Chapter 2: Business structure

Question 1

Private limited company

Answer 1

A business owned by shareholders, often members of the same family. Cannot sell shares outside the business.

Question 2

Initial Public Offering (IPO)

Answer 2

An offer to the public to buy a company’s shares

Question 3

Public limited company

Answer 3

A company whose shares are sold to the public on a stock exchange

Question 4

Primary sector business

Answer 4

A business that deals with the extraction of raw materials

Question 5

Secondary sector business

Answer 5

A business that turns raw materials into finished goods

Question 6

Tertiary sector business

Answer 6

A business that is based in the service industry

Question 7

Quaternary sector business

Answer 7

A business that provides information services such as web design

Question 8

Benefits of industrialisation

Answer 8

1. GDP increases
2. High output of goods can result in more exports than imports
3. More jobs from expanding businesses
4. More tax by expanding businesses
5. Value is added to a country’s exports1.

Question 9

Problems of industrialisation

Answer 9

1. The movement of people into towns causes housing problems
2. Import of raw materials increases import costs
3. More multinational companies means more competition

Question 10

Consequences of deindustrialisation

Answer 10

1. job losses in the primary sector
2. Movement of people away from cities
3. job opportunities in the service sector
4. increased need for retraining programs

Question 11

Public sector

Answer 11

Organisations owned and controlled by the government

Question 12

Private sector

Answer 12

Organisations owned and controlled by individuals

Question 13

Mixed economy

Answer 13

Economic resources are owned by bot public and private sectors

Question 14

Free-market economy

Answer 14

Resources are largely owned by the private sector

Question 15

Command economy

Answer 15

Resources are controlled by the public sector

Question 16

Public corporation

Answer 16

A business owned and controlled by the state

Question 17

Sole trader

Answer 17

A business owned by one person who has full control of the business and provides permanent finance.

Question 18

Unlimited liability

Answer 18

Business owners have full legal responsibility for the debts of a business

Question 19

Partnership

Answer 19

A business formed by two or more people who share responsibilities and capital investment.

Question 20

Limited liability

Answer 20

The only liability a shareholder has if the business fails is the amount they have invested

Question 21

Share

Answer 21

A certificate confirming part-ownership of a business and entitlement of dividends to the shareholder

Question 22

Shareholder

Answer 22

An individual or group that owns shares in a limited company

Question 23

Memorandum of association

Answer 23

Document stating the name of the company, address of the head office, maximum share capital and declared aims.

Question 24

Articles of association

Answer 24

Document covering the internal workings of the business, name of directors an procedures to follow during meetings

Question 25

Cooperative

Answer 25

A jointly owned business operated by members for their mutual benefit, to distribute goods or services

Question 26

Franchise

Answer 26

The legal right to use the name, logo and trading systems of an existing successful business

Question 27

Franchisee

Answer 27

A person or business that buys the right from a franchiser to run the franchise

Question 28

Franchiser

Answer 28

A person or business that sells the right to open stores and sell products/services using the brand name and identity.

Question 29

Joint venture

Answer 29

Two or more companies agree to work on a project together and create a different business division to do so

Question 30

Social enterprise

Answer 30

A business with mainly social objectives that re-invests most of its profits into benefiting society.

Question 31

What are the advantages of a Private limited company

Answer 31

Shareholders have limited liability Continuity The business has a separate legal identity

Question 32

What are the disadvantages of a Private limited company

Answer 32

Not easy to raise finance through the sale of shares Legal formalities involved such as the memorandum of association and the article of association. The company would have to send its end of year accounts to the government.

Question 33

What are the advantages of a Public limited company?

Answer 33

Easy to raise finance through the sales of shares Owners have limited liability Continuity

Question 34

What are the disadvantages of a Public limited company?

Answer 34

Shares are subject to fluctuation There is a high risk of a takeover from another business.