Sectors of Economy Flashcards
What are the sectors of economy?
- Private
- Public
- Third
Types of a private companies:
- Private limited company (ltd)
- Public limited company (plc)
Ownership of a ltd:
Shareholders (who holds a share of the business that is’nt available for the public to purchase)
Control of a ltd:
Board of directors elected at the AGM (who are people who that are specialised so they bring significant experience and expertise)
Finance of a ltd:
Selling shares privately, bank loans, grants and retained profits
Aim of a ltd:
Maximise profits
Advantages of a ltd:
- Control of the company is not lost to outsiders
- More finance can be raised form shareholders and lenders
- Limited liability
- BOD bring significant experience and decision making skills to the business
Disadvantages of a ltd:
- Profits are shared
- Shares cannot be sold publicly
- Must abide by companies act
Ownership of a plc:
Shareholders
Control of a plc:
Board of directors
Finance of a plc:
Selling shares on the stock market, bank loans, grants, retained profits and share issues
Aim of a plc:
Maximise profits
Advantages of a plc:
- Limited liability
- Large amounts of finance raised through selling shares publicly
- Easier to borrow money due to plc’s size and reputation
- PLC’s can easily dominate the market
Disadvantages of a plc:
- Dividends are shared with many shareholders
- Can lose control of the business
- Annual accounts must be public
- It is a costly and complicated process to set-up
Public sector ownership:
Government
e.g. council, local, government, central government, scottish government, uk government
Public sector control:
Elected officials
e.g. Mp’s
Public sector finance:
Taxation
Public sector aim:
Provide a good quality service with the budget that they are given
Third sector (charity) ownership:
A trust
Third sector (charity) control:
Board of trustees
Third sector (charity) finance:
Donations, sponsorship and fundraising events
Third sector (charity) aim:
Depends on the individual cause
Third sector (charity) advantages:
- Exempt from paying some taxes
- Low wage cost due to volunteers
- Clubs that run as charities can gain gift aid (tax paid by customers)
- Private companies are more willing to donate as it leads to good PR
Third sector (charity) disadvantages:
- Can be difficult to compete with private companies larger marketing budgets
- Volunteers may leave for paid work
Third sector (voluntary organisations) ownership:
Members
Third sector (voluntary organisations) control:
Elected committee
Third sector (voluntary organisations) finance:
Members subscriptions
Third sector (voluntary organisations) aim:
Provide a service for members and the local community
Third sector (social enterprise) description:
An organisation that runs like a private business but must donate atleast 50% of its profits
Social enterprise ownership:
Soletrader, partner, shareholder
Social enterprise control:
Board of directors elected at the AGM or paid managers
Social enterprise finance:
Capital investment or bank loans
Social enterprise aim:
Make a profit to benefit a specific group of cause
Social enterprise advantages:
- Increased customers who share the same aim value
- More likely to receive government grants
- Asset lock (if company goes bust, all assets go to the cause)
