Test Bank Complete_ Understanding Business 2024
Release By William Nickels, Jim McHugh and Susan
McHugh | All Chapters 1-20| All Chapters With Correct
Answer Key| Graded A+
What are the four sectors of industry? - ANSWER- primary
- secondary
- tertiary
- quaternary
Primary sector of industry - ANSWERExtract raw materials from the ground to make
goods and services
Examples:
Agriculture and farming
Fishing
Mining
Secondary sector of industry - ANSWERUse raw materials to make goods or
manufacture them into an end product
Examples:
Car manufacturer
Cake baker
Tertiary sector of industry - ANSWERProvides a service. Consumers need to be
present to consume or experience these services
Examples:
Fitness instructor
Hotel
Fast food restaurant
Quaternary sector of industry - ANSWERInvolves the provision of information
through education, training and IT.
Examples:
Universities
Schools
Research centres
Search engines
What are the three sectors of economy? - ANSWER- private
- public
- third
Private sector of economy - ANSWERType of ownership - Privately owned, profit
making organisations.
Owned by - Shareholders, Partners, Private individuals
,Controlled by - board of directors
Financed by - Sales of shares, bank loans, Government Grants
Examples - Tesco, Greggs, Love's
Public sector of economy - ANSWERType of ownership - Local or national
government owned organisations
Owned by - government
Controlled by - elected officials, appointed managers
Financed by - Taxation, payments of fines and penalties
Examples - NHS, schools, police
Third sector of economy - ANSWERType of ownership - Charities, clubs, social
enterprises
Owned by - trustees
Controlled by - appointed managers
Financed by - Donations, member fees, grants
Examples - Oxfam, Strathcarron hospice
What is limited liability and its two impacts? - ANSWERThe owners have limited
liability. This means that the shareholders can only lose the amount of money they
have invested.
The impact of having limited liability;
- This can encourage potential investment.
- Can make it easier to secure additional finance
What is unlimited liability and its three impacts? - ANSWERUnlimited liability means
that if a business should fail and not be able to repay all of its debts, then the owner
will have to sell their personal possessions in order to find the funds to cover the
amounts still owed.
The business and the owner are legally the same thing.
The impact of having unlimited liability is that;
- it can put off potential investors
- can prevent small businesses being established
- can make it more challenging to secure loans
What is a private limited company (LTD)? - ANSWERLimited companies have a
separate legal existence from that of its owners who are known as shareholders.
These organisations are owned by INVITED shareholders and are controlled by a
Board of Directors.
A managing director (who may or may not be a shareholder) will run the business.
, Features of a private limited company - ANSWEROwnership - invited/private
shareholder like family and friends
Control - managing director/board of directors
Financed through - Selling shares, bank loan, government grant
Liability - limited
Advantages of a private limited company (4) - ANSWER- Shareholders have limited
liability
- Economies of scale can be achieved
- Outsiders cannot gain control as shares are not available to the public
- Less risk of failure
Disadvantages of a private limited company (4) - ANSWER- Profits are shared
amongst all shareholders
- Dividends are only paid to shareholders if a profit is made
- Have to comply with companies act
- Must produce annual accounts that can be viewed by outsiders
What is a public limited company (plc) - ANSWERThese organisations are very similar
to a private limited company except they can sell shares of the company to the
public on the stock market to raise finance. These are normally very large
organisations.
There are requirements which a company must meet before becoming a PLC.
Must have share capital of at least £50,000
Must have two shareholders, two directors and a qualified company secretary
Features of a public limited company - ANSWEROwnership - public shareholders
(sold on the stock market)
Control - managing director/board of directors
Financed through - shares, debentures
Liability - limited
Advantages of a public limited company (4) - ANSWER- Shareholders have limited
liability
- Large amounts of finance can be raised through the public sale of shares.
- It is easier to borrow finance due to size and reputation
- PLC's can easily dominate the market
Disadvantages of a public limited company (4) - ANSWER- Dividends are shared with
many shareholders
- Control of the business can be lost as anyone can buy shares via stock market
- Annual accounts have to be published
- Setting up a Plc can be costly and complicated
Release By William Nickels, Jim McHugh and Susan
McHugh | All Chapters 1-20| All Chapters With Correct
Answer Key| Graded A+
What are the four sectors of industry? - ANSWER- primary
- secondary
- tertiary
- quaternary
Primary sector of industry - ANSWERExtract raw materials from the ground to make
goods and services
Examples:
Agriculture and farming
Fishing
Mining
Secondary sector of industry - ANSWERUse raw materials to make goods or
manufacture them into an end product
Examples:
Car manufacturer
Cake baker
Tertiary sector of industry - ANSWERProvides a service. Consumers need to be
present to consume or experience these services
Examples:
Fitness instructor
Hotel
Fast food restaurant
Quaternary sector of industry - ANSWERInvolves the provision of information
through education, training and IT.
Examples:
Universities
Schools
Research centres
Search engines
What are the three sectors of economy? - ANSWER- private
- public
- third
Private sector of economy - ANSWERType of ownership - Privately owned, profit
making organisations.
Owned by - Shareholders, Partners, Private individuals
,Controlled by - board of directors
Financed by - Sales of shares, bank loans, Government Grants
Examples - Tesco, Greggs, Love's
Public sector of economy - ANSWERType of ownership - Local or national
government owned organisations
Owned by - government
Controlled by - elected officials, appointed managers
Financed by - Taxation, payments of fines and penalties
Examples - NHS, schools, police
Third sector of economy - ANSWERType of ownership - Charities, clubs, social
enterprises
Owned by - trustees
Controlled by - appointed managers
Financed by - Donations, member fees, grants
Examples - Oxfam, Strathcarron hospice
What is limited liability and its two impacts? - ANSWERThe owners have limited
liability. This means that the shareholders can only lose the amount of money they
have invested.
The impact of having limited liability;
- This can encourage potential investment.
- Can make it easier to secure additional finance
What is unlimited liability and its three impacts? - ANSWERUnlimited liability means
that if a business should fail and not be able to repay all of its debts, then the owner
will have to sell their personal possessions in order to find the funds to cover the
amounts still owed.
The business and the owner are legally the same thing.
The impact of having unlimited liability is that;
- it can put off potential investors
- can prevent small businesses being established
- can make it more challenging to secure loans
What is a private limited company (LTD)? - ANSWERLimited companies have a
separate legal existence from that of its owners who are known as shareholders.
These organisations are owned by INVITED shareholders and are controlled by a
Board of Directors.
A managing director (who may or may not be a shareholder) will run the business.
, Features of a private limited company - ANSWEROwnership - invited/private
shareholder like family and friends
Control - managing director/board of directors
Financed through - Selling shares, bank loan, government grant
Liability - limited
Advantages of a private limited company (4) - ANSWER- Shareholders have limited
liability
- Economies of scale can be achieved
- Outsiders cannot gain control as shares are not available to the public
- Less risk of failure
Disadvantages of a private limited company (4) - ANSWER- Profits are shared
amongst all shareholders
- Dividends are only paid to shareholders if a profit is made
- Have to comply with companies act
- Must produce annual accounts that can be viewed by outsiders
What is a public limited company (plc) - ANSWERThese organisations are very similar
to a private limited company except they can sell shares of the company to the
public on the stock market to raise finance. These are normally very large
organisations.
There are requirements which a company must meet before becoming a PLC.
Must have share capital of at least £50,000
Must have two shareholders, two directors and a qualified company secretary
Features of a public limited company - ANSWEROwnership - public shareholders
(sold on the stock market)
Control - managing director/board of directors
Financed through - shares, debentures
Liability - limited
Advantages of a public limited company (4) - ANSWER- Shareholders have limited
liability
- Large amounts of finance can be raised through the public sale of shares.
- It is easier to borrow finance due to size and reputation
- PLC's can easily dominate the market
Disadvantages of a public limited company (4) - ANSWER- Dividends are shared with
many shareholders
- Control of the business can be lost as anyone can buy shares via stock market
- Annual accounts have to be published
- Setting up a Plc can be costly and complicated
