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Although all businesses are different, interestingly, they all share a common purpose: to add value to customers. Almost all businesses have distinct characteristics and values, so it is essential to first understand: what exactly is a business? A business is an individual or group of individuals that work together to produce and sell goods and services for a profit. Businesses can either be run for profit, such as restaurants, supermarkets, etc., or non-profit organisations developed to serve a social purpose. Non-profit organisations do not earn profits from their services, as all earned profits are used in achieving social objectives. An example of this is the non-profit organisation SafeNight, which offers a secure way for domestic violence shelters and anti-trafficking service organisations to crowdsource funding for immediate shelter. A business is defined as an organisation or entity involved in commercial, industrial, or professional activities providing goods or services to the public. Business meaningBusiness is a broad term but is usually referred to as the profit-generating activities which include the provision of goods or services wanted or needed by people in exchange for a profit. Profit does not necessarily mean cash payments. It can also mean other securities such as stocks or the classic barter system. All business organisations have a few common characteristics: the formal structure, aim to achieve objectives, use of resources, the requirement of direction, and the legal regulations controlling them. Based on the factors such as the degree of liability, regulation on tax exemptions, business organisations are divided into the following: sole-proprietorship, partnership, corporations, and limited liability companies. Sole proprietorships - local food joints and grocery stores, etc. Partnerships - Microsoft (Bill Gates and Paul Allen) and Apple (Steve Jobs, Ronald Wayne, and Steve Wozniak). Corporations - Amazon, JP Morgan Chase, etc. Limited liability companies - like Brake Bros Ltd., Virgin Atlantic, etc., are also corporations. What is a business concept?A business concept is a statement representing a business idea. It includes all the key elements – what it offers, target market, Unique Selling Proposition (USP), and feasibility of succeeding. It explains why the businesses’ USP provides itself with a competitive advantage in the market. A developed business concept is then added to the business plan for the successful implementation of the concept. What is the purpose of business?The purpose of every business is to offer/add value to their customers’ lives through the products or services they offer. Every business markets its offerings with the promise of making its consumers’ lives a bit better by adding value. And the purpose of business is to act on this promise. Businesses should make sure that their corporate vision reflects their purpose. Different stakeholders may have different answers as to what the purpose of business is. A shareholder might say that the purpose of business is to create profit, as it would only benefit him when the business grows financially. A politician may believe that the purpose of a business is to create long-term jobs. But profit and job creation are means to run a business, as businesses cannot generally be sustained without profits and employees combined. What is the nature of business?The nature of a business describes the type of business it is and what its overall goals are. It describes its legal structure, industry, products or services, and everything a business does to reach its goals. It depicts the business’s problem and the main focus of the company’s offerings. A company’s vision and mission statement also provide an insight into its nature. A mission statement provides an overview of the overall purpose of an organisation. It is a short statement that describes what the company does, who they do it for, and what its benefits are. The company vision describes what it aims to achieve in the future, to fulfil its mission. It should provide guidance and inspiration to employees. The following aspects determine the nature of business:
List of natures of businessesThe characteristics grouped in the following categories help to describe the nature of businesses: Figure 1. List of Natures of Business, StudySmarter Originals. Types of businesses explainedThe meaning of the various natures of business is explained below.
Do businesses exist only to make a profit?It is a common misperception that businesses exist only to make a profit. Although this was the previous understanding of business, this does not stand true anymore. Profit-creation is not a core reason for businesses to exist but is a means for a businesses’ existence - it can be considered a means to an end. Profits help a business to do better and improve its quality. Businesses will not survive in the market without making a profit; thus, this is considered a business objective. So businesses do not just exist to make a profit. What is business? - Key takeaways
Frequently Asked Questions about Nature of BusinessA document that explains a company's objective and the methods of achieving the objective in detail is called a business plan. It shows the details of how every department should perform to achieve the goals. It is also used by startups to attract investors, and by established firms to have the executives on board and on track with the company's strategies. A business model shows how a business plans to make a profit. It is a company's foundation and identifies the business's products and services, its target market, sources of revenue, and financing details. It is important for both startups and established businesses alike. Partnerships are a business organisational structure that includes businesses run by two or more people under a legal agreement. A business is defined as an organisation or entity involved in commercial, industrial, or professional activities providing goods or services to the public. Final Nature of Business Quiz
Question What is the definition of a sole trader? Show answer Answer A sole trader is a business that is owned and managed by one person. People operating a sole trader business work for
themselves and are responsible for all business activities and decisions involved in running the business. Show question
Question What is another term for a sole trader? Show answer Answer A sole proprietor. The terms 'sole trader' and 'sole proprietor' are synonymous. Show question
Question Define unlimited liability. Show answer Answer Unlimited liability is when an individual is personally responsible for all the actions of their business. For a
sole trader there is no distinction between the individual and the business. This means that the individual is personally responsible for their business losses and problems. For instance, if a sole proprietor borrows money from a bank and cannot repay their debt, they may risk losing personal possessions. Show question
Question Which one of the following is not a common characteristic of a sole trader?
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Question One of the main disadvantages of a sole trader is:
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Question Why would someone choose to operate as a sole trader rather than work for a company? Show answer Answer
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Question Does operating as a sole trader mean that a business will always be able to make the right decision? Show answer Answer No, this is not true. A sole trader has the
freedom to make all decisions on their own without the involvement of a manager or other team members. However, this does not mean that a sole trader will always make the correct decision for their business. It is easy to get demotivated, lack appropriate time management skills and become disorganized when you are working without supervision and the guidance of others. Show question
Question Does operating as a sole trader mean that you cannot hire anyone to help you with certain tasks? Show answer Answer No, as a sole trader it is possible to hire employees.
However, it is the sole trader's responsibility to make the right decisions when hiring help, as they are personally liable for all the operations and actions of their business. Show question
Question Does operating as a sole trader mean that you are not allowed to take out a loan from the bank? Show answer Answer As a sole trader, it is possible to borrow money from a bank or
other financial institutions. However, it could be disadvantageous to do this since they often charge high interest rates. Banks do this because they are worried about the sole trader being able to repay their debts in case of failure. Show question
Question Which one of the following is not a benefit of operating as a sole trader?
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Question Is it true that there are no downfalls to operating as a sole trader? Show answer Answer No, this is not true. The disadvantages of a sole trader include:
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Question Is it true that by hiring an employee, they are also responsible for the actions and decisions of the sole trader? Show answer Answer No, the sole trader is individually and
solely responsible for all the actions and decisions they make. Show question
Question Name some of the disadvantages of the freedoms a sole trader experiences. Show answer Answer One of the advantages of a sole trader is that they can set their schedule and work
flexibly. However, this can result in the sole trader having to work long hours and not being able to take any holidays. Show question
Question Name three examples of a sole trader. Show answer Answer Several different types of jobs are suitable for a sole trader:
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Question Name and outline an example of someone who would want to set up a sole trader. Show answer Answer An example of someone who would want to set up as a sole trader would be a freelance copywriter. They would enjoy the benefits of managing their own schedule, making their own business decisions and the freedoms that come with being their 'own boss'. Their business can respond directly to the needs of her clients, engage with her clients on a personal level, and make decisions freely on the number of clients they take on. Show question
Answer Incorporation is a process through which a business establishes itself as a company. Through incorporation, the business establishes that it is its own legal entity, separate from its owners and shareholders. It allows the company to benefit from limited liability. Show question
Question What is limited liability? Show answer Answer Limited liability ensures that the personal assets of the owners and shareholders of a company are safe. If the company were to
experience financial troubles, shareholders would only lose up to the amount they originally invested in the company when they bought shares. Limited liability ensures that their personal belongings are kept safe, even if the company is struggling financially. Show question
Question What is the difference between limited liability and unlimited liability? Show answer Answer In limited liability companies, the company is a separate legal entity to its owners. This means that they are not
personally responsible for the debts of the company. In an unlimited liability business, the owner is personally responsible for the debts of the business. This means that if the business were experiencing financial difficulties, the personal assets of the owner are at risk. Show question
Question Is it possible to set up a limited liability sole proprietorship? Show answer Answer No, it is not possible to set up a limited liability sole proprietorship. The owner of a sole proprietorship has unlimited liability, meaning that their personal belongings and assets are at risk if the business is experiencing financial difficulties. Show question
Answer A dividend is a part of the firm's profits that is paid to its shareholders. The more shares an owner has in the company, the more dividend payments they receive. Show question
Question Are dividend payments equal to the original investment shareholders made into the firm? Show answer Answer No. Dividends are paid based on the profits the company
has made. This does not mean that shareholders receive the value of their original investment each time a dividend is paid to them. Show question
Question Why do companies have limited liability?
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Question A difference between a limited liability company and a sole proprietorship is that: Show answer Answer A limited liability company can own property and a sole proprietorship cannot Show question
Question The difference between a private limited company and a public limited company is that: Show answer Answer Private limited companies can decide who they sell shares to but public
limited companies cannot Show question
Question What type of company would be at risk of a takeover?
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Question Imagine you are running a family business. The business is doing really well, so you decide you are going to incorporate your business. What type of company would you set up if you did not want to risk the family business getting into the hands of non-family owners? Show answer Answer You would set up a private limited company. This type of company would ensure that the owner (you) has control over who the company sells its shares to. Show question
Question What are some of the advantages of a limited liability company? Show answer Answer
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Question What are some of the disadvantages of a limited liability company? Show answer Answer
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Question One of the disadvantages of a limited liability company is that:
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Question Other than limited liability, what are some of the advantages of operating as a limited liability company? Show answer Answer
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Question What is the definition of a non-profit business? Show answer Answer A non-profit organization is a social enterprise that has social aims and operates to benefit a community or society as a whole. The
mission of non-profit organizations can range from community service projects, childcare, recycling companies, apprenticeship programs, etc. Show question
Question What is one of the key differences between a non-profit and a for-profit organization? Show answer Answer A non-profit is an organization that is not set up to make profits.
For non-profit organizations, the goal is not to maximize profits. Rather, their objectives are to operate for the benefit of a community or society as a whole. Show question
Question What are the three different types of non-profit organizations? Show answer Answer
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Question What are the three different types of public sector businesses? Show answer Answer
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Question What is the general mission and purpose of non-profit organizations? Show answer Answer The mission and purpose of non-profit organizations are to create social benefits, also
known as social capital. By creating social capital, non-profit organizations aim to solve an existing problem or issue in order to advance humanity in a certain way. Show question
Question What is the definition of privatization? Show answer Answer A process in which the state transfers their businesses or services from public to private ownership. Show question
Question Give an example of a potential downfall of privatization. Show answer Answer A potential problem that could arise as a result of privatization is short-term unemployment. Show question
Question Which of the following statements about non-profit organizations is true?
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Question Which of the following statements about co-operatives is false?
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Question Which one of the following does not make up one of the ethical values of a co-operative?
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Question What are the different types of co-operatives? Show answer Answer
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Question What is the difference between a public corporation and a public service? Show answer Answer A public corporation is an enterprise owned by the state but offers products and
services to both private and public sectors. A public service includes organizations that provide services to the entire nation. Public corporations include the BBC or Channel 4 television. Public services include the NHS or the HMRC. Show question
Question Which one of the following statements is correct?
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Question What is a municipal service? Show answer Answer These are services offered by local governments and councils. Examples include libraries, street lighting, and
municipal parks and recreation. Show question
Question Which one of the following statements holds true for public services?
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Answer A franchise is a business, which has an established owner, that sells the rights of operating the business to a franchisee. Franchising is a two-party contract. The franchisor provides a set of information to the franchisee on how to run the business. The franchisee
essentially receives the whole 'business package' from the franchisor. Show question
Answer A franchisor is an established business that sells the rights to its name. The franchisor also provides training and input to the franchisee on how to run the daily operations and manage the franchise. The franchisor receives royalty payments from the franchisee. Show question
Answer The franchisee is the party that purchases the rights to the franchise. Upon purchase, they receive the right to the business name and are allowed to operate their business with the same business model as the franchisor. The franchisee is also granted the right to use the name,
branding and marketing as the franchisor. Show question
Question What is a royalty payment? Show answer Answer A royalty payment or royalty fee is a fee the franchisee must pay to the franchisor. This fee is usually calculated based on a
percentage of the franchisee's yearly sales and profit. They must pay this fee in order to continue operating as a franchise. Show question
Question What is a franchising system? Show answer Answer In a franchising system, individual business owners are a tightly knit group, whose operations are directed and controlled by the
franchisor. Show question Discover the right content for your subjectsNo need to cheat if you have everything you need to succeed! Packed into one app!Study PlanBe perfectly prepared on time with an individual plan. QuizzesTest your knowledge with gamified quizzes. FlashcardsCreate and find flashcards in record time. NotesCreate beautiful notes faster than ever before. Study SetsHave all your study materials in one place. DocumentsUpload unlimited documents and save them online. Study AnalyticsIdentify your study strength and weaknesses. Weekly GoalsSet individual study goals and earn points reaching them. Smart RemindersStop procrastinating with our study reminders. RewardsEarn points, unlock badges and level up while studying. Magic MarkerCreate flashcards in notes completely automatically. Smart FormattingCreate the most beautiful study materials using our templates. Sign up to highlight and take notes. It’s 100% free. What is an organization that produces or sells goods and services to earn a profit called?A business is an organization that produces or sells goods or services to satisfy the needs, wants and demands of consumers for the purpose of making a profit. This is a business. It is producing a good for profit and it is meeting the needs and wants of consumers.
What are the 6 types of business activities?What Are the 6 Types of Business Activities?. Sales. The sales team is the lifeblood of every business. ... . Marketing. Marketing and advertising help in developing the brand and boosting the exposure of the business and its services.. Finance. ... . Accounting. ... . Customer Service. ... . Human Resources.. What are the 3 types of business activities explain with examples?There are three main types of business activities: operating, investing, and financing. The cash flows used and created by each of these activities are listed in the cash flow statement. The cash flow statement is meant to be a reconciliation of net income on an accrual basis to cash flow.
What is known as business?Business refers to an enterprising entity or organization that carries out professional activities. They can be commercial, industrial, or others. For-profit business entities do business to earn a profit, while non-profit ones do it for a charitable mission.
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