1.4 Making the business idea effective (website)

Bankrupt

• The situation when a bank balance in an account reaches zero

• When an individual is unable to pay his/her debts, even after all personal assets have been sold for cash

• The private equity an individual has on the value of their property

• Where property is sold to pay off an existing debt

Limited liability

• the ability to limit the extent to which shareholders can invest in a business

• When a business owner owes over 50% of the value of their business to a bank

• Ensuring that there is only partial legal responsibility for an action

• Restricting the losses suffered by owners to the sum that they invested in the business

Private limited company

• A small family business in which shareholders enjoy limited liability

• When a business owner decides to float the business on the London Stock Exchange

• When a business owner approaches an investor for additional funds

• The investment of additional capital into the business by issuing further shares

Which one of the following is a characteristic of a sole trader?

• Run and owned by a group of people

• Simplest form of ownership

• It has limited liability

• Difficult and expensive to set up

Which one of the following is a characteristic of a Private Limited Company

• Registered at Companies House

• Unlimited liability

• Competitors cannot see financial information

• Can sell shares to the general public

Sole trader

• The transformation of a small business to one that enjoys limited liability

• A small, micro business that has only one member of staff

• A business that has only one product in its product portfolio

• A business run by one person; that person has unlimited liability for the business debts

Which one of the following is the best definition of unlimited liability

• Provides the entrepreneur with a limitless opportunity to make high profits

• Ensures that if things go wrong the owners can only lose the money they invested

• It is the method used by the majority of businesses in Britain

• The business owners can be held responsible personally for any debts of the business

Unlimited liability

• Treating the business and the individual owner as inseparable, therefore making the individual responsible for all the debts of a failed business

• The development of a business idea that significantly increases the demands on the owner and adds considerable risk to the business

• The unlimited nature of risks to a business

• The debts that must be repaid to banks after a loan has been taken out

Royalties

• The rate of tax that a small business must pay

• The percentage of revenue that is paid to staff as expenses

• A business that has dealings with the government

• A percentage of the sales revenue to be paid to the overall franchise owner

Which one of the following is a disadvantage of buying into a retail franchise operation

• The brand name will already be known to many customers

• There will be training available on how to use the electronic tills

• You won't be able to form a private limited company

• A fee of perhaps 5% of the revenue can strip away most of the profit