Role of a business

Nature of a Business

The primary function of a business is to produce goods and services for profit.

Goods

Tangible items that can be seen and touched.

Services

Intangible actions performed for someone else.

Inputs

Resources used in the production process, including land, capital, labor, and enterprise.

Outputs

The final goods and services produced for consumers.

Profit

The financial gain after all expenses are deducted from sales revenue.

Employment

Businesses create job opportunities, contributing to the economy.

Income

Money received by employees for their labor, often in the form of wages or salaries.

Choice

The variety of products available to consumers at competitive prices.

Innovation

The introduction of new or improved products or services to maintain competitive advantage.

Entrepreneurship

The process of transforming ideas into a business, involving risk-taking.

Wealth

The net value owned by individuals or businesses, created through profits and investments.

Quality of Life

The overall standard of living and well-being influenced by business activities.

Types of Businesses

Classification based on size, geographical spread, industry, and legal structure.

Small Business

A business with 5 to 19 employees, often owner-operated.

Medium Business

A business with 20 to 199 employees, typically privately owned.

Large Business

A business with 200 or more employees, often publicly traded.

Geographical Spread

The operational reach of a business, which can be local, national, or global.

Industry Classification

Divided into primary, secondary, tertiary, quaternary, and quinary sectors.

Legal Structure

The framework defining the ownership and operation of a business, such as sole trader or partnership.

Sole Trader

A business owned by one person, with full control and limited liability.

Partnership

A business owned by 2 to 20 individuals, sharing responsibilities and profits.

Private Company

A business with no more than 50 owners, often incorporated.

Public Company

A business with no maximum number of owners, publicly traded and run by a board of directors.

Government Enterprise

A business that operates on behalf of the government.

External Influences

Factors outside a business that affect its operations, including economic and social conditions.

Internal Influences

Factors within a business that impact its performance, such as management and resources.

Stakeholders

Individuals or groups with an interest in the business, including owners, employees, and customers.

Business Lifecycle

Stages a business goes through, including establishment, growth, maturity, and post-maturity.

Voluntary Cessation

When a business owner decides to cease operations willingly.

Involuntary Cessation

When a business is forced to close due to creditor actions.

Bankruptcy

A legal status for individuals or businesses unable to pay their debts.

Liquidation

The process of selling a business's assets to pay creditors, often leading to closure.

limited liability

Flashcard

Definition: A legal structure that protects an owner’s personal assets from being used to satisfy business debts or liabilities. This means that if the business fails or faces lawsuits, the owner's financial risk is confined to their investment in the business, shielding personal wealth from creditors.

Unlimited liability

Unlimited LiabilityUnlimited liability is a legal concept where the owners of a business are personally responsible for all debts and obligations of the business. This means that if the business cannot pay its debts, creditors can pursue the personal assets of the owners, such as homes and savings, to satisfy the debts. This is commonly associated with sole proprietorships and partnerships.