Business revision 1.5

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What is an entrepreneur?
Individuals who, typically, set up and run a business and take the risks associated with this
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What is an intrapreneur?
Employees who use entrepreneurial skills, without having to risk their own money, to find and develop initiatives that will have financial benefits for their employer.
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What are the main barriers to entrepreneurship?
Lack of finance/lack of entrepreneurial capacity/becoming an employer/legal barriers/lack of ideas/fear of failure/corrupt and unsupportive environment
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What are the main characteristics of entrepreneurs?
Decisive/ambitious/innovators/risk taker/self-confidence/self-determination/perseverance/initiative/good communication skills
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What are the reasons why people set up businesses?
Financial motives/profit maximisation/profit satisficing/ethical stance/social enterprise/independence/home working
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What are the advantages of sole traders?
The owner keeps all the profit/The business is independent and the owner has complete control/The business is simple to set up, with no legal requirements/The business can be flexible and can adapt to change quickly
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What are the disadvantages of sole traders?
The owner has unlimited liability/The owner may struggle to raise finance/Independence may be a burden, for example if an owner is ill/The owner and employees are likely to work hard with long hours
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What are the advantages of a partnership?
The partnership is easy to set up and run/partners can specialise in their area of expertise/more owners can raise more capital/the partnership does not have to publish financial information
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What are the disadvantages of a partnership?
Partners have unlimited liability/Partners have to share profit/partners may disagree and fall out with one another/partnerships have limited growth potential
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What are the advantages of a private limited company (Ltd)?
Shareholders have limited liability/More capital can be raised by issuing shares/Control over the business cannot be lost to outsiders/Higher status than a sole trader for example
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What are the disadvantages of a private limited company (Ltd)?
They have to publish their financial information/Setting up costs have to be met/Profits are shared between more members/It takes time to transfer shares to new owners/ Cannot raise large amounts of money like PLCS.
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What is a lifestyle business?
A business that aims to make enough money and provide the flexibility needed to support a particular lifestyle for the owner
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What is a limited company?
A business organisation that has a separate legal entity from that of its owners
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What is limited liability?
A legal status which means that a business owner is only liable for the original amount of money invested in the business
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What is a sleeping partner?
A partner that contributes capital and enjoys a share of the profit but takes no active role in running the business
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What is a social enterprise?
A business that trades with the objective of improving human or environmental well-being-charities and workers co-operatives, for example
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What is unlimited liability?
A legal status which means that the owner of a business is personally liable for all business debts.
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What is the articles of association?
A document that provides details of the internal running of a limited company
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What is the memorandum of association?
A document that sets out the constitution and states key external details about a limited company. It includes details such as company name, objectives of the company
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What are advantages to franchisees of franchising?
Franchises are lower risk/Franchisees get support from the franchisor/The set up costs of a franchise are predictable/Franchisees can benefit from national marketing campaigns organised by the franchisor
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What are the disadvantages to franchisees of franchising?
A franchisees profit is shared with the franchisor/Franchisees have to sign contracts with franchisors, which can reduce independence/Setting up a franchise can be expensive/Franchisees lack independence and must abide by strict operating rules
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What are the advantages to franchisors of franchising?
Franchising is a fast method of growth/Franchising is a cheaper method of growth because franchisees take some of the financial risk/Franchisees are more motivated than employees
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What are the disadvantages to franchisors of franchising?
Potential profit is shared with franchisees/Poor franchisees may damage the brands reputation/Franchisees may get their merchandise from elsewhere/The cost of supporting franchisees may be high
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What is a public limited company?
A company owned by shareholders where the shares can be traded openly on the stock market
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What is stock market flotation?
The process of a company going public-making shares available to the public for the first time.
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What is a private equity company?
A business usually owned by private individuals backed by financial institutions
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What are the advantages of being a public limited company?
All members have limited liability/Huge amounts of money can be raised/Production costs will be lower as firms may gain economies of scale/PLCS can dominate the market/It becomes easier to raise finance
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What are the disadvantages of being a public limited company?
Setting up costs can be very expensive/Anyone can buy shares meaning an outsider can take control of the company/Members of the public can inspect all of the companys accounts. some PLCS are inflexible due to their size/
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What is opportunity cost?
When choosing between different alternatives, the opportunity cost is the benefits forgone of the next best alternative.
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What are trade-offs?
In business, where a decision maker faces a compromise between two different alternatives; for example, between paying dividends to shareholders and re investing profits in the business
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Give an example of non monetary opportunity costs?
An entrepreneur might decide to reinvest profits in the business at the expense of a family holiday. The opportunity cost of this decision might be over work and disappointed children, which might be felt by the whole family.
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Give the main types of business objectives?
Survival/profit maximisation/sales maximisation/market share/cost efficiency/employee welfare/customer satisfaction/social objectives
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Other cards in this set

Card 2

Front

What is an intrapreneur?

Back

Employees who use entrepreneurial skills, without having to risk their own money, to find and develop initiatives that will have financial benefits for their employer.

Card 3

Front

What are the main barriers to entrepreneurship?

Back

Preview of the front of card 3

Card 4

Front

What are the main characteristics of entrepreneurs?

Back

Preview of the front of card 4

Card 5

Front

What are the reasons why people set up businesses?

Back

Preview of the front of card 5
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