AQA A level Business Unit 1

What are the issues with different forms of business?

What are the issues with different forms of business?

Unlimited/ limited liability, Ordinary share capital, Market capitalisation and Dividends.

ordinary share capital

the amount of money which is raised by the companies from the issue of the common shares of the company from the public and the private sources

Corporate Objectives

Targets for the whole business, such as profits to rise by 20% a year for the next 3 years.

Entrepreneur

Person with the initiative and drive to make a business idea happen.

Mission

Business aim expressed to make it seem especially purposeful and motivating.

Mission Statement

A short, powerful expressed sentence or two that explains the business aims clearly yet motivationally.

Objectives

Targets precise enough to allow praise or blame for the person in charge.

Profit Optimisation

The surplus of revenue over costs should be just right; neither too high in the short term nor too low to finance long term success.

Strategy

Medium to long term plan for meeting objectives.

What are the 4 business functions?

Marketing, People (Human Resources), Finance and Operations.

Why do businesses exist?

Human spirit, a sense of adventure to lead people to what they can do, and to create income.

Why do businesses set objectives?

gives the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims

common business objectives

Profit Maximization, Profit Optimisation, Growth, Cash Flow, Survival and Social and Ethical.

SMART

Specific, Measurable, Achievable, Realistic and Timebound

Bankrupt

Individual is unable to meet personal liabilities, some or all of which can be as a consequence of business activities.

Creditors

Those owned money by a business. For example, suppliers and bankers.

Incorporation

Establishing a business as a separate legal entity from its owners, and therefore giving the owners limited liability.

Limited Liability

Owners are not liable for the debts of the business; they can lose no more than the sum they invested.

Monopoly

Where the sales of one business have a dominant share of its marketplace.

Sole Trader

One person business with unlimited liability.

Unlimited Liability

Owners are liable for any debts incurred by the business, requires them to sell their personal assets and possessions and become personally bankrupt.

advantages of limited liability

Shareholders may be confident to expand business, access to wider borrowing opportunities.

disadvantages of limited liability

Have to follow more rules, must make financial information available publicly.

Private Limited Company

The start up capital will often be £100, this is wholly owned by the entrepreneur, or investors. Shares cannot be bought and sold without agreement, cannot be listed on stock market. For example, Aviva.

Public Limited Company

When LTD expands to point of having share capital of more than £50'000, it can then be converted to PLC. It can be floated on stock market, allowing members of the public to buy shares, this increases the company's access to share capital. For example, Tescos.

Co-Operatives

This can be worker owned, such as John Lewis, or customer owned, such as the retail Co-Op. They have the potential to offer more united cause for workforce than profits of shareholders.

Mutual Business

This includes building societies/ mutual life assurance. They have no shareholder or owners. Exists solely for best interests of members; Customers. For example, Nationwide.

Charities

Important organisations have charitable status. Includes pressure groups, such as Greenpeace and conventional charities, such as Oxfam. They ensure that those who fund the charity are not liable for any debts, also provides significant tax benefits.

Public Corporation

Government owned that trade mainly with private sector. Most have been sold to the private sector, forming private monopoly. Few remaining PC is Crown Estate, earns rental income for the government from publicly owned lands and buildings.

Local Authority Service

They run services such as care homes for the elderly, even though there was alternative provision from the private sector. The rationale of healthcare was priced below the private sector level or might even be free.

Private Public Partnerships

Governments have promoted the idea that public services will be more efficient if run in partnership with the private sector.

Annual General Meeting

A yearly meeting in which company directors invite all shareholders to come to quiz the board and vote on new resolutions. A legal requirement for PLCs.

Dividend Cover

Measures how well a firm's dividends are covered by its profits for the year. Accountants recommend a figure of at least 2, company should pay out no more than half its profits to shareholders.

Market Capitalisation

Value placed on the business by the stock market, calculated as; share price x number of shares issued.

role of shareholders

They literally own a share of the business, proportionate to their shareholding. It is to provide the capital to get the business going and to keep it growing

shareholder rewards

Annual dividend payments and rise in the value of shares.