Lesson 1: Nature of Business Instruments of Exchange

The problems of the barter system

Economy - place or a country where created the need for a medium that could
resources are managed by a government to be used to facilitate trade. Money solved
bring about maximum benefits for the the problems of the barter system. Money
entire society. is anything that is accept- able for the
purchase of goods and services.
Third World Countries characterized as - The Characteristics of Money
developing economies. Developing Acceptable, Convertible, Divisible, Durable,
economies are described as those with Homogeneous, Scarce, Portable (ACDDHSP)
average income earned, rate of literacy and
health services lower than - Functions of Money
industrialized/developed nations. 1. A measure of value
2. It is a medium of exchange
Early Caribbean economies dated 3. It is a standard for deferred payments
from the Taino and Kalinago Indians are 4. It is a store of wealth
examples of a system of economics
because although they lived simple - Types of Money
lives, this community was ruled by a Near Money
leader who organized all economic Notes and Coins - Quasi
activities. They hunted, fished, and grew Money/Substitute Money
crops to provide the means of survival for Bank Draft
their village. Bill of Exchange
Cheques
Barter - exchange of goods or services for Credit Cards/Debit Cards
other good or services A credit card facility is actually a
loan given to a customer and thus it is
There were several problems with the repaid at an interest. A debit card is
barter system: issued against a customer's account
balance and is therefore not a loan.
1. A common measure of value did not Electronic commerce more
exist. popularly called ecommerce is the buying
2. A double coincidence of wants may not and selling of goods and service using the
exist. (e.g. animal skins for another internet.
commodity such as clay pots). Electronic Transfer
This is a system used to transfer
Firms produce commodities/goods funds electronically rather than paper-
and services that satisfy needs and wants based payment methods.
for its market. They are the producers in an Internet Banking
economy. This differs form tele-banking in that
the internet is used to access the same
Government manages the economy. services.
They set the laws that govern households Money Order
and businesses. They can be used to make payments
locally or overseas, as they are made out in
Households are known as consumers. the currency in which they are to be paid.

Specialization is defined as the division of Tele-Banking

labor. This system allows a bank's
Complex specialization involves the customer to simply use the telephone to
breaking down of tasks into minute tasks, get his banking services done
and assigning each task to an individual or
a unit group.

The advantages of specialization Lesson 2: Nature of Business

include: improved quality of output, and
shorter production time, because of the
repletion of a single task. Reasons for Starting a Business

1. Being Your Own Boss

2. Financial Independence A partnership business is formed
3. Self-actualization/Fulfillment legally by a minimum of two and a
4. To Create Employment for Relatives, maximum of twenty persons in a business.
Friends and Community Members There are two types of partnership forms:
5. To Use Your Skills and Knowledge for
Yourself 1. Limited Liability Partnership - at
lease one partner must have unlimited
Forms of Business Organizations liability.
An organization is a system that
groups people together towards 2. Unlimited Liability Partnership - all
establishing a common goal. partners have unlimited liability.
Conglomerates - This is a group of
unrelated companies (e.g. a restaurant, A deed of partnership must be
shoe store a travel agency etc,) under one drafted which set out the terms and
umbrella. conditions of the partnership.
Cooperatives - business entities owned by
their members who purchase shares to join Types of Partners
them
There are several types of 1. Ordinary/General Partners: take an
cooperative, for example, Retail/ Consumer active part in the run- ning of the business.
cooperatives and Producer cooperatives.
2. Sleeping Partners: invest in the
Franchise - owner acquiring a franchise to business but do not take an active part in
operate under an already existing business the business.
name. A franchise is an agreement
between a franchisee (the person 3. Limited Liability Partners: assets
requesting permission to set up business) will not be lost if the business goes
and the parent company to allow the bankrupt.
franchisee to sell its products or services.
Since more than one person is
Government Departments involved more capital can be raised to
These include the government inject into the business. There is more
ministries e.g. the Ministries of Finance and expertise and work load is shared. The risk
Education. A minister is appointed in of the business operation is also shared.
charge of each ministry. These
departments are very important to the All partners will be affected by the
running of government. action of each partner since each person
represents the business. Decision making
Local and Municipal Authorities may be very slow if partners are not in
Local and Municipal Authorities are agreement. There are high risks for
government bodies which are run by partners who do not have limited liability.
elected local officials, e.g., the Kingston and
St. Andrew Corporation (K.S.A.C.) in 4. Private and Public Sector
Jamaica.
All privately owned industries, services and
Multinationals other business activities are a part of the
Private Sector.
A multinational company is a global
organization directed from a main centre or
office. Examples of Multinational companies Sole Trader
in the Caribbean are Shell, Kentucky Fried The sole trader as the title suggest is
Chicken and Digicel. a single business owner. This person may
employ several other persons to work in the
Nationalized Industries organization, but he has to make all
Nationalized industries are decisions, acquire all the capital required
government owned and controlled and other resources needed for the
businesses. business on his own.
Benefits of operating alone are:
Partnership 1. All profits are taken by the owner.
2. Consultations are not necessary for 3. Statutory Declaration
decision making and the legal requirements 4. Certificate of Incorporation
for start-up is very simple as the proprietor 5. Certificate of Trading
only needs to submit the registration
documents for the business.

Private and Public Liability Company

All industries, services and any other
business activities that are owned by the
state are a part of the Public Sector. For
example, the commercial banks are a part
of the Private Sector, and public schools
and hospital are a part of the Public Sector.

Limited Liability Companies are

companies in which shareholders/investors
are protected as they will not lose their
personal assets if the business goes
bankrupt. They are not liable for the debts
of the company beyond their level of
investment. Therefore if a shareholder buys
shares in a company valuing $5000 then he
will only lose that $5000 invested and his
personal assets.
There are two types of limited liability
companies.
1. Private Limited Liability Company
2. Public Limited Liability Company
The Private Limited Company only
allows friends, relatives and co-workers to
purchase shares and to be a part of the
company. Its privacy is also protected by
the fact that unlike the public
limitedliability company, it does not have to
publish its balance sheet in the newspaper.
The public limited company allows
members of the public blic to purchase
shares. The shares/stocks of companies are
traded on the stock market. public limited
Legally the private limited company
can only have a mini- mum of two and a
maximum of fifty persons to join. Whereas
the public limited liability company has a
minimum of seven members and there is
no limit to the number of share holders that
can join.

The legal procedures for both these types

of companies are lengthy as they must
submit the several documents.

The Companies Act contains the laws

relating to companies. To comply with
certain requirements which were laid down
by the Companies Act, the promoters of the
company must present the following
documents:

1. The Memorandum of Association

2. The Articles of Association