1.2 Types of organisations Flashcards
Defi of public sector
Organisations accountable to and controlled by the government
Defi of private sector
Businesses owned and controlled by individuals or groups
Defi of privatisation
The sale of public sector organisations to the private sector
Defi of mixed economy
Economic resources owned by both private and public sectors
Defi of free-market economy
Economic resources owned mainly by private sector with little state intervention
Defi of command economy
Economic resources owned, planned & controlled by the state
Why does the government want to control goods & services? [4]
To ensure adequate supplies of essential goods & services
Prevents private monopolies
Maintain employment
Maintain environmental standards
Defi of entrepreneur
Someone who takes the financial risk of starting & managing a new venture
Defi of intrapreneur
Someone within a large corporation who acts like an entrepreneur
Reasons for starting a biz [4]
Loss of job
Desire for independence
Clear existence of biz opportunity
Desire to make more money than current job
Problems faced by new biz
Competition Building a new customer base Lack of record-keeping to chase debtors Lack of working capital Poor management skills Changes in biz environment
Name the 4 types of profit-based organisations
Sole trader
Partnership
Private limited
Public limited
Defi of limited liability
The only liability a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder
Advantages of sole trader
Easy to set up, no legal formalities
Complete control
Keep all the profits
Able to choose times and patterns of working
Disadvantages of sole trader
Unlimited liability Intense competition Inability to specialise Difficult to raise additional capital Long hours necessary to break-even Lack of continuity
Defi of sole trader
A biz in which one person provides the permanent finance, and in return, has full control of the business and is able to keep all the profits
Defi of partnership
A biz formed by 2 or more persons to carry on a business together, with shared capital investment & shared responsiblitiies
Advantages of partnership
Can specialise Shared decision-making Additional capital by each partner Business losses shared Fewer legal formalities
Disadvantages of partnership
Unlimited liability Shared profits No continuity Hard to raise additional capital Lose the independence of decision-making
Defi of private limited company
A small-to-medium sized biz owned by shareholders who are often members of the same family. Shares cannot be sold to general public
Advantages of private limited company
Limited liabilty of shareholders Separate legal personality Continuity of business Original owner often able to retain control Raise capital from selling shares
Disadvantages of private limited
Legal formalities involved, high legal cost
Capital raised not a lot
Difficult for shareholders to sell shares
End-of-year accounts must be made available for public inspection, less secrecy
Defi of public limited company
A large biz with the legal right to sell shares to general public. Share price is quoted on national stock exchange.
Advantages of public limited
Limited liability Continuity Ease of buying & selling of shares Access to substantial capital sources Raise huge amounts of capital
Disadvantages of public limited
Legal formalities
Cost of business consultants & financial advisors
Share prices subject to fluctuation beyond control
Required to disclose financial information to public
Risk of takeover
Directors influenced by short-term objectives of major investors
Defi of shareholder
A person or institution owning shares in a limited company
Defi of shares
A certificate confirming part ownership of a company and entitling the shareholder to dividends and certain shareholder rights
Defi of public corporation
A biz enterprise owned and controlled by the state
Advantages of public corporation
Social objectives rather than profit objectives
Loss-making services might still be kept operating
Finance raised mainly from government
Disadvantages of public corporation [2]
Tendency towards inefficiency due to lack of profit targets & subsidies from government
Government may interfere in biz decisions due to political reasons
What is a non-profit organisation
An organisation that has aims other than making and distributing profits, usually governed by a voluntary board
What is a non-governmental organisation
A legally constituted body with no participation or representation of any governments
Defi of pressure groups
NPOs that aim to change the behaviour and decisions of either organisations or governments
Defi of social enterprises
A biz with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners
What is the triple-bottom line?
The 3 objectives of social enterprises - economic, social, environmental
Defi of co-operatives
Biz owned and run by and for their members
Advantages of co-operatives
Incentives to work
Decision-making power
Social benefits
Public support
Disadvantages of co-ops
Lower salaries and bonuses
Limited sources of finance
Slower decision-making
Limited promotional opportunities
Defi of microfinance providers
For-profit social enterprise that offers financial services to low income populations
Advantages of microfinance providers
Accessibility
Job creation
Social wellbeing
Disadvantages of microfinance providers
Immoral
Limited finance
Limited eligibility
Defi of public-private partnerships
Involvement of the private sector in public sector projects aimed at benefiting the public
