the answers

What is the focus of the Kaizen philosophy?

Continuous small improvements (D) Signup and view all the answers

Which of the following is an advantage of Just in Time (JIT) production?

Reduced waste (C) Signup and view all the answers

In Maslow's Hierarchy of Needs, which need is prioritized first?

Physiological Needs (C) Signup and view all the answers

What is a characteristic of Job Production?

Custom, one-off items are produced (A) Signup and view all the answers

Which of the following statements about the value chain is TRUE?

It adds value through a series of activities. (C) Signup and view all the answers

What distinguishes Batch Production from Job Production?

Batch production is suited for moderate quantities. (D) Signup and view all the answers

Which is a disadvantage of the Jidoka approach?

Potential production stops for quality issues (A) Signup and view all the answers

What is NOT a function of the human resources department?

Revenue generation (A) Signup and view all the answers

What does agency theory primarily address?

The relationship between owners and managers and conflicts of interest (B) Signup and view all the answers

Which of the following is NOT a type of resource organizations possess?

Social resources (D) Signup and view all the answers

What is the primary purpose of a cash flow statement?

To track cash inflows and outflows, indicating liquidity (A) Signup and view all the answers

Which of the following best defines working capital?

Current Assets - Current Liabilities (C) Signup and view all the answers

What is the primary focus of transaction cost theory?

Analyzing the costs associated with economic exchanges and decisions (B) Signup and view all the answers

What is a key characteristic of the resource-based theory?

Creating a sustainable competitive advantage through unique resources (B) Signup and view all the answers

Which question is NOT part of the four criteria to assess the importance of resources?

Measurable (C) Signup and view all the answers

Which level of management is primarily responsible for strategic decision-making?

Top Management (A) Signup and view all the answers

What do SMART objectives NOT include as part of their criteria?

Rapid (C) Signup and view all the answers

What is the formula for calculating Return on Equity (ROE)?

Net Profit × 100 / Equity (A) Signup and view all the answers

What is a characteristic of Cost Leadership strategy?

Being the lowest-cost producer for competitive pricing (D) Signup and view all the answers

Which of the following is considered a non-current asset?

Property (C) Signup and view all the answers

During which stage of planning is SWOT analysis executed?

Analyzing the Situation (C) Signup and view all the answers

Study Notes

Company Types and Definitions

Companies are categorized by size, type, activity, geography, and legal status.
Size categories: micro, small, medium, large.
Types: internship, limited, PLC, coop (cooperative).
Activity sectors: primary, secondary, tertiary.
Geography: local, national, international, global.
Legal status: individual, social.
Holding companies and franchises are business structures, not legal types. A holding company is typically a registered company. Franchise operations can be sole traders or limited companies.

Company Structures

Sole Trader: One person, basic legal requirements, no minimum capital, full liability, pays income tax.
Partnership: Two or more people, basic legal requirements, no minimum capital, full liability, pays income tax (general) or corporate tax (limited).
Private Limited Company (Ltd.): Owners are legally separate, registered with tax office, own bank account, at least one director, pays corporate tax, has a secretary.
Public Limited Company (PLC): Owners are legally separate, stock market trading, registered with tax office, own bank account, financial data public.

Responsibility Types

Limited Responsibility: Personal assets protected. Example: Corporations, LLCs.
Unlimited Responsibility: Personal assets exposed. Example: Sole proprietorships, partnerships.
Limited responsibility often requires more complex setup processes and bureaucratic steps compared to unlimited responsibility structures.

Setting Up a Company

Register company name.
Open a business bank account.
Create company documents (name, partners, capital, activity details) with a notary.
Register a partner in social security as administrator.
Transfer capital (e.g., €3,000 or €60,000) to the company account.

Company Theories

Agency Theory: Addresses conflicts between owners (principals) and managers (agents). Focuses on aligning their interests.
Transaction Cost Theory: Explains why companies produce goods internally or outsource. Minimizing exchange costs.
Resource-Based Theory: Emphasizes the importance of unique, valuable internal resources (skills, brand, innovation) for competitive advantage.

Types of Resources

Physical resources (e.g., buildings, equipment).
Financial resources (e.g., capital, investments).
Human resources (e.g., employees, skills).
Natural resources (e.g., materials for production).

Management Levels

Top Management: CEOs, presidents, board: sets long-term goals, makes strategic decisions.
Middle Management: Department/division managers: implements strategy, coordinates teams, monitors performance.
Bottom Management: Supervisors/team leaders: daily tasks, manages employees, reports to middle management.

Financial Statements

Balance Sheet: Shows a company's financial position at a specific time. Displays assets, liabilities, and equity. Assesses solvency.
Cash Flow Statement: Tracks cash inflows and outflows over a period. Breaks down activities into operating, investing, and financing. Assesses liquidity.
Profit and Loss Account (Income Statement): Shows revenue, expenses, and profit/loss over a period. Tracks profitability.

Balance Sheet Categories

Assets: What the company owns.
- Current Assets: Used or converted to cash within a year (cash, inventory).
- Non-Current Assets: Long-term resources (property, equipment).
Liabilities: What the company owes.
- Current Liabilities: Due within a year (accounts payable, loans).
- Non-Current Liabilities: Due after a year (long-term loans).
Equity: Owner's stake (share capital, retained earnings).

Financial Ratios

Working Capital: Current Assets - Current Liabilities (measures short-term liquidity).
Acid Test Ratio: (Current Assets - Inventory) / Current Liabilities (measures short-term liquidity excluding inventory).
Solvency Ratio: Total Equity / Total Assets (assessing long-term financial stability).

Profitability Calculations

Operating Profit: Revenue - COGS - Operating Expenses.
Net Profit: Operating Profit - Interest - Taxes - Non-Operating Expenses.
ROI (Return on Investment): (Net Profit / Investment Cost) * 100.
ROE (Return on Equity): (Net Profit / Equity) * 100.

Strategy and Planning

Five Stages of a Plan: Setting objectives, analyzing the situation (SWOT), developing strategies, implementing, monitoring and evaluation.
SMART Objectives: Specific, Measurable, Achievable, Relevant, Time-bound.
Generic Strategies: Cost leadership (Walmart), differentiation (Apple), focus (IKEA, Tesla).

Decision Trees

Used to analyze decisions with multiple alternatives and possible outcomes.
Using symbols (decision nodes, chance nodes, branches) to outline decisions, possible outcomes and associated probabilities.
Expected Value (EV) calculation determines the best outcome.

Operations Management

Goods vs. Services: Goods are tangible, produced and consumed separately, standardized; Services are intangible, produced and consumed simultaneously, often customized.
Value Chain: Series of activities to deliver a product or service. Analyzing value chain for improvements in efficiency, cost reduction, and quality.
Production Methods: Job, Batch, Flow.
Just-in-Time (JIT): Minimizes inventory, optimizes efficiency; risks include stockouts, supplier dependency
Kaizen: Continuous improvement philosophy
Jidoka: Automated quality control stopping production at defect

Human Resource Management

HR Functions: Recruitment, training, performance management, compensation, employee relations, legal compliance
Maslow's Hierarchy of Needs: Physiological, Safety, Love/Belonging, Esteem, Self-Actualization.
Herzberg's Motivation-Hygiene Theory: Hygiene factors (prevent dissatisfaction), Motivators (increase satisfaction).
Job Design: Job enlargement, job redesign, employee empowerment.
Leadership Styles: Autocratic, Democratic, Transformational, Laissez-faire, Transactional (advantages and disadvantages for each)

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Description

Explore the various types and structures of companies, including categorizations by size, activity sectors, geography, and legal status. This quiz covers sole traders, partnerships, and limited companies, providing essential definitions and characteristics for each type.