Business Structure

Question 1

what is the private sector?

Answer 1

includes all these businesses that are set up by individuals / groups
e.g sole traders, partnerships, charities and cooperatives.

Question 2

what is the public sector?

Answer 2

business activity that is owned / run by the government for the benefit of everyone
e.g. army, police force, schools, hospitals

Question 3

what are public goods?

Answer 3

goods that would not be provided in a free market system, because firms would not be able to charge for them

Question 4

what are non-excludable goods?

Answer 4

it is impossible to exclude others from benefiting from their use
e.g people who use the street will benefit from the street lighting provided.

Question 5

what are non-rivalry goods?

Answer 5

the consumption of the good by one individual does not reduce the amount available for others
e.g. social services.

Question 6

what are merit goods?

Answer 6

goods that could be provided by the free market but it is recognised that they would be under-consumed

Question 7

what are consumer goods?

Answer 7

goods that are used by the consumer

Question 8

what are producer goods?

Answer 8

items that are bought by another business and used to help make other goods
e.g. JCB

Question 9

what are single use goods?

Answer 9

items that can only be used once
e.g. ice cream, coffee

Question 10

what are durable goods?

Answer 10

Items that can be used over and over again
e.g. car, kettle

Question 11

what is the definition of services?

Answer 11

intangible tasks performed in return for payment (includes personal/
direct services)
e.g. hairdresser

Question 12

what is the importance of the public sector?

Answer 12

• we all benefit from them without paying for them
• private companies wouldn’t provide these goods/services unless they were making a profit

Question 13

what are the aims of a business?

Answer 13

the long-term intentions that provide a focus for setting objectives

Question 14

what are the objectives of a business?

Answer 14

the medium to long-term targets that can give a sense of direction to a manager, department or whole organisation
e.g. boost market share from 8% to 10% within the next 3 years

Question 15

what are the aims of the private sector?

Answer 15

• survival
• maximising profit
• growth
• gain market share
• improve reputation

Question 16

what are the aims of the public sector?

Answer 16

• provide a universal service to all UK households
• provide a service that the private sector may not be willing to provide (not profitable to do so)
• raise society’s standard of living
• provide effective public goods.

Question 17

what is the definition of a sole trader?

Answer 17

a business owned and run my one person

Question 18

what is the definition of a partnership?

Answer 18

a joint owned business, with 2-20 owners

Question 19

what are the advantages of a sole trader?

Answer 19

• easy to set up
• low costs
• no need to publish the accounts
• fast decisions (full control)

Question 20

what are the advantages of a partnership?

Answer 20

• wider range of skills
• greater capital
• shared decision making
• reduced pressure

Question 21

what are the disadvantages of a sole trader?

Answer 21

• limited capital
• limited range of skills
• unlimited liability (personally responsible for all business debts)

Question 22

what are the disadvantages of a partnership?

Answer 22

• unlimited liability
• complications with re-establishing the partnership after the death of a partner
• capital is still limited
• new partners can cause strains

Question 23

what is the definition of a private limited company (LTD)?

Answer 23

a small business where shares are traded with family/friends

Question 24

what are the advantages of an LTD?

Answer 24

• limited liability (not personally responsible for business debts) - legal action is taken against the business and not the owners
• control is not lost
• capital can be easily raised by getting more shareholders

Question 25

what are the drawbacks of an LTD?

Answer 25

• costly as it has many legal set up procedures
• profits have to be shared
• have to publish yearly accounts

Question 26

what is the definition of a public limited company (PLC)?

Answer 26

a large, usually well known business who trades it’s shares on the stock exchange

Question 27

what are the advantages of a PLC?

Answer 27

• limited liability (not personally responsible for business debts) - legal action is taken against the business and not the owners
• business continues if one owner dies
• economies of scale
• easier to raise finance (lenders are more willing)
• increased market dominance

Question 28

what are the drawbacks of a PLC?

Answer 28

• increased set up costs
• higher chance of losing control
• more legal requirements
• inefficiency with increased size
• accounts can be seen by the public

Question 29

what are not for profit organisations?

Answer 29

not out to maximize profits, they focus on social/ethical objectives

Question 30

what is a charity?

Answer 30

collecting money from individuals and spending it on a cause

Question 31

even though charities cannot make profits, what can they earn?

Answer 31

surpluses

Question 32

what is a cooperative?

Answer 32

an organization owned by its members (shoppers) who benefit through the payment of a dividend in the form of money-off vouchers

Question 33

what is a worker cooperative?

Answer 33

owned and controlled by those who work in it

Question 34

what is a social enterprise?

Answer 34

they trade with clear social and environmental objectives and purposes

Question 35

what are the two key features of a social enterprise?

Answer 35

1. trade to help social problems, improve communities and the environment
2. aim to make profits from goods and services then reinvesting profit to achieve their social objectives

Question 36

what is a stakeholder?

Answer 36

an individual or group which interested in a businesses decisions

Question 37

name the internal stakeholders? and what do they all want?

Answer 37

employees - want fair pay and job security
managers - want stable employment and and good salary
owners - want high profits and survival

Question 38

name the external stakeholders? and what do they want?

Answer 38

suppliers - want on time payment and loyalty
customers - want good quality and customer service
shareholders - want dividends and growth
community - want job opportunities and low pollution

Question 39

what is conflict?

Answer 39

decisions that upset / affect stakeholders