1

Objective 1 Explain the development of barter

Concept of barter:
Early ancestors satisfied their needs directly from nature, which is called the direct
satisfaction of wants.
An economic system where needs and wants are directly satisfied from nature is referred
to as a subsistence economy.
For bartering to be successful, one person must have what the other person wants and
Double coincidence of wants

Advantages of Barter

A simple system, free of complex monetary problems

Ideal utilization of natural resources
No currency is needed to perform bartering

Disadvantages of Barter

Deciding the rate of exchange The right quantity in exchange for another
Indivisibility of certain commodities an example is an exchange from peas for a
cow
Store of wealth and store of value Some items lose value over time, while other
gain value
 3

Objective 2 Describe the role of money

What is money?

Money is any commodity that is accepted as a measurement of value and a

medium of exchange. Money has helped solve many problems associated with the
bartering system.

Features of money

It must be acceptable
It must be relatively scarce
Must be capable of being divided into smaller fractions
It must be homogenous (Identical)

Functions/Role of money

1. A medium of exchange It is accepted

2. Standards of value Different items have different value
3. Store of value Can be saved and used for future use
4. Means of deferred payments Used to pay for goods bought on credit
 4

Objective 3 Identify the instruments of exchange

Instruments of exchange:
Barter the exchange of goods for other goods without the use of money.

Bills of exchange this is a written order from one person to another for money
to be paid to another. Usually used by persons who are selling goods to others in
another country.

Electronic Transfer money is transferred electronically via the use of a computer

network.

Telebanking telebanking is a system for conducting banking transactions over

the telephone.

E-commerce any business transaction that is done through the internet.

Cheques a document written by the drawer ordering the bank to make payments
of a specific amount to the payee.

Money order (bank money order) it is used as a method of payment that is sold
by banks to persons who wish to make overseas payments for goods and services
to suppliers.

Debit Cards this is given to customers with savings on current accounts. The card
may be used at the point of sale (POS) where the seller has a machine connected.

Credit Cards these are given to customers of financial institutions (banks) who
qualify for credit from the institution. The customer has a limit that cannot be
exceeded. The amount used must be repaid by the due date and an interest rate
is charged.

Bank Draft this is a document drawn by one bank on another. The firm that owes
money pays their bank the sum they owe, and the bank will then make out a
cheque made payable to the credits.

Telegraphic money transfer an electronic means of transferring funds.

 5

Bank transfer when money is sent from one bank account to another.

Mobile Money is a mobile banking service that allows users to store and transfer
through their mobile phones.

Mobile Wallets is a virtual wallet that stores payment card information on a

mobile device. It can be used by merchants/traders listed with the mobile wallet
service provider.

Objective 4 Advantages and disadvantages of e-commerce

Advantages
It is convenient as purchases can be done in the comfort of your home
Access to a wider range of products and services online
Access to cheaper and affordable goods and services

Disadvantages

Your system can get hacked and you can lose all your personal information
Must have access to the internet to make a purchase
Items can get lost/damaged whilst in transit
You can potentially get scammed from your purchase

Objective 5 Differentiate between the private and public sectors

Private Sector Public Sector

Owner Owned and Owned by the
controlled by government/state
private firms
Objective To make a profit To gain revenue to
use for the benefit
of the country
Source of capital Provided by Financed by the
private individuals government
through taxpayers
Fig 1.0 Diagram differentiating the private and public sectors
 6

Objective 6 Describe the various forms of business organizations and

arrangements
Different forms of business organizations:
1. Sole Trader A person who has total ownership, control and responsibility of his
or her business.
Characteristics -
He or she does not share profits and is responsible for all debts
Very small in size
Easy to form, with minimal start-up capital and legal requirements needed
Has unlimited liability, which means the owner can lose more than he
invested
Lack of leisure time
Limited sources of finance as the business is dependent on one individual

2. Partnership An association of 2-20 persons operating a business.

Characteristics -
The goal is to make a profit
Owners share the responsibilities, profits and losses
Ordinary partners may have unlimited liability, whereas Preferred partners
may enjoy limited liability
Greater access to sources of finance than a sole trader
At least one partner (an ordinary partner) must have unlimited liability
There is continuity of the business in case one partner dies
Decision making can be slow
Conflict may arise
Profits are shared equally in the absence of a partnership deed.

Partnership Deed Partnership Act

The Partnership Deed states The Partnership Act states
1. Name of business 1. Profits and losses are shared equally
2. Nature of business 2. No salaries are paid to partners
3. Amount of capital by each partner 3. No interest is paid on capital
Fig 1.1 Diagram depicting the partnership deed and partnership act
 7

3. Cooperatives These are businesses that are formed and operated by their
members.
Characteristics -
It must be registered
Managed and controlled by members
Selected Board of Directors to manage the business
Profits are shared among members in the form of dividends
Decision making is slow
Members have easier access to loans compared to banks
Creates employment for members
The interest rate on loans may be higher than that of banks
An example of a cooperative is the Credit Union

4. Companies A company may be defined as a separate legal identity that is owned

and operated by a group of persons, or other companies, who have purchased
shares in the business. These individuals who have purchased shares are known as
shareholders.

Legal requirements must be met by submitting documents to the registrar of

companies. These requirements are:

1. Memorandum of Association
2. Articles of Association
3. Statement of authorized, registered or normal capital
4. The Prospectus
 8

There are two types of companies:

a) Private Limited Company
Characteristics -

Has 2-50 shareholders

Shareholders have limited liability
It may be family owned
Shares are not sold to the public
Greater access to capital than a sole trader or partnership
There is continuity
Company financial statements are private. They are not published
Capital is limited
The company must submit financial reports for auditing
Decision making can be slow
Examples of private companies are A.S Bryden & Sons Ltd and
Amalgamated Security Service Ltd

b) Public Limited Company (sometimes called a Joint Stock Company)

Characteristics -

Has a minimum of 7 and no limit on the maximum amount of members

Shareholders have limited liability
Shares are sold to the public which leads to greater access to capital
Separate legal existence
Shares are easily transferrable from one shareholder to another
 9

Shareholders gain dividends on profits

Financial statements must be audited and published
Decision making can be slow
Risk of losing control of the company if another company acquires a greater
percentage of shares
Examples of public companies are The Royal Bank of Canada and Sagitor

5. Franchise An agreement between an established company (the franchisor) and

a franchisee to conduct business in a manner set by the franchisor. Examples of
franchises are KFC, McDonald and Pizza Hut.

Characteristics -

The franchisor sells the right to use its name and idea
The contract is temporary
A ready-made business operation
Larger capital base
Easy source of revenue for the franchisor
Must pay royalties to the franchisor which reduces profits for the franchisee
CANNOT change or enhance the product or service set by the franchisor
Less of a need to market the business as it is recognized around the world
 10

Objective 7 Differentiate among the types of economic systems

What is an economic system?
An economic system refers to the way society organizes its scarce resources to
produce goods and services.

Types of economic systems:

a) Traditional (Subsistence)
Existing early society
People formed communities and produced food and basic goods for a simple
lifestyle
They exchanged goods if there was any surplus
Bartering was used

b) Command or planned economy (Socialist)

The government is responsible for economic planning, ensuring the best use of
and distribution of a coun
The government decides what, how much and for whom to produce
Prices are set by the state
Less wastage of resources
Incomes are more evenly distributed
Planning may be more rigid and inflexible

c) Free Market economy (Capitalist)

The customer drives the economy by influencing producers based on their
demands
Private individuals own the resources and there is little or no government
interference

d) Mixed Economy (Public, Private)

Both the government and private individuals make economic decisions as to
what, how much and for whom to produce for
Efficient use of resources
More equitable distribution of income than Free Market
Conflict may arise between both parties
 11

Objective 8 Describe the functional areas of a business

The function areas of business are:
1. Production The process where raw materials are converted into goods and
services. This function includes:
Purchases of raw materials
Scheduling
Making the product

2. Marketing This department deals with identifying, anticipating and satisfying

customer wants profitably. This function includes:
Market Research
Product Design
Pricing
Sales Promotion

3. Finance This department is responsible for the final account of the business.
It involves:
Making Payments
Receiving money from the company
Deals with all financial matters of the business
4. Human Resource Department The department is responsible for:
Recruitment of staff
Training of staff
Promotion of staff
Welfare of staff

5. Research and Development This department deals with:

Keeping abreast of what is happening in the market, in which the business
operates
Developing new products and services
Redesigning/Improving the product or service
 12

Objective 9 Identify the stakeholders involved in business activities

The various stakeholders involved:
1. Owners/Investors
2. Employees/Managers
3. Consumers
4. Suppliers
5. Communities
6. Environment
7. Government
8. Future generations

Objective 10 Discuss the role and functions of the stakeholders involved in

business activities
What are stakeholders?
Stakeholders are the various groups within and outside an organization or any
individual with an interest in the operations of the business.

Roles and functions of various stakeholders:

1. Owners/Investors
To achieve profits
Achieve efficient management of resources
To provide goods and services of high quality and at reasonable prices
2. Employees/Managers
To carry out the activities stated in their job description
To efficiently utilize the resources placed in their care
3. Consumers
Provide feedback on product quality through complaints and
suggestions
Use the product or service in the way it was intended to be used
 13

4. Suppliers
To provide high-quality materials at a reasonable price to the business
buying
To allow products to be recognized by consumers through the business
buying
5. Communities
The community and society in which the business operates
Provides employment for the business
Promotes good human relationships
Expects the business to be a good corporate citizen, showing respect for
the community, environment and human dignity
6. Environment
The environment around the business would need to business respect
laws on protecting the environment
Provides good climate
Can affect us in ways such as climate change
The business can affect the environment in ways such as pollution
7. Government
Provide regulations that businesses must follow
Assist businesses in the form of loans, trading, research, financial aids
and subsidies.
8. Future generations
The future employees, customers, investors etc.
They are the heirs who will inherit the world we leave/business
 14

Objective 11 Explain the ethical and legal issues in the establishment & operations
of a business
Ethical and legal issues in the establishment of a business:
1. Ensuring that the business is a bona fide firm or establishment and not using it as
a front for money laundering and other illicit activities

2. Ensuring that capital is legally obtained and not tainted with illegal operations as
a source of funding

3. In the operations of a business, the business must make payment to the National
Insurance Contributions (NIS) and taxes.

Objective 12 Explain the principles that must be adopted in the establishment &
operation of a business
Principles that must be adopted in the establishment of a business:
1. The adoption of an organization code of ethics

2. Policies on environmental issues

3. Handling of personal information

 15

Objective 13 Explain the consequences of unethical and illegal practices in a

business
Consequences of unethical practices in a business:
a) Misleading Advertisement
Unfair and fraudulent practices on the population; customers spend unnecessary

b) Withholding of tax
Cheating the government of revenue.

c) Unethical disposal of waste

Leads to pollution and diseases.

d) Money laundering
Leads to distortions in the national economy.

Objective 14- Describe the careers in the field of business

Careers in the field of business:
i. Advertising & Public Relations
ii. Compliance officers
iii. Strategic planner
iv. Educators (Online and face to face)
v. Information officers
vi. Entrepreneurs
vii. Resource Personnel
viii. Web designers
ix. Web planners
x. Software developers