Sectors Of The Economy Flashcards
Describe the private sector
This consists of businesses that aim primarily to maximise profits and includes all profit-making businesses ranging from your local high-street bakery to huge multinational companies such as ford or Samsung.
Describe the public sector
This consists of government owned organisations and agencies which aim to provide a service to society. This sector of the economy includes fue NHS, police and state education.
Describe the third sector
This consists of organisations that have been set up to provide goods or services to benefit others. Thus sector of the economy includes:
-charities such as Cancer research and the SSPCA
-voluntary organisations such as gold clubs and scout groups
-social enterprises
-democratic enterprises such as co-operatives.
Describe the a private limited company (Ltd)
A private limited company is owned by private shareholders (1 to 50) who are normally friends, family or employees. They are controlled by a board of directors. They are financed by ‘share of equity’ the investments of individual private shareholders.
Key points of Ltd’s
-get their name as they have ‘limited liability’
-shares are sold privately to investors that the business know (family, friends, employees)
-aim to maximise profits as belong to private sector
-have to produce complex documents called Memorandum of Association and Articles of Association
- Advantage of an Ltd
Owners (shareholders) have limited liability
- Advantage of private limited company
Ownership is not lost to outsiders.
- Advantage of private limited company
The business usually retains a close a tight-knit, friendly feel with a higher level of customer service.
- Advantage of private limited company
Expertise and business acumen are gained from an experienced board of directors.
- Disadvantages of a private limited company
Profits have to be split with many shareholders by issuing dividends.
- Disadvantages of a private limited company
A complicated legal process is required to set up the company.
- Disadvantages of a private limited company
A limited source of capital is available as shares are not sold publicly.
- Disadvantages of a private limited company
Financial statements have to be shared with Companies House (and are therefore made publicly available) meaning profits are not kept private.
Describe a public limited company
This company is owned by shareholders of which shares are sold on the stock market. They are controlled by a board of directors. They are financed by selling shares on the stock market.
Key points of PLC
-get their name as they have ‘limited liability’
-shares came be sold publicly through the stock market
-aim to dominate the market, increase market share and increase market value.
