BMT is a business partnership owned by 2 brothers. The brothers received government support when they started BMT 6 years ago. BMT now has 30 employees who make high quality watches. The business tries to achieve lean production. Demand has increased each year and in 2019 BMT sold 8000 watches. BMT makes some parts for watches and all the other parts are imported. BMT had to consider a number of factors, including exchange rates, when deciding whether to import parts for watches.
04 Outline two disadvantages of BMT being a business partnership. [4]
Possible KNs:
> Unlimited liability/ each responsible for debts of other
> Fewer sources of finance (than limited company)
> Possible disagreements/slower decision making
> Have to share profits
Please read the answer of the previous student & if the answer seems well developed don't use the same KN in your answer, try to give new one.
04 Outline two disadvantages of BMT being a business partnership. [4]
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Sir Afzal Shad
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Muzamil Ahmed
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Re: 04 Outline two disadvantages of BMT being a business partnership. [4]
[KN] Unlimited liability
[APP] If BMT owes money both brothers must use their personal assets to pay the debts.
[AN] This means that their homes or savings could be lost and they might avoid taking risks like expanding production. It could also make it harder to borrow money because money lenders see higher risk.
[KN] Have to share profits
[APP] The earnings from selling 8,000 watches in 2019 are split between the two brothers
[AN] This leads to less money for each brother and less funds available to reinvest in BMT for new equipment or marketing, and there can be disagreement if one brother feels that the share is unfair.
Examiner Comments: [6/6]
[APP] If BMT owes money both brothers must use their personal assets to pay the debts.
[AN] This means that their homes or savings could be lost and they might avoid taking risks like expanding production. It could also make it harder to borrow money because money lenders see higher risk.
[KN] Have to share profits
[APP] The earnings from selling 8,000 watches in 2019 are split between the two brothers
[AN] This leads to less money for each brother and less funds available to reinvest in BMT for new equipment or marketing, and there can be disagreement if one brother feels that the share is unfair.
Examiner Comments: [6/6]
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Shahmir Arshad
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Re: 04 Outline two disadvantages of BMT being a business partnership. [4]
KN: Unlimited Liability
APP:Because BMT is a partnership, the two brothers have unlimited liability. This means they are personally responsible for all the business's debts.
AN:If BMT cannot pay for the imported watch parts or falls into financial trouble, the brothers might have to sell their own personal belongings, like their houses or cars, to pay back what the business owes.
KN:Slower Decision-Making and Disagreements
APP:Even though they are brothers, they might not always agree on how to run the watch business. For example, one brother might want to invest in new technology for lean production, while the other might want to spend money on better quality materials.
AN:Because they both have a say, they have to discuss everything, which can make it take a long time to make important decisions.
APP:Because BMT is a partnership, the two brothers have unlimited liability. This means they are personally responsible for all the business's debts.
AN:If BMT cannot pay for the imported watch parts or falls into financial trouble, the brothers might have to sell their own personal belongings, like their houses or cars, to pay back what the business owes.
KN:Slower Decision-Making and Disagreements
APP:Even though they are brothers, they might not always agree on how to run the watch business. For example, one brother might want to invest in new technology for lean production, while the other might want to spend money on better quality materials.
AN:Because they both have a say, they have to discuss everything, which can make it take a long time to make important decisions.