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Nature and function of organisations and financial institution Flashcards

1
Q

What is international specialization?

A

A country specializes in the production of a particular product due to differences in climate, e.g. South Africa specializes in gold production.

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2
Q

Define opportunity cost.

A

Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen.

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3
Q

What is a factor of production?

A

A factor of production is a resource used in the creation of goods and services.

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4
Q

Why is refuse removal often provided by the public sector?

A

Refuse removal is often public sector due to its essential nature, need for uniformity, and public health considerations.

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5
Q

What is meant by specialization?

A

Specialization refers to the focus on a specific task or product by individuals or companies to increase efficiency.

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6
Q

List advantages of specialization.

A
  • Increased efficiency
  • Higher productivity
  • Greater quality of goods
  • Economies of scale
  • Enhanced skill development
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7
Q

What distinguishes the private sector from the public sector?

A

The private sector is owned and controlled by private individuals, while the public sector is owned and controlled by the government.

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8
Q

What is the ownership structure of the public sector?

A

Owned by the state and funded by taxation.

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9
Q

What is the ownership structure of the private sector?

A

Owned by shareholders and funded by customers.

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10
Q

Define privatisation.

A

Privatisation is the process of transferring state-owned enterprises to private ownership.

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11
Q

Define nationalisation.

A

Nationalisation is the process of transferring privately owned enterprises to state ownership.

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12
Q

List reasons for privatisation.

A
  • Increased efficiency
  • Revenue for the government
  • Enhanced competition
  • Reduced political interference
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13
Q

List arguments against privatisation.

A
  • Sale of state assets at low prices
  • Decreased investment
  • Large-scale job reductions
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14
Q

List arguments for nationalisation.

A
  • Avoidance of wasteful competition
  • Economies of scale
  • Economic management
  • Political arguments
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15
Q

List arguments against nationalisation.

A
  • Lack of efficiency
  • Difficulty in measuring efficiency
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16
Q

What is a sole trader?

A

A sole trader is a business owned and controlled by one person.

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17
Q

What is unlimited liability?

A

Unlimited liability means the owner is personally responsible for all business debts.

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18
Q

List advantages of sole proprietorship.

A
  • Simple and flexible
  • All profits belong to the owner
  • Easy to run
  • Close relationship with customers
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19
Q

List disadvantages of sole proprietorship.

A
  • Unlimited liability
  • Difficulty in obtaining loans
  • Business closure upon owner’s death
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20
Q

What is a partnership?

A

A partnership is a business formed by 2 to 20 individuals called partners.

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21
Q

List advantages of partnerships.

A
  • More capital can be raised
  • Sharing of skills
  • Specialization in business aspects
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22
Q

List disadvantages of partnerships.

A
  • Unlimited liability
  • Business dissolution upon partner’s death
  • Limited to 20 partners
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23
Q

What is a close corporation (CC)?

A

A close corporation is owned by 1 to 10 members who have limited liability.

24
Q

List advantages of close corporations.

A
  • Limited liability
  • Unlimited continuity
  • Simple setup
  • Easier to obtain loans
25
List disadvantages of close corporations.
* Limited growth potential * High audit costs for loans * Potential management disagreements
26
What is a cooperative?
A cooperative is a business owned and controlled by its members who work together to meet common needs.
27
What are the two types of cooperatives?
* Producer cooperatives * Retail cooperatives
28
List advantages of cooperatives.
* Non-profit making * Equal decision-making * Less tax burden * Easier borrowing
29
List disadvantages of cooperatives.
* Longer decision-making process * Requires full member participation * Less incentives
30
What is a limited company?
A limited company is a business structure where owners have limited liability for the company's debts.
31
What are the two types of limited companies?
* Public limited companies * Private limited companies
32
What distinguishes public limited companies from private limited companies?
Public limited companies can sell shares to the public, while private limited companies cannot.
33
What are ordinary shares?
Ordinary shares are shares that provide voting rights and dividends based on the company's profit.
34
What are preference shares?
Preference shares are shares that offer fixed dividends and voting rights only under certain conditions.
35
What is a multinational company?
A multinational company is a company that operates in multiple countries, producing and selling goods and services globally.
36
What is the definition of a multinational company?
A multinational company is a company that operates in many different countries, producing and selling in various countries.
37
Where are the head offices of most multinational companies typically located?
In developed countries.
38
What is a characteristic of preference shareholders?
Preference shareholders vote only if their dividend has not been paid.
39
What are dividends?
Dividends are the fixed amount paid each year to shareholders, only if profits are made.
40
What is a key advantage of multinational companies?
They increase employment in the host countries.
41
What is a disadvantage of multinational companies?
They may cause unemployment if they decide to close down their operations in a country.
42
What is the main aim of public corporations?
To provide essential services and industries like water, electricity, and railways.
43
How are public corporations established?
By law (Act of Parliament) which sets up the corporation’s functions and organization.
44
What is the main difference between public limited companies and public corporations?
Public limited companies aim to make profit, while public corporations aim to provide public and merit goods.
45
What does unlimited liability mean?
Unlimited liability means that the owners of a business are personally responsible for all debts of the business.
46
Name two features of a partnership.
* Shared ownership * Joint decision-making
47
Name two features of a close corporation.
* Limited number of members * Limited liability
48
What is the role of government in public corporations?
The government appoints a Board of Directors to manage the corporation according to set objectives.
49
True or False: Public corporations are directly operated by the government.
False
50
Fill in the blank: A company that takes over the ownership of NAMWATER from the government is called a _______.
[privatization]
51
What is one feature of a sole trader?
The owner has unlimited liability.
52
What is a reason for the growth of multinational companies?
* Limits to the size of the local market * Avoidance of trade barriers * Access to essential raw materials * Availability of cheap labor * Tax advantages
53
What might limit the decision-making capabilities of branch managers in a centralized business structure?
A large amount of supervision from head office.
54
What is a public limited company?
A company whose shares are sold to the public and aims to make profit.
55
How do multinational companies contribute to the economies of host countries?
* Increase economic activities * Transfer advanced technology * Provide tax revenues

economics (1 decks)

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