1.2 Flashcards
Sectors of Economy
Private sector
Public sector
Third sector
Private sector
- Owned by individuals or groups
- Aim is to maximize profit
- Profit benefits owners, shareholders and investors
- Financed by private money from shareholders and bank loans
- Wong, Pandora, Zara, Promart
Public sector
- Owned by the government
- Provide goods and services to benefit the community
- Operate with money raised from taxes
- Healthcare, education, public libraries
Third sector
- Owned and run voluntarily by trustees
- Aim is to help the community
- Operate with money from donations, grants from the government and other organisations
- Charities, The Red Cross, Cancer Research
Sole Trader
Business owned and controlled by one person:
- Sole trader runs and owns the business
- Sole trader has unlimited liability
- Finance is limited (high risk)
- Financial documents remain private to public
- Registering the business is relatively easy, inexpensive and quick
Unlimited Liability
Business owners who are legally liable for any debt their business might have.
Partnerships
Business association between 2 to 20 people:
- Decisions are made jointly by the partners
- Partners have unlimited liability
- More capital to start the business
- There are sleeping partners
- More legal requirements
- Profits are not shared equally, based on percentage of ownership (capital)
Sleeping partners
Provide finance and expect a share of the profit. Limited liability
Private limited company (Ltd)
- Owned by shareholders who have limited liability
- Run by a board of directors
- Have to pay coororation tax
- Profits are shared amongst shareholders in dividends
- Shares are owned privately
- Finance is raised through privately inviting others to become shareholders (have limites liability)
- Dyson
Public limited company (Plc)
- Owned by shareholders who have limited liability
- Run by a board of directors
- Have to pay coororation tax
- Profits are shared amongst shareholders in dividends
- Shares are available in the market
- Shares con be bought and sold on the stock exchange
- Amazon
Co-operatives
A form of partnership owned and controlled by its members:
- Aim to promote the development of a community, believe in social responsibility
- All members can vote
- Members receive a share of profits in dividends
- Anyone can join
Types of cooperatives
Financial: Lending money at lower rates on interest, offer longer payback periods
Housing: Provides housing for its members
Workers: Business owned and controlled by its workers, doesn’t pay significantly higher wages to managers
Producer: Aim to maximise utilization of an expensive piece of equipment leading to reduced costs
Consumer: Provides service to consumers who are also part owners and receive lower prices
Micro-financers
- Developed in low income economies
- Provide small amounts of finance to those who typically wouldn’t receive it
- Money is lent with specified conditions for use and scheduled payments
- Make profit of interest
- Loan amounts are small and interest rates are low
Public Private Partnerships
Business created between the private and public sector:
- Typically involves construction of a facility with a social aim
- Is expected to make a return on the money invested but profits is not priority
- Public sector provides finance and private sector provides expertise
- Profits are used to sustain the business
Not-for profit social enterprises
- Generate surpluses rather than profit
- NGO’s, Charities
