Commerce

What are the main types of business ownership?

Sole trader, Partnership, Private limited company, Public limited company.

Why would someone choose to be a sole trader?

They want full control, to keep all profits, and to start simply with low setup costs.

What is a disadvantage of being a sole trader?

Unlimited liability and heavy workload.

Why might people form a partnership?

To share skills, share capital investment, and share decision-making.

What is one advantage and one disadvantage of a private limited company?

Advantage: Limited liability. Disadvantage: More complex and expensive to set up than sole trader.

What is limited liability?

Business owners are not personally responsible for business debts.

What is unlimited liability?

Business owners must pay for business debts from personal money or assets.

What is a franchise?

A business owned by one person (franchisee) using the brand and system of another (franchisor).

What is the benefit of a franchise to the franchisee?

Established brand recognition and support from the franchisor.

What is the benefit of a franchise to the franchisor?

Expand the business quickly without using their own money.

Why do businesses need finance?

To start the business, cover daily expenses, expand operations, or invest in equipment.

What are examples of short-term finance?

Bank overdraft, trade credit.

What are examples of long-term finance?

Bank loans, mortgages, retained profits, selling shares.

What are examples of internal finance?

Owner's savings, retained profit, sale of assets.

What are examples of external finance?

Bank loan, investor capital, government grants.

What is an advantage of using internal finance?

No interest or repayments required.

What is a disadvantage of internal finance?

Might limit growth and drain owner's savings.

What is an advantage of external finance?

Can provide large sums quickly.

What is a disadvantage of external finance?

Repayments and interest are required, possibly giving away ownership.

Why do people become entrepreneurs?

To be their own boss, to earn more money, to follow a passion or solve a problem.

What makes a good entrepreneur?

Risk-taking, determination, creativity, leadership, problem-solving skills.

What is the accounting equation?

Assets = Liabilities + Owner's Equity (Capital).

What happens if you buy equipment with a loan?

Assets go up (equipment), liabilities go up (loan).

What are examples of stakeholder objectives?

Owners = profit, Employees = pay and job security, Customers = good value and service.

What is the difference between internal and external stakeholders?

Internal = involved inside the business (e.g. staff), External = outside influence (e.g. government).

What is Corporate Social Responsibility?

When a business acts ethically, helps the environment and local community.

Why do businesses use CSR?

To build reputation, meet customer expectations, reduce harm to society.

What are examples of CSR?

Recycling, fair wages, reducing emissions, charity donations.

What is Kaitiakitanga in business?

A Māori value that encourages businesses to act as guardians of the land and resources.

Why is Putake important in Māori business?

It reflects the business's core reason for existing beyond just profit.

What is the purpose of a mission statement?

To describe a business's purpose, values, and overall direction.

What are business objectives used for?

To set specific, measurable goals that help achieve the business's aim.

What is the double entry system of accounting?

Every transaction affects at least two accounts: a debit and a credit.

What is the effect of receiving cash from a customer?

Increase in cash (asset - debit), decrease in accounts receivable (asset - credit).

What is the effect of buying inventory on credit?

Increase in inventory (asset - debit), increase in accounts payable (liability - credit).