Types of Businesses and Finance Sources

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Questions and Answers

What is a Public Limited Company (Plc) and how does it benefit from being publicly traded?

A Public Limited Company (Plc) is a business whose shares are traded publicly on the stock exchange, which makes it easier to raise large amounts of money.

List two main goals of Corporate Social Responsibility (CSR) statements.

The main goals of CSR statements include reducing environmental damage and supporting community projects.

Identify three key attributes of successful entrepreneurs.

Three key attributes of successful entrepreneurs are being innovative, risk-takers, and resilient.

What is one advantage and one disadvantage of being a franchisee?

One advantage is having an established brand to attract customers, while a disadvantage is having to pay fees and share profits with the franchisor. Signup and view all the answers

Why might a company prioritize fair treatment of employees in its CSR statements?

A company may prioritize fair treatment of employees to promote ethical practices and improve employee satisfaction. Signup and view all the answers

What is the main advantage of being a sole trader?

The main advantage is full control over the business operations. Signup and view all the answers

How does a Private Limited Company (Ltd) protect its owners?

A Ltd protects its owners' personal assets from being used to pay business debts. Signup and view all the answers

What is trade credit and how does it benefit businesses?

Trade credit allows businesses to buy goods and pay for them later, improving cash flow. Signup and view all the answers

Differentiate between needs and wants with examples.

Needs are essential for survival, like food and water; wants are non-essential, like phones and holidays. Signup and view all the answers

What is the difference between limited and unlimited liability?

Limited liability protects owners' personal assets, while unlimited liability makes them fully responsible for debts. Signup and view all the answers

What activities are included in the primary sector?

The primary sector includes extracting raw materials, such as farming, mining, and fishing. Signup and view all the answers

What is the major difference between a Private Limited Company (Ltd) and a Public Limited Company (Plc)?

A Private Limited Company sells shares privately, while a Public Limited Company can sell shares to the public. Signup and view all the answers

Identify two internal and two external stakeholders of a business.

Internal stakeholders include employees and managers; external stakeholders include customers and suppliers. Signup and view all the answers

Study Notes

Types of Businesses

Sole Trader: One owner, full control, but personal liability for debts. Examples include shopkeepers, photographers, and plumbers.
Partnership: Two or more owners, shared responsibilities and profits, personal liability for debts.
Private Limited Company (Ltd): Owned by a small group (individuals or families). Owners’ personal assets are protected, cannot sell shares publicly. Examples include restaurants and clothing stores.
Public Limited Company (Plc): Can sell shares publicly on stock markets. Owners’ personal assets are protected; generally larger companies. Examples include Apple, Microsoft, and Huawei.

External Finance Sources

Bank Loans: Borrowed from banks, repaid with interest.
Overdraft: Spending beyond account balance up to a defined limit.
Trade Credit: Buying goods, paying later.
Leasing: Renting equipment, or machinery instead of purchasing.
Selling Shares: Raising capital by selling ownership (applicable to Ltds and Plcs).

Stakeholders

Internal Stakeholders: Employees, managers, owners.
External Stakeholders: Customers, suppliers, government, community, banks.

Needs vs. Wants

Needs: Essential for survival (food, water, shelter).
Wants: Desired but non-essential things (phones, holidays).

Liability

Limited Liability: Owners' personal assets are protected; only investment is at risk (e.g., Ltds, Plcs).
Unlimited Liability: Owners are fully responsible for all debts; personal assets can be used to pay debts (e.g., sole traders, partnerships).

Economic Sectors

Primary Sector: Extracting raw materials (farming, mining, fishing, forestry).
Secondary Sector: Manufacturing goods (factories, construction).
Tertiary Sector: Providing services (retail, education, healthcare, transport).

Company Structures

Private Limited Company (Ltd): Shares sold privately, tighter ownership control.
Public Limited Company (Plc): Shares traded publicly, easier to raise large sums of capital.

CSR: Companies committing to ethical behavior and contributing to society:
- Reducing environmental damage.
- Supporting community projects.
- Ensuring fair worker treatment.

Entrepreneurial Attributes

Innovative: Creative with ideas.
Risk-taker: Willing to take calculated risks.
Resilient: Persistence through challenges.
Good Decision-Maker: Quick and effective judgment.

Franchising

Franchisee Advantages: Established brand, easier customer attraction, support from franchisor (training, marketing).
Franchisee Disadvantages: Payment of fees and profit sharing, limited business decision control.

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Description

This quiz covers the different types of businesses, including sole traders, partnerships, private and public limited companies. Additionally, it explores external finance sources available to businesses such as bank loans, overdrafts, trade credit, and leasing. Test your knowledge of these fundamental concepts in business!