Unit 3

  • Created by: liznick
  • Created on: 28-04-14 21:00

Public Limited Companies

Advantages to its stakeholders

  • Has limited liability- they only risk the amount they have invested in the business in the event of failure-cant loose personal possesions- owners can't loose possesions
  • Can sell shares to anyone- via the stock exchange- stakeholders can buy shares- more money for the business
  • Likely to be in the media frequently- Hebden Carpets "regular apperances in the media"- attracts more attention and publiciy- Stakeholders can see its progress- affects local community- more jobs if doing well
  • Gives Hebden Carpets a more prestigious profile- have been PLC for 32 years- attracts more people
  • Large plc's may find it easier to get a loan from banks- helpful when raising money for their large investment
  • Cheaper borrowing and bulk purchasing- economies of scale- suppliers benefit from the business purchasing more- Hebdens can buy more supplies for overall less price
1 of 19

Public Limited Companies

Disavantages to its stakeholders

  • Accounts have to be published showing detailed financial information- competition could benefit from this- depends on current success of busines, if doing well people can see and might buy shares ADVANTAGE, if not people might decide not too- affects the stakholders e.g. owners/ managers and customers
  • Have to pay a percentage of profit to shareholders- dividends- less money for stakeholders
  • Hebdens owners may lose control because anyone can buy shares- affects the stakeholders

How they are financed

  • Grants
  • Loans
  • Selling shares via Stock Exchange

In conclusion- e.g. advantages outweigh disadvantages...

2 of 19

Hebden Carpets

For undertaking the large investment

  • Sales have risen steadily for vinyl flooring products since 2000 in Europe
  • Cheaper to have factory in Poland- could continue with high uneployment areas for employees
  • Good distribution network in Europe and good relations with many retailers
  • Could be easier to get a bank loan as they are a well established and successful plc- needed for investment
  • Profits from vinyl are 50% higher than for carpets
  • Could please the Shareholders- improves their financial performance#
  • Cash flow forecast shows....
3 of 19

Hebden Carpets

Against undertaking the investment

  • Hebdens dont have much competition in UK- could open factory here to produce vinyl
  • Got a USP if produced in UK- "Made in Britain"- could then sell online abroad- good promotional technique
  • Already had success/ many awards, in media- could continue in the UK, could be jeopardised in Poland
  • Hebdens market research shows its competitive
  • £124 million is a lot of money- could instead expand product range in UK- open/ expand factories,- continue to employ from high unemployment areas
  • Could loose customers in the UK


  • e.g. could be a high risk project
  • might be more successful if save the money and use it in the UK instead
4 of 19

Sole Trader

  • Pros
  • Have all the control over the business
  • Make all of the decisions, you are your own boss
  • Keep all profits
  • Full ownership
  • Cons
  • Only have your ideas within the business
  • You are responsible for everything
  • Unlimited liability
  • Inflexible


  • Personal savings
  • Investment from friends and family
  • Loans
5 of 19



  • Can share responsibility
  • Less pressure on the partners
  • Opinions get shared
  • Flexibility
  • Raise capital


  • Disputes over decisions and ideas
  • Unlimited liability
  • No full ownership


  • Partners' savings
  • Loans
6 of 19

Private Limited


  • Has limited liability
  • Accounts dont have to be published- private
  • Easier to raise finance- shares


  • Cant sell shares to anyone- less money
  • Growth may be limited
  • Disputes- loss of control


  • Grants
  • Loans
  • Suppliers
  • Leasing
7 of 19

Public Limitied


  • Has limited liability
  • Can sell shares to anyone
  • Raise lots of money


  • Accounts have to be published- could be good or bad
  • Pay percentage of profit to shareholders- dividends


  • Grants
  • Loans
  • Selling shares via the stock exchange
8 of 19

Sources of finance- credit cards

Credit Cards


  • Allow you to purchase items and pay them off in monthly investments
  • May offer cash back
  • You can use them practically everywhere


  • May spend more money than you have
  • Cost of interest and fares

9 of 19

Sources of finance- retained profit


  • Long term finance
  • No fixed obligation of interest
  • Cost effective


  • Not making any excess profit
  • Wasted money
10 of 19

Sources of finance- sale of assets


  • Way of making money on items that you no longer need
  • Instant money


  • You might need these items at another time
  • Losing resources
11 of 19

Sources of finance- loans


  • Not repayable on demand
  • Interest rates may be fixed so wont change
  • Quick


  • Have to pay the money back by a certain time with interest
12 of 19

Sources of finance- Renting assets


  • Way of making money on items you dont always use
  • May make profit


  • Assets could get damaged or abused
  • You might need these items at another time
13 of 19

Sources of finance- government grants


  • You dont have to pay the money back


  • Takes a lot of time to be approved
  • Great deal of competition to get the grant
  • Not easily available
14 of 19

Sources of finance- venture capital


  • get capital


  • Venture capitalists get some of your profit
  • Take some of your control
  • May have disputes
15 of 19

Business Plan

Main sections

  • Cover
  • Contents Page
  • The executive summary- main points
  • Key features of the business
  • Aims and objectives
  • Industry analysis- understanding the market you are selling to
  • Market research
  • Marketing- 4P's
  • Human resources
  • Financial forecasting
  • Operational requirements- IT, machinery
  • Appendix and research

Why needed?

  • To set out clear plans supported by accurate forecasts, validity purposes and records, guide for success, bank requirement, sets out key aims and objectives
16 of 19

Business Plan

Key stakeholders interested in a business plan

  • The business's owners
  • Banks and other investors
  • Suppliers
  • Employees


  • Enables you to measure how you are getting on
  • Sets a direction
  • The plan is flexible and adaptable
  • Source of finance
  • Initiates strategic thinking- what your strategy will be
  • Building relationships


  • Takes a lot of time, data could be inaccurate, false certainty-projection/projection-biased, can be inflexible if followed
17 of 19

Business Resources

Labour intensity: Pros

  • Provides employmeny and therefore brings income and opportunities for individuals
  • flexible
  • Job production- made specialised/ personalised products e.g. wedding cakes
  • Cheaper in the short term
  • Better for small businesses- cheap


  • Usually used to produce products on a small scale- normally seen in small scale enterprises
  • Have to fund for wages, recruitment, training, benefits etc
  • Inconsistent effor- quality
  • Hours- breaks- holidays
  • Different personalities
18 of 19

Business resources

Capital intensity: Pros

  • Can produce on a large scale
  • high rate of success- produce things quickly and efficiently
  • flow production- conveyor belt
  • Low competiiton
  • Low risk of losing your investment
  • 24/7 work- flexible hours
  • Consistent qulity/ precise


  • Requires a relatively high level of capital- short term cost
  • Can be costly and time consuming
  • Have to pay for repairs if they break- stops production
  • Consistent effors- e.g. Toyota breaks
  • Inflexible to change production
19 of 19


No comments have yet been made

Similar Applied Business resources:

See all Applied Business resources »See all Financial planning and monitoring resources »