Unit 1.2

Question 1

Define private sector

Answer 1

Owned and controlled by Government

Question 2

Define public sector

Answer 2

Businesses owned by individuals, usually with the aim to make profit

Question 3

Define sole trader

Answer 3

An Individual who, owns their own business, provides the finance, has full control, and keeps all the profit

Question 4

Define partnership

Answer 4

2 or more people combine to form a business enterprise.

Partners usually

Share start up capital

Share of profit

Share responsibilities

Question 5

Define unlimited liability

Answer 5

If company goes bankrupt, the owner(s) are liable for the debts of the company

Their personal possessions and property can be used to pay off the debts of the company.

Question 6

Define limited liability

Answer 6

Owners are only liable for their investment in the company

Question 7

Charataristics of a public limited company

Answer 7

Access to large amounts of finance

Anyone can buy and sell shares easily

Ownership is often split across numerous people who are often not linked to the company

CEO is often not the original founder

Shareholders own the company – want short term profits

Question 8

Characteristics of a private limited company

Answer 8

Incorporated, so limited liability

shares cannot be sold on the open market

Usually small to medium - sized company

Question 9

Pros and cons of a sole trader

Answer 9

Pros

Not Restricted by Formal Business Structure / full control

Easy to set up

Keeps all the profits

Cons

Unlimited Liability

Difficult to raise funds - hard to expand

When you die the business doesn’t survive - lack of continuity

Owner is responsible for all areas - workload and stress

Question 10

Pros and cons of a partnership

Answer 10

Pros

Reduced financial burden

Additional knowledge and set of hands / specialise

More capital allows expansion

Losses are shared between partners

Cons

Less independence - decision making - more time, less control and disagreements

Divide Profits

Cannot issue shares

Unlimited liability- Liable for your partner’s actions

Question 11

Pros and cons of a Private limited company

Answer 11

Pros

Limited Liability

Continuity

Original owner often remains in control

Raise more capital

Cons

Legal requirements

Cannot sell shares to general public

Lack of financial privacy

Question 12

Pros and cons of a public limited company

Answer 12

Pros

Limited Liability

Can raise large amounts of capital

Easy for shareholders to trade shares

Continuity - business doesn’t stop if owner passes away

Cons

Short termism of shareholders

More legal requirements

Lack of financial privacy - anyone can look at their accounts

Costly legal requirements of going public

Risk of takeover

Question 13

Define social enterprise

Answer 13

A business that makes money in a socially responsible way.

Reinvests some profits to benefit society rather than maximize profit for owners

Question 14

Define Co-operative

Answer 14

A group of people with common interests Who share ownership of a company

Question 15

Define Microfinance provider

Answer 15

Organizations that provides small loans to individuals who usually can’t receive a loan

Question 16

Public Private Partnership

Answer 16

When the private sector gets involved (management, finance etc) In a public project aimed at benefiting the public

E.g. Railways, Motorways

Question 17

Non-Government Organizations (NGO)

Answer 17

A non-profit organization that operates independently of any government, typically one whose purpose is to address a social or political issue.

E.g. Red Cross, Amnesty International

Question 18

Charities

Answer 18

Non Profit Social Enterprise that raises money to help those in need