Chapter 2: Business Structure

Question 1

Define primary sector business

Answer 1

Primary sector business activity: firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms.

Question 2

Define secondary sector business

Answer 2

Secondary sector business activity: firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes-making and construction.

Question 3

Define tertiary sector business

Answer 3

Tertiary sector business activity: firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications.

Question 4

Define command economy

Answer 4

Command economy: economic resources are owned, planned and controlled by the state.

Question 5

Define public sector

Answer 5

Public sector: comprises organisations accountable to and controlled by central or local government
(the state).

Question 6

Define private sector

Answer 6

Private sector: comprises businesses owned and controlled by individuals or groups of individuals.

Question 7

Define mixed economy

Answer 7

Mixed economy: economic resources are owned and controlled by both private and public sectors.

Question 8

Define free market economy

Answer 8

Free-market economy: economic resources are owned largely by the private sector with very little state intervention.

Question 9

Define sole trader

Answer 9

Sole trader: 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 of the profits.

Question 10

Define partnership

Answer 10

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

Question 11

Define limited liability

Answer 11

Limited liability: 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 12

Define private limited company

Answer 12

Private limited company: 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.

Question 13

Define share

Answer 13

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

Question 14

Define shareholder

Answer 14

Shareholder: a person or institution owning shares in a limited company.

Question 15

Define public limited company

Answer 15

Public limited company: a limited company, often a large business, with the legal right to sell shares to the general public – share prices are quoted on the national stock exchange.

Question 16

Define memorandum of association

Answer 16

Memorandum of Association: 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 17

Define articles of association

Answer 17

Articles of Association: this document covers the internal workings and control of the business – for example, the names of directors and the procedures to be followed at meetings will be detailed.

Question 18

Define franchise

Answer 18

Franchise: a business that uses the name,logo and trading systems of an existing successful business.

Question 19

Define holding company

Answer 19

Holding company: a business organisation that owns and controls a number of separate businesses, but does not unite them into one unified company.

Question 20

Define public corporation

Answer 20

Public corporation: a business enterprise owned and controlled by the state – also known as nationalised industry.

Question 21

Define joint venture

Answer 21

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

Question 22

Define quaternary sector

Answer 22

Quaternary sector involves knowledge based, high value services eg. ICT, biotechnology, finance services

Question 23

Define industrialization

Answer 23

Industrialization is the process of transforming an economy from agricultural or primary sector to manufacturing or secondary sector

Question 24

Define unlimited liability

Answer 24

Unlimited liability is when the owners of a business have no limit on their personal financial responsibilities for debts of the business

Question 25

Define Cooperative

Answer 25

A cooperative is a business owned and controlled by its members who share common goals and operate with democratic decision making

Question 26

Define social enterprise

Answer 26

Social enterprise is a business that combines social or environmental objectives aiming to achieve financial sustainability while making a positive impact on the environment