Types of businesses
1 Explain how limited liability is of benefit to a person who is establishing a
business.
Limited Liability allows for businesses to separate their business and their personal
life. This allows for money to be set aside for personal life ie, cars, house and.
Personal bank account, with this having no correlation with the business. This
means, that if the business goes wrong, everything is separate, so you only lose the
business side, but still have the personal things to fall back on.
Outline the difference between international and transnational businesses.
multinational cooperation MNC found all over the world but its production is only
conducted in the home country- Ferrari, Gucci
transnational cooperation TNC has a home-base but its production is all over the world -
coke
Chapter revision task
The following terms and their definition have been mixed up. List the appropriate
letter against the correct terms and definitions.
a International a A business that operates in many countries. Its goods
business and services are produced and sold in a number of
different countries.
b Transnational b A business that has its ownership and production
business based in one country. The business exports its
products to other countries.
c Primary industry c Businesses involved in the acquisition of raw
materials, including natural resources.
d Secondary industry d Businesses that use raw materials as well as labour
and capital equipment to create finished products.
e Tertiary industry e Businesses whose prime function is related to
providing a service.
f Quaternary sector f Tertiary sector businesses that provide information
services to their customers.
g Quinary sector g Tertiary sector businesses that provide services that
are traditionally performed in the home.
Multiple-choice questions
1 What would be an advantage of a business being registered as a sole trader?
(A) It may have restrictions on the amount of money that it could borrow
(B) The owner is responsible for all the decisions affecting the business
(C) The personal assets of the owner could be sold in the event that the owner
is unable to meet the financial obligations of the business
(D) Funds used to operate the business are generally provided by the owner
2 How may a public company be best defined?
(A) A business that is listed on the Australian Securities Exchange and has
ownership open to all members of the public
(B) A business that is owned and operated by government
(C) A business that is open for ownership by a select group of people
(D) A government business that is in the process of being sold to private
investors
3 Jannon purchases shares in a public company listed on the Australian Securities
Exchange. What is the name given to the income that Jannon would receive
from this?
(A) Profit
(B) Yield
(C) Return on investment
(D) Dividend
4 Stephanie is employed by Arnott’s to prepare and mix ingredients as part of the
process of making biscuits. Which industry does Stephanie work in?
(A) Primary
(B) Secondary
(C) Tertiary
(D) Quaternary
5 Each year a public company must release a document to its shareholders
outlining the financial performance of the business over the past year. What is
this report known as?
(A) Prospectus
(B) Annual report
(C) Financial accounts summary
(D) Shareholder report
6 What is the process of organising and operating a government business
enterprise on private sector principles known as?
(A) Corporatisation
(B) Privatisation
(C) Nationalisation
(D) Entrepreneurship
7 What is the name given to businesses that are registered as legal entities
separate from their owners?
(A) Sole traders
(B) Unincorporated businesses
(C) Incorporated businesses
(D) Private companies
8 Paperlix is a medium-sized private company that specialises in the production of
recycled paper. It is considering the possibility of becoming a public company.
What would be an advantage of this?
(A) The business would move from an unlimited liability to a limited liability
company
(B) It would be able to access external funds for future growth and expansion
strategies
(C) Existing shareholders would remain responsible for the long-term and day-
to-day operations of the business
(D) The business would move from an incorporated business entity to an
unincorporated business entity
9 What would be a primary aim of a public sector business?
(A) To provide essential services to the community that, for various reasons,
the private sector does not supply
(B) To achieve a profit on the services that it provides to the community
(C) To compete with private sector businesses across a range of industries,
including telecommunications and postal services
(D) To employ Australians
10 Through which organisation are shares in public companies traded?
(A) The Stock Exchange Association of Australia
(B) The Australian Market of Exchange
(C) The Australian Securities Exchange
(D) The Australian Stock Market
Short-answer questions
1 (a) Identify and describe the different types of legal structure a business may
use.
(b) For each structure, state whether the business has limited or unlimited
liability and explain the impact this has on the business.
2 (a) Investigate the difference between a national business and a global
business. Illustrate your answer through the use of examples.
Extended-response question
Funtastic Entertainment is owned and operated by Phil Colls. The business is
registered as a sole trader and its main function is to perform to young children
in entertainment venues across New South Wales. Phil is seeking to expand his
business.
Write a business report to the owner advising him on the advantages of
expanding his business from a sole trader to a partnership, private company or
public company. Explain how the choice of legal structure will impact on the
owner’s obligations to his creditors.
