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The Need for, and Nature of, Business Activity.

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Introduction

The Need for, and Nature of, Business Activity. 1. The production of goods and services that satisfy the needs of consumers or other firms (often with the aim of making a profit) is known as 'business activity'. Businesses need to purchase resources (known as factors of production) to do this. 2. There are four factors of production; they are: land, labour, capital and enterprise. Normally, the term 'land' includes the natural resources that are available in the area, such as crude oil and coal. Labour is the workforce, manual and skilled alike. Capital includes finance as well as the man-made resources required to run the business. Any business needs enterprise for production to commence. It combines the other factors of production with entrepreneurship (providing a managing, decisive and co-ordinating role) to create a unit that is capable of producing goods and services. 3. An increase in industrialisation boosts the GDP, which raises the average living standards. ...read more.

Middle

own the business. The infrastructure in a Private Limited company's business is such that ownership is divided into shares, so more than one person can control the business. A sole trader business cannot be divided into shares. Another difference is present in the way the business is run. In a sole trader, the sole owner of the business has complete control over decision making. However, if any decisions are to be made in a Private Limited Company, decisions can rest upon the agreement of other shareholders. A Private Limited Company's end-of-year accounts must be sent to the Companies' House, where it is available for public inspection. However, a sole trader has more secrecy concerning financial affairs. 6. Since a large number of shares are issued (and because many people and institutions invest in the company), it is unlikely the original owner/s of a public limited company will be able to retain total ownership and control. ...read more.

Conclusion

can lead to conflict and inefficiency. 2. If one of the partners fail, the whole project is put at risk. 8. By buying a majority of the shares, the Directors of a Public Limited Company might decide to convert the business back into a Private Limited Company to overcome the separation of control and ownership. The owner of a ltd can take a long-term long-term planning view of the business. As a public limited company, 'short-termism' can be damaging to the long-term investment plans of the business. The cost of business consultants and financial advisors is less in a Private Limited Company. There is less risk of takeover and the risk of fluctuation of share prices is less. 9. If a company has limited liability, people and institutions are more willing to invest because the company's chance of closing down is greatly reduced. It also encourages investment because the shareholders' private assets cannot be put at risk when debt is incurred by the business. It is also easier for limited companies to raise finance because they can issue shares. ...read more.

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