Chapter 2: Business structure

Question 1

private limited company

Answer 1

a business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the public

Question 2

initial public offering (IPO)

Answer 2

an offer to the public to buy shares in a public limited company

Question 3

public limited company (PLC)

Answer 3

a company whose shares are traded on a stock exchange and can be bought and sold by the public

Question 4

primary sector business activity

Answer 4

firms engaging in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed

Question 5

secondary sector business activity

Answer 5

firms that manufacture and process products from natural resources , including computers, brewing, baking, clothes-making and construction

Question 6

tertiary sector business activity

Answer 6

firms providing services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels and tourism

Question 7

quaternary sector business activity

Answer 7

businesses providing information services, such as computing, web design, ICT, management consultancy and R&D

Question 8

public sector

Answer 8

organisations accountable to and controlled by central or local government (the state)

Question 9

private sector

Answer 9

businesses owned and controlled by individuals or groups of individuals

Question 10

mixed economy

Answer 10

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

Question 11

free-market economy

Answer 11

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

Question 12

command economy

Answer 12

economic resources are owned, planned and controlled by the state

Question 13

public corporation

Answer 13

a business enterprise owned and controlled by the state - also known as a nationalised industry

Question 14

sole trader

Answer 14

a business 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

Question 15

unlimited liability

Answer 15

business owners have full legal responsibility for the debts of the business

Question 16

partnership

Answer 16

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

Question 17

limited liability

Answer 17

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

Question 18

share

Answer 18

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

Question 19

shareholder

Answer 19

a person or institution owning shares in a limited company

Question 20

Memorandum of Association

Answer 20

this states the name of the company, the address of the head office through which it can be contacted, the maximum share capital for which the company seeks authorisation and the declared aims of the business

Question 21

Articles of Assocation

Answer 21

this document covers the internal workings and control of the business, the names of directors and the procedures to be followed at meetings

Question 22

cooperative

Answer 22

a jointly owned business operated by members for their mutual benefit, to produce or distribute goods or services - as in consumers’ cooperatives or farmers’ cooperatives

Question 23

franchise

Answer 23

the legal right to use the name, logo and trading systems of an existing successful business

Question 24

franchiser

Answer 24

a person or business that sells the right to open stores and sell products or services, using the brand name and brand identity

Question 25

franchisee

Answer 25

a person or business that buys the right from the franchiser to operate the franchise

Question 26

joint venture

Answer 26

two or more businesses agree to work closely together on a particular project and create a separate business division to do so

Question 27

social enterprise

Answer 27

a business with mainly social objectives that re-invests most of its profits into benefiting society rather than maximising returns to owners