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Higher Business Management -
Understanding Business Questions and
Answers
Primary sector Ans: Consists of businesses that are involved in
the extraction and exploitation of natural resources
Secondary sector Ans: Consists of businesses that are involved in
manufacturing and construction, by taking the natural resources
provided by the primary sector and turning them into goods to be
sold later
Tertiary sector Ans: Consists of businesses and organisations that
are involved in providing services rather than goods
Quaternary sector Ans: Consists of businesses providing
information and knowledge-based support services, such as ICT,
consultancy and research and development services
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Private sector Ans: - Consists of businesses that aim primarily to
maximise profits and that are owned by private individuals
- Includes all profit-making businesses from small local businesses
to multinational companies
Public sector Ans: Consists of government-owned organisations
and agencies which aim to provide a service to society
Third sector Ans: - Consists of organisations that have been set up
to provide goods or services to benefit others
- Includes charities, voluntary organisations, social enterprises and
democratic enterprises
Private limited companies Ans: - Owned by shareholders, who have
one or more shares in the business
- Shareholders have limited liability
- Shares are sold privately to investors whom the business knows
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- Aim to maximise profits, grow and increase market share
- Controlled by a Board of Directors who are managed by a
managing director
- Have to produce documents called the Memorandum of
Association and Articles of Association
Limited liability Ans: The owners' personal possessions are not at
risk if the business gets into debt, as they only lose their
investment in the company
Advantages of a private limited company Ans: - Shareholders have
limited liability
- Capital can be raised by selling shares
- They do not have to disclose most of the information that public
limited companies have to provide
- Ownership is not lost to outsiders as all shareholders are known
© 2025 All rights reserved
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Disadvantages of a private limited company Ans: - Profits have to
be split with shareholders by issuing dividends
- Legal process required to set up the company
- Shares cannot be sold publicly on the Stock Exchange, so there is
a limited source of capital available
- Financial accounts can't be kept private as they must be shared
with the Companies House and are therefore made publicly
available
- Larger companies are more difficult to manage effectively
Public limited companies Ans: - Owned by shareholder who have
limited liability
- Must have a minimum of £50,000 share capital (usually a large
company)
- Controlled by a Board of Directors
© 2025 All rights reserved
Higher Business Management -
Understanding Business Questions and
Answers
Primary sector Ans: Consists of businesses that are involved in
the extraction and exploitation of natural resources
Secondary sector Ans: Consists of businesses that are involved in
manufacturing and construction, by taking the natural resources
provided by the primary sector and turning them into goods to be
sold later
Tertiary sector Ans: Consists of businesses and organisations that
are involved in providing services rather than goods
Quaternary sector Ans: Consists of businesses providing
information and knowledge-based support services, such as ICT,
consultancy and research and development services
© 2025 All rights reserved
, 2 | Page
Private sector Ans: - Consists of businesses that aim primarily to
maximise profits and that are owned by private individuals
- Includes all profit-making businesses from small local businesses
to multinational companies
Public sector Ans: Consists of government-owned organisations
and agencies which aim to provide a service to society
Third sector Ans: - Consists of organisations that have been set up
to provide goods or services to benefit others
- Includes charities, voluntary organisations, social enterprises and
democratic enterprises
Private limited companies Ans: - Owned by shareholders, who have
one or more shares in the business
- Shareholders have limited liability
- Shares are sold privately to investors whom the business knows
© 2025 All rights reserved
, 3 | Page
- Aim to maximise profits, grow and increase market share
- Controlled by a Board of Directors who are managed by a
managing director
- Have to produce documents called the Memorandum of
Association and Articles of Association
Limited liability Ans: The owners' personal possessions are not at
risk if the business gets into debt, as they only lose their
investment in the company
Advantages of a private limited company Ans: - Shareholders have
limited liability
- Capital can be raised by selling shares
- They do not have to disclose most of the information that public
limited companies have to provide
- Ownership is not lost to outsiders as all shareholders are known
© 2025 All rights reserved
, 4 | Page
Disadvantages of a private limited company Ans: - Profits have to
be split with shareholders by issuing dividends
- Legal process required to set up the company
- Shares cannot be sold publicly on the Stock Exchange, so there is
a limited source of capital available
- Financial accounts can't be kept private as they must be shared
with the Companies House and are therefore made publicly
available
- Larger companies are more difficult to manage effectively
Public limited companies Ans: - Owned by shareholder who have
limited liability
- Must have a minimum of £50,000 share capital (usually a large
company)
- Controlled by a Board of Directors
© 2025 All rights reserved
