Structures

Question 1

What is the private sector?

Answer 1

Owned and controlled by private individuals to make a profit

Question 2

What are the aims of the private sector?

Answer 2

Survival, profit maximisation, increase market share, increase share value, increasing ethical activity.

Question 3

Why is the private sector important?

Answer 3

-Customers have more choice.
-Innovation from large profits.
-Encourages investment from abroad.
-Pay tax to the government who can spend it on the public sector.

Question 4

What is the public sector?

Answer 4

Owned and controlled by the Government on behalf of the tax payer

Question 5

Example of the public sector:

Answer 5

NHS (biggest civilian employer in Europe), schools, emergency services

Question 6

Why do we need the public sector?

Answer 6

Some goods/services are needed by everyone, but they wouldn’t be provided by the private sector as they look primarily for profit.

Question 7

What is non-excludability?

Answer 7

Goods and services aren’t just for people who paid for them, but for anyone who qualifies.

Question 8

What is non-rivalry?

Answer 8

One person’s consumption does not affect another’s, aka there is no limit.

Question 9

What are merit goods?

Answer 9

Goods or services that would be under consumed if left to the private sector (e.g. Education and Healthcare), because not everyone can afford/see the benefits.

Question 10

What are the positives of public sector merit goods?

Answer 10

Have positive externalises eg. if people complete school then they will get jobs and won’t turn to crime.

Question 11

What are the public sector objectives?

Answer 11

-Create a fair society and efficient economy.
-Provide employment.
-Provide merit goods.
-Some goods are difficult to price.
-Raise standard of living and allows people to live safely.

Question 12

Evaluating public sector:

Answer 12

Good because:
-Provide goods that aren’t fully provided in the private sector.
-Prevent customer exploitation and ensures everyone benefits.
-Purchasing supplies (drugs for NHS) on a large scale reduces cost.
-Have been a way to protect jobs.
However:
-Large burden on the government and can become inefficient.

Question 13

What factors affect business structure?

Answer 13

-Type.
-If the owner wants to grow.
-If the business intends to tale high risks with lots of money.
-If the owner wishes for continuity.

Question 14

What is limited liability?

Answer 14

Responsibility is limited to what they have already invested.

Question 15

What is unlimited liability?

Answer 15

The owner is personally and fully responsible for all losses and debts of the business

Question 16

What is libility?

Answer 16

The state of being legally responsible (liable) for something, such as a debt or obligation.

Question 17

What is a sole trader?

Answer 17

A business owned by one person.

Question 18

Advantages of sole traders?

Answer 18

easy to set up
make decisions quickly
less capital needed
taxed differently(national insurance contributions are low)
all profits kept
don’t have to make any info public

Question 19

Disadvantages of sole traders?

Answer 19

-Unlimited liability
-(Not on the stock market)
-Banks don’t like to lend them money
-Working long hours.
-Impact of illness

Question 20

How does being a sole trader impact stakeholders?

Answer 20

-Customers/suppliers/investors have more risk dealing with them.
-Customer may find tailored, niche products.

Question 21

What is a partnership?

Answer 21

A business owned by 2-20 people, where each is joint liable.

Question 22

What is a deed of partnership?

Answer 22

a legal document drawn up by a solicitor/lawyer setting up rules for the partnership
-Amount of money invested.
-How much profit each will receive.
-Roles and responsibilities.
-What will happen if one dies.
-The rules for a dissolution of partnership.

Question 23

Advantages of partnerships?

Answer 23

-Easy to set up.
-More money from more owners.
-Shared workload.
-Increased skills

Question 24

Disadvantages of partnerships?

Answer 24

Unlimited liability
Management disagreements
Lack of continuity
May not do equal workload.
Slower decisions

Question 25

How do partnerships impact stakeholders?

Answer 25

-Less risky than dealing with a sole trader but still risk from liability.
-Customers get a wider range of goods from more skills.

Question 26

What is a private limited company?

Answer 26

Business exists as its own legal entity and shares are sold privately. A new shareholder must be invited and approved by all current shareholders.

Question 27

Advantages of private limited companies?

Answer 27

• Shareholders have limited liability
• Capital can be raised by selling shares
• Ownership is not lost to outsiders as all shareholders are known.

Question 28

Disadvantages of private limited companies?

Answer 28

• Profits have to be split with shareholders by issuing dividends
• Legal process required to set up the company
• Shares cannot be sold publicly on the Stock Exchange, so there is a limited source of capital available
• Financial accounts public

Question 29

How does being a ltd impact stakeholders?

Answer 29

Owners benefit from better status with limited liability.
Suppliers may not get all money from debts.

Question 30

What is a public limited company?

Answer 30

shares are available for purchase on the stock market, business have a public profile.

Question 31

Advantages of public limited companies?

Answer 31

-Limited Liability
-Greater Public Profile
-No selling shares restrictions
-Raise higher level of funds

Question 32

Disadvantages of public limited companies?

Answer 32

Dividends shared with many shareholders
Setting up a PLC is costly and complicated
Financial information is published.
Can struggle to adapt to changes because are so big

Question 33

How does being a plc impact stakeholders?

Answer 33

-Shareholders and managers are separate.
-More efficient for customers.
-Shareholders have less of a say.
-Less flexible for customers.

Question 34

What are not-for-profit organisations?

Answer 34

Businesses with social and ethical objectives.

Question 35

What is a charity?

Answer 35

Aim to collect money to help those who are disadvantaged in society.
-Some are multi-issue, some have a single issue to focus on.
-Raise money through public donation or retail outlets.

Question 36

What is a cooperative?

Answer 36

a business organisation owned and operated by a group of individuals for their mutual benefit.
-Flat structure and motivated employees.
-Workers are involved in decisions.

Question 37

What is a social enterprise?

Answer 37

A business with mainly social objectives that reinvests most of its profits into the business to benefit society rather than maximising owner’s returns.
-Sell goods into the open market and the main purpose is to help society.

Question 38

What is a friendly society?

Answer 38

Help its members with issue including pensions, life insurance and universal credit.
-Financial gains are given back to the membership.
-Tax advantage over banks.
-Strict legal rules to follow.