Chapter 2 Keyterms

Private Limited Company

a business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the general public

Initial public offering

An offer to the public to buy share in a public limited company

Public limited company

A company whose shares are traded on a stock exchange and can be bought and sold by the public

Primary sector business activity

Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed

Secondary sector business activity

Firms that manufacture and process products from natural resources, including computer, brewing, baking, clothes-making and construction

Tertiary sector business activity

Firms providing services to consumers and other businesses. Such as retailing, transport, insurance, banking, hotels and tourism

Quaternary sector business activity

Businesses providing information services, such as computing, web design, ICT, managements consultancy and R&D

Public sector

Organizations accountable to end controlled by central or local government (the state)

Private Sector

Business owned and controlled by individuals or groups of individuals

Mixed economy

Economic resources are owned and controlled by both private and public sectors

Free-market economy

Economic resources are owned largely by the private sector with very little state intervention

Command Economy

Economic resources are owned, planned and controlled by the state

Public corporation

A business enterprise owned and controlled by the state- also know as a nationalized industry

Sole trader

A business in which one person provides the permanent finance and, in return, has full control of the business and is able to keep all of the profits

Unlimited Liability

Business owners have full legal responsibility for the debts of the business

Partnership

A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities

Limited liability

The only liability - or potential loss - a share holder, has, if the company fails, is the amount invested in the company, not the total wealth of the shareholder

Share

A certificate confirming part-ownership of a company and entitling the shareholder owner the dividends and certain shareholder rights

Shareholder

A person or institution holding a share

Memorandum of association

This states the name of the company, the address of the head office, through which it can be contacted, the maximum share capital for which the company seeks authorization and the declared aims of the business

Articles of Association

This document covers the internal workings and control of the business, the names of directors and the procedures to be followed at meetings

Cooperative

A jointly owned business operated by members for their mutual benefit, to produce or distribute goods or services - as in consumers’ cooperatives or farmers’ cooperatives

Franchise

The legal right to use the name, logo, and trading systems of an existing successful business

Franchiser

A person or business that sells the right to open stores and sell products or services, using the brand name and brand identity

Franchisee

A person or business that buys the right from the franchiser to operate the franchise

Joint venture

Two or more businesses agree to work closely together on a particular project and create a separate business divisions to do so

Social Enterprise

A business with mainly social objectives that re-invents most of its profits into benefiting society rather than maximizing returns to owners.