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Revision. Year 11 Mid Year Exam. Types of Businesses. Businesses are classified in a number of ways Size Geographical spread Industry sector Legal Structure. S ize. Small business- Less than 20 employees Independently owned and operated by one or two people

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  1. Revision Year 11 Mid Year Exam

  2. Types of Businesses • Businesses are classified in a number of ways • Size • Geographical spread • Industry sector • Legal Structure

  3. Size • Small business- • Less than 20 employees • Independently owned and operated by one or two people • What kind of ownership is most common for a small business? • Owner responsible for majority of decision making. Quick implementation of changes • How are these businesses usually financed? • Small market share, local area, not dominant in industry • Examples?

  4. Medium businesses- • 20-199 employees • Owned and operated by a few people and/or private share holders • Partnership or private company • Owner basically responsible for majority of decisions if partnership; more complicated decisions, with slower implementation if a private company. • How is a medium sized business financed? • Medium market share due to dominance within geographic region. Some market dominence. • Examples?

  5. Large businesses- • 200+ employees • Usually owned by thousands of public shareholders • Most often a public company (listed on the ASX) • Complex decision making and various levels of management fronted by a CEO or director/s, followed by senior and middle management. Possibly slow implementation of decision making and change due to layers of management. • Many sources of finance including; cash reserves, retained profit, sale of shares and loans from domestic and foreign institutions • Large market share, particularly for multinational corporations that dominate the markets of many countries • Examples?

  6. Geographical Spread • Local businesses- • Serves the surrounding area, with a restricted geographical spread. • Often only used by consumers who live nearby. • National businesses- • As a business grows the area its serves also increases. • A small local business can sometimes grow exponentially to become a national business, operating country wide- within a single country.

  7. Global businesses- • Can be further divided into multi-national and transnational businesses • Usually has a base in a home country while operating partially or wholly owned businesses in other countries. • For these companies national borders do not represent barriers to trade, they are simply lines on a map. • Why has the number of global businesses increased in the last 20 years?

  8. Why do businesses expand from local  national  global Desire to increase profits Increase in sales Business Expansion Increase in market share Global consumers

  9. Industry Sector INDUSTRY SECTOR TERTIARY PRIMARY SECONDARY QUARTERNARY QUINARY

  10. Legal Structure CLASSIFICATION BY LEGAL STRUCTURE SOLE TRADER PARTNERSHIP PRIVATE COMPANY PUBLIC COMPANY Unincorporated Incorporated

  11. Business Structure • Personal (unlimited) liability for business debts • End of business when owner dies • Difficult to operate if sick • Need to carry all loses • Burden of management • Need to perform a vide variety of tasks • Difficult to raise finance for expansion • Sole trader ADVANTAGES • Low cost of entry • Simplest form • Complete control • Less costly to operate • Owners right to keep all profits • Less government regulation • No tax on profit, only personal income DISADVANTAGES

  12. Personal unlimited liablity • Liability for all debts, including partners debts even before partnership began. • Possibility of disputes • Divided loyalty and authority • Partnerships ADVANTAGES • Low start up costs • Less costly to operate than a company • Pooled funds and talent • Minimal government regulation • No taxes on profit, only personal income • On death of one partner, business can continue DISADVANTAGES

  13. Companies What is meant by the term limited liability? Private company vs. Public companies • The most common type of company in Australia. • Has between two and 50 private shareholders • Small to medium family businesses • Shareholders can only sell their shares if approved by other directors • Listed on the ASX • Large companies • At least one shareholder with no maximum number • No restrictions on the transfer of shares • Must issue a prospectus when selling first shares • A minimum of three directors • The word ‘Limited’ or ‘Ltd’ • Publish an annual report

  14. Government Enterprises- • Government owned and operated. • Provide essential community services such as health, education, roads and welfare. • Wave of privatisation in the early 1980’s- the reason for this is that economic efficiency is increased by transferring enterprises away from the public sector into the private sector • Franchising- • A _________ means buying the rights from another business to distribute its product under its name. • A _________is an individual or business that grants a franchise • A __________ is an individual or business that purchases the franchise. Franchisee Franchise Franchisor

  15. Factors influencing legal structure • Three factors • Size of the business 2. Ownership structure 3. Finances needed WHY? Give an example of a company the started as a sole trader or partnership which is now a public company

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