Prelim Knowledge Flashcards
What are the 3 main sectors of industry?
Primary
Secondary
Tertiary
Describe the primary sector of industry
The primary sector is concerned with the extraction of existing raw materials or natural resources from the land. Any business which grows or extracts materials from the land is classed as a primary sector business.
Name some common examples of businesses in the primary sector of industry.
Farming
Mining
Fishing
Oil production
Describe the secondary sector of industry
The secondary sector is concerned with manufacturing. This means taking raw resources from the primary sector and creating new products with those resources.
Name some common examples of businesses in the secondary sector of industry.
Car manufacturers, food production or building companies.
Describe the tertiary sector of industry
The tertiary sector is concerned with providing a service, these are activities done by people or businesses for customers.
Name some common examples of businesses in the tertiary sector of industry
Hairdressers
Banks
Supermarkets
Cinemas
What are the 3 sectors of economy
The 3 sectors of economy are the private sector, public sector and third sector.
Within each sector there are different types of businesses with different objectives and aims.
Describe the private sector of economy
Private sector organisations, such as a local newsagent or large supermarket chain are owned and controlled by private individuals. Their primary aims are to survive and make a profit.
What type of organisations would be found in the private sector of economy
Sole traders
Partnerships
Private limited companies
Describe the public sector of economy
Public sector organisations are owned and controlled by the government. They aim to provide a service to the public and are funded by taxes. Public sector organisations function in areas such as health, education, housing and social work.
What type of organisations would be found in the public sector of economy
national government
local government
Describe the third sector of economy
Third sector organisations are set up to help a cause or provide a service to members. They aim to raise money and increase awareness for good causes. Examples of third sector organisations would be Oxfam, The Big Issue or a local youth club.
What types of organisations would be found in the third sector of economy?
charities
voluntary organisations
social enterprises
Describe a sole trader
A sole trader is a business owned by one person. They are usually small in size. Hairdressers, butchers, and electricians often operate as sole traders.
How are sole traders financed?
Sole traders rely on their own savings,
bank loans or loans from friends and family to finance their business.
What are the advantages of a sole trader business?
Easy to set up - Has less rules and regulations than other types of organisation.
Sole traders retain all profit for themselves
Sole traders make all the decisions by themself - they run the business as they see fit.
What are the disadvantages of a sole trader business?
It can be difficult to raise finance - banks are unlikely to give this type of business a large loan as it can be seen as risky.
Unlimited liability - A sole trader is liable for the organisation’s debts, personal assets such as cars or property are at risk to pay off the debt of the business.
Heavy workload - Sole traders have to shoulder the full burden of responsibility for their business, to keep labour costs low many will choose to do most the work themselves
Describe a partnership business.
Partnerships can have a minimum of 2 and a maximum of 20 partners.
Lawyers, estate agents, doctor and dental practises often operate as partnerships.
A partnership is a business set up by the deed of partnership document.
What is the deed of partnership document?
The deed of partnership document sets out the terms of the partnership. For example it states how much money each partner invested in the partnership and what role each partner will have in the partnership.
What is a sleeping partner?
A partner who invests but is not involved in the day-to-day running of a partnership is called a sleeping partner.
What are the advantages of a partnership business?
More equity available to finance the business compared to a sole trader - Banks are more likely to lend money to an organisation that has many partners
Different partners can bring different skills -a partnership running a garage might have some partners who are excellent mechanics while other partners may have excellent sales skills.
Workload is shared.
What are the disadvantages of a partnership business?
Unlimited liability - All partners have the worry of being liable for any business debt the partnership has.
Profit is shared between the partners - an individual in the partnership may make less than a sole trader.
Partners may not always agree on decisions for the business
Describe a private limited company (LTD)
A private limited company is more complex than a partnership or sole trader. In law, a private limited company is separate from the people who own it. Its finances are separate from their personal finances
The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.
A limited company is private when its shares are not available to the public by being bought and sold on the stock exchange.
A private limited company is controlled by a board of directors. This is a group appointed by the shareholders who oversee the running of the business.