Unit 5 – P2
In FF the capital income will come from the investors that own FF(Future Fashion). Investor’s money is used to buy things that will stay in the business for a medium to long period of time – FF’s premises, vehicles or equipment. These are called fixed assets. When FF sets up a business, Capital Income might also be used to buy opening stock, but as the business develops, stock should be paid for by sales income. The sources of capital income available to business owners are influenced by the type of Business.
Sole trader: Sole traders are people who own a business by them self, they will have to find all the capital income for the business on their own by things such as personal loans. Sole Traders often invest their personal savings into a business or borrow from the bank using their personal assets, such as their house to secure a loan. Sole Traders take a big risk when they do this as they are ultimately responsible for the debts of the business. Being a sole trader can also limit the size of the business but all the profit made from the business can be kept by the sole trader. This would not affect FF; as they are not a sole trader.
Partnership: Partnerships are when two or more people join together to make a business as partners. Each partner would be expected to contribute towards the capital income, hence increasing the potential amount of money available. Partners will share all decisions made in the business as-well as the profits made. Loans that are taken to start the business are still secured by the partners’ assets, so this is still a high risked operation. This would not affect FF; as they are not a Partnership.
Shares: A company is when a business is registered with companies’ house and issues shares to its shareholders. The shareholders and owners of the business will all have to contribute towards the capital income for the business. Shareholders will receive voting rights and the more shares they own, the greater their ability is to influence decision making. Shareholders are rewarded a share of the profits for their investments in the company/business. FF consists of different shareholders who contribute towards the capital income. These shareholders have voting rights and the more shares they own, the greater their ability is to influence decision making. These shareholders are rewarded a share of the profits for their investments in FF.