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Business IB > 1.2 Types of organisations > Flashcards

1.2 Types of organisations Flashcards

1
Q

Public sector

A

Comprises organisations accountable to and controlled by central central or local government

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2
Q

Private sector

A

Comprises businesses owned and controlled by individuals or groups of individuals

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3
Q

Mixed economy

A

Economic resources are owned and controlled by both private and public sectors

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4
Q

Free market economy

A

Economic resources are owned largely by the private sector with very little state intervention

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5
Q

Privatisation

A

The sale of public sector organisations to the private sector

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6
Q

Examples of public sector need

A

Maintaining employment

Maintaining environmental standards

Ensuring supplies of essential good and services

Preventing private monopolies

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7
Q

Public corporation (public sector enterprise, nationalised industry)

A

A business enterprise owned and controlled by the state

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8
Q

Advantage of public sector organisations

A

Managed with social objectives rather than solely with profit objectives

Loss making services might still be kept operating if the social benefit is great enough

Finance raised mainly from the government so not subject to limitations from banks or shareholders

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9
Q

Disadvantages of public sector organisations

A

Tendency towards inefficiency due to lack of strict profit targets

Subsidies from government can encourage inefficiencies

Government may interest in business decisions for political reasons

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10
Q

Sole trader

A

A business which one person provides the permanent finance and therefore has full control of the business and is able to keep all of the profits

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11
Q

Advantages of sole trader

A

Easy to set up - no legal formalities

Owner has complete control - not answerable to anyone else

Owner keeps all profits

Able to choose times and patterns of working

Able to establish close personal relationships with staff and customers

The business can be based on the interest or skills of the owner

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12
Q

Disadvantages of sole trader

A

Unlimited liability - all owner’s assets are at risk

Often faces intense competition from bigger firms

Owner is unable to specialise in areas of the business that are most interesting - is responsible for all aspects of management

Difficult to raise additional capital

Long hours often necessary to make business pay

Lack of continuity - as the business does not have separate legal status, when the owner dies the business ends too

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13
Q

Partnership

A

A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities

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14
Q

When does a partnership become a corporation and pay corporate tax?

A

More than 15 partners

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15
Q

Advantages of partnership

A

Liability is spread around

Range of skills

Higher capital

Losses are shared

Shared decision making

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16
Q

Disadvantages of partnership

A

Unlimited liability despite being spread out between partners

Profits are shared

No contiunuity after death of one of the partners

Slower decision-making

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17
Q

Limited liability of a company

A

The only liability - or potential loss - a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder

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18
Q

Share

A

A certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights

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19
Q

Shareholders

A

Individuals or institutions that buy/own shares in a limited company

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20
Q

Legal personality of a company

A

A company is legally recognised as having identity separate from that of its owners.

21
Q

Continuity of a company

A

The death of an owner or director does not lead to its break up or dissolution

22
Q

Private limited company

A

A small to medium sized business that is owned by shareholders who are often members of the same family. This company cannot sell shares to the general public

23
Q

Advantages of a private limited company

A

Shareholders have limited liability

Seperate legal personality

Continuity in the event of the death of a shareholder

Original owner is still often able to retain control

Able to raise capital from sale of shares to family, friends and employees

Greater status than an unincorporated business

24
Q

Disadvantages of a private limited company

A

Legal formalities involved in establishing the business

Capital cannot be raised by sale of shares to the general public

Quite difficult for shareholders to sell shares

End of year accounts must be inspected

25
Q

Public limited company

A

A limited company, often a large business, with the legal right to sell shares to the general public. Its share price is quoted on the national stock exchange

26
Q

Advantages of public limited company

A

Limited liability

Separate legal identity

Continuity

Ease of buying and selling of shares for shareholders - encourages investment

Access to substantial capital sources due to the ability to issue a prospectus to the public and to offer shares for sale

27
Q

Disadvantage of public limited company

A

Legal formalities in formation

Cost of business consultants and financial advisers when creating a plc

Share prices subject of fluctuation - sometimes for reasons beyond business’s control

Legal requirements concerning disclosure of information to shareholders and the public

Risk of takeover due to the availability of shares on the stock exchange

Directors influenced by short term objectives of major investors

28
Q

Why would businesses change their legal form?

A

To expand and as the owner’s objectives change

29
Q

Social enterprise

A

A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners

30
Q

Common features of social enterprise

A

They directly produce goods or provide services

They have social aims and use ethical ways of achieving them

They need to make a surplus for profit to survive as they cannot rely on donations as charities do

31
Q

Objectives of social enterprises

A

Economic - to make a profit or surplus to reinvest back into the business and provide some return to the owners

Social - to provide jobs or support for local, often disadvantaged, communities

Environmental - to protect the environment and to manage the business in an environmentally sustainable way

32
Q

Triple bottom line

A

The three objectives of social enterprises:

Economic

Social

Environmental

33
Q

Cooperative

A

A group of people acting together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically

34
Q

What are the three cooperatives that cooperatives fall into?

A

Retail cooperative

Agricultural cooperative

Worker cooperative

35
Q

Retail cooperative (consumers’ cooperatives)

A

Cooperative owned by customers for their mutual benefits. it is a private sector enterprise that is oriented towards service rather than financial profit.

The consumers are the people who have provided the capital required to launch or purchase the enterprise and profits are shared either by discounts on products or by a payout to customer owners each year.

36
Q

Agricultural cooperative

A

This exists when farmers pool resources for mutual benefit

37
Q

Worker cooperative

A

Often engaged in manufacturing. Workers collectively own the business and make the important decisions

38
Q

Microfinance

A

The provision of very small loans by specialist finance businesses, usually not traditional commercial banks

39
Q

Public-private partnership (PPP)

A

Involvement of the private sector, in the form of management expertise and/or financial investment, in public sector projects aimed at benefiting the public

40
Q

Private finance initiative (PFI)

A

Investment by private sector organisations in public sector projects

41
Q

What are the 3 main types of Public private partnerships?

A

Government funded

Private sector funded

Government directed but with private sector finance and management

42
Q

Government funded PPP

A

Privately managed schemes.

Government provides all or part of the funding, but the organisation is managed by a private business that uses private sector methods and techniques to control it as efficiently as possible.

43
Q

Costs of PPP

A

The private sector could try to increase profits by cutting staff wage sand benefits.

PFI schema have been criticised for earning private sector business larger profits from high rents and leasing charges

Private sector organisations may lack the experience needed to operate large public sector projects

44
Q

Benefits of PPP

A

Many schools, roads, prisons and hospitals have been built through PP schemes. Private sector had to be involved.

Private sector businesses aim to make profits. Their managers will therefore operate services as efficiently as possible.

By using private sector business finance, the government can claim that public services are being improved without an increase in taxes.

45
Q

Non profit organisation

A

Any organisation that has aims other than making and distributing profit and which is usually governed by a voluntary board

46
Q

Non governmental organisation (NGO)

A

A legally constituted body with no participation or representation of any government which has a specific aim and purpose

47
Q

Types of aims for NGOs

A

Social

Environmental

Humanitarian

48
Q

Charities

A

An organisation set up to raise money to help people in need or to support causes that require funding

49
Q

Examples of activities of charities that are accepted as being for charitable purposes

A

Prevention or relief of poverty

Advancement of education

Advancement of religion

Advancement of health or the saving of lives

Business IB (39 decks)

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