Types of business entities practice questions.

Which of the following is a feature of a private limited company?

• shares are sold freely on a stock exchange
• shareholders have limited liability
• the owner has unlimited liability
• it cannot employ staff

Answer: shareholders have limited liability

Limited liability means shareholders can lose only what they invested. Private limited company shares are not traded publicly.

Which of these is an example of an internal stakeholder of a business?

• a local pressure group
• a supplier
• an employee
• the national government

Answer: an employee

Internal stakeholders operate inside the organisation (owners, employees, managers). Suppliers, pressure groups and government are external stakeholders.

Two clothing retailers at the same stage of production merge. This is best described as:

• horizontal integration
• forward vertical integration
• backward vertical integration
• conglomerate diversification

Answer: horizontal integration

Horizontal integration is a merger or takeover between firms in the same industry and at the same stage of the supply chain.

Which feature is characteristic of a cooperative?

• Its shares are traded freely on a stock exchange
• It is owned and democratically controlled by its members
• It is a government department funded through taxation
• Its main aim is to maximise dividends for outside investors

Answer: It is owned and democratically controlled by its members

Cooperatives are for-profit social enterprises owned by their members (workers, customers or producers), who share the profits and each have an equal vote regardless of capital contributed.

A microfinance provider is best described as an organisation that:

• Donates grants that never have to be repaid
• Provides large corporate loans to multinational companies
• Lends small amounts to entrepreneurs who lack access to banks
• Collects taxes from informal businesses on behalf of the government

Answer: Lends small amounts to entrepreneurs who lack access to banks

Microfinance providers are for-profit social enterprises that offer small loans and basic financial services to people, often in developing economies, who cannot obtain credit from conventional banks.

A national government contracts a private firm to finance and build a new toll bridge, which the two parties will then operate together. This arrangement is an example of:

• A public-private partnership
• Privatisation
• Nationalisation
• A long-term franchise agreement

Answer: A public-private partnership

In a public-private partnership the public and private sectors jointly fund and operate a project, combining private capital and expertise with public oversight.