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Flashcards by icadestudents ., updated more than 1 year ago
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| Question | Answer |
| What is a sole proprietorship? | A one-person business - A business that is fully owned and run by a single owner. |
| Advantages of being a sole trader? | >Full control over decision making. >Get to keep all the profits. >Financial privacy > Flexibility |
| Disadvantages of being a sole trader? | >Unlimited Liabililty >No economies of scale >Limited capital >Lack of continuity |
| What is a Partnership? | A business that is owned by 2-20 people. |
| Advantages of a partnership? | >More effective decision-making. >Increased Capital >Shared workload / Specialisation |
| Disadvantages of a partnership? | >Unlimited Liablility >Shared profits >Lack of continuity >Possible conflict between partners |
| What is the document that should be drawn up when a partnership is formed? What kind of information should it contain? | >The partnership agreement. -It should include Name and function of the company, capital invested, profit ratio, rules for ending a partnership |
| What is a silent partner? | A partner which has invested capital in the business but isn't involved in the running of the business. |
| What is a limited company? | A company, which is a separate legal entity from its owners. |
| What is an LTD | A private limited company: ie, a limited company with shares that cannot be bought by the public. |
| What is a PLC? | A private limited company: ie, a limited company whose shares can be bought by the public because they are traded publicly.. |
| Advantages of an LTD? | >Continuity >Limited Liability of its owners >More Control >Easier access to capital |
| Disadvantages of an LTD? | >Shared Profits >Lack of financial privacy >Limit on capital >Set up costs |
| Advantages of a PLC? | >Raising capital is easy because of unlimited number of shareholders >Limited Liability >Continuity |
| Disadvantages of a PLC? | >Threat of hostile takeover! :( >Lack of control >Set up costs >No financial privacy |
| What are the two documents required for a Limited company? | 1. The "Memorandum of Association." >Basically of interest to outsiders eg. name, function, objectives 2. The "Articles of Association." >Basically of interest to shareholders, directors and managers eg. How board meetings will work, how profits will be split, duties of the directors |
| Examples of Internal sources of finance? | >Owner's Investment >Sale of fixed assets and stock >Debt Collection >Retained profits |
| Examples of External sources of finance. | >Hire purchase (small payments until its paid off.) >Issue of shares >Bank loans & overdrafts >Goverment grants and subsidies >Rent leasing >Trade credit (goods now pay later) |
| What is a stakeholder? | Someone with an interest in the business. |
| Examples of internal stakeholders | Managers and employees |
| Examples of external stakeholders | customers, community, competitors, creditors, government |
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