Contents 2 Instructions Re: SBA 369 SBA Cover and S.B.A. Specimen 373 Appendix 3 Revenue Analysis and Market Structure 375 Index xvii vii Contents

Dedication v

Foreword viii

Acknowledgement x

Abbreviations xi

Maps xiii

Chapter 1 The Nature of Business and the Business Environment 1

Chapter 2 Factors of Production 35

Chapter 3 Organization of the Factors of Production 67

Chapter 4 Internal Organizational Structure of Business 85

Chapter 5 Money, Capital and the Financial Sector 111

Chapter 6 Marketing and Market Economics 145

Chapter 7 Business Documents 177

Chapter 8 Management and Industrial Relations 209

Chapter 9 The Role of Government 217

Chapter 10 Legal Aspects of Business 237

Chapter 11 Social Accounting and International Trade 253

Chapter 12 Regional and International Business Environment 279

Appendix 1 General Guidelines for Students Writing Exams 317

Appendix 2 Instructions Re: SBA 369

SBA Cover and S.B.A. Specimen 373

Appendix 3 Revenue Analysis and Market Structure 375

Index xvii

vii

Contents

FM.indd Sec2:viiFM.indd Sec2:vii 7/30/2005 5:23:03 PM7/30/2005 5:23:03 PM

Because of the changes in the CXC Principles of Business syllabus, as from June, 1999, it has become necessary to indicate to both students and teachers how this text should be used. Despite these changes, this text still maintains its appropriateness and relevance.

The guidelines below should be followed closely. Profile One includes Units 1–4; Profile Two, Units 5–7; and Profile Three, Units 8–13.

CXC UnitsFrom (1999)

Chapters in this text

1

2

3

4

5

6

7 + 11

8

9

10

12

13

One

Four

Eight

Ten

Two

Three

Six

Seven

Five

Nine

Eleven

Twelve

The Nature of Business and the Business Environment

Internal Organizational Structure of Business

Management and Industrial Relations

Legal Aspects of Business

Factors of Production

Organization of the Factors of Production

Marketing and Market Economics

Business Documents

Money, Capital and the Financial Sector

The Role of Government

Social Accounting and International Trade

Regional and International Business Environment

There is a psychological trend running through this entire text, which in itself represents a teacher’s voice and presence, directly. Then again, no Answers are given for both the Paper 01 (Multiple Choice Questions) and for Paper 02 Questions. The reason is that with no Answers:

1. • The student develops his/her mental ability by thinking out Answers, with or with-out help from fellow-students or a teacher. In other words, he/she becomes a better student, self-reliant, develops innate qualities, and better able to cope with problems.

• The student learns to interact with other students and with the teacher, thus creating an environment of informal relationships and inter-dependence.

• With special reference to group discussions (strongly recommended), the student learns from other students and the teacher, thus developing a respect for one another.

• During group discussions, in particular, not only mental discipline is developed but also knowledge and understanding are acquired.

viii

Foreword (How to use this Text)

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ACP African, Caribbean and Pacific

ACS Association of Caribbean States

BMCs Borrowing Member Countries (CDB)

BOJ Bank of Jamaica

BOP Balance of Payments

BOT Balance of Trade

CAIB Caribbean Association of Indigenous Banks

CAIC Caribbean Association of Industry and Commerce

CARIBCAN Caribbean Community/Canada Technical Cooperation Agreement

CARICOM Caribbean Community

CARIFORUM Caribbean Forum of ACP States

CARIFTA Caribbean Free Trade Association

CARIRI Caribbean Industrial Research Institute

CBI Caribbean Basin Initiative

CCMSC Caribbean Common Market Standards Council

CCS Caribbean Community Secretariat

CDB Caribbean Development Bank

CDERA Caribbean Disaster Emergency Response Agency

CEDP CARICOM Export Development Project

CET Common External Tariff

CFRAMP Caribbean Fisheries Resource Assessment and Management Programme

CFTC Commonwealth Fund for Technical Cooperation

CPI Consumer Price Index

CSM & E CARICOM Single Market and Economy

CTO Caribbean Tourism Organization

CXC Caribbean Examinations Council

DFC Development Finance Corporation

EAI Enterprise for the Americas Initiative

EC European Community

ECCB Eastern Caribbean Central Bank

EDF European Development Fund

EEZ Exclusive Economic Zone

EIB European Investment Bank

EU European Union

FTAA Free Trade Area of the Americas

FY Fiscal Year

xi

Abbreviations

FM.indd Sec1:xiFM.indd Sec1:xi 7/30/2005 5:23:06 PM7/30/2005 5:23:06 PM

GATT General Agreement on Tariffs and Trade

GDP Gross Domestic Product

GNP Gross National Product

HIPC Highly Indebted Poor Countries

ILO International Labour Organization

IMA Institute of Marine Affairs

IMF International Monetary Fund

IMO International Maritime Organization

LDC Less Developed Country

LIAT Leeward Islands Air Transport (1974) Ltd.

MDC More Developed Country

NAFTA North American Free Trade Agreement

NGO Non-Government Organization

NNP Net National Product (National Income)

NPRP National Poverty Reduction Programme

OAS Organization of American States

OECD Organization for Economic Cooperation and Development

OECS Organization of Eastern Caribbean States

OPEC Organization of Petroleum Exporting Countries

PAHO Pan American Health Organization

RPI Retail Price Index

SELA Latin American Economic System

SICA Central American Integration System

TTEDC Trinidad and Tobago Export Development Corporation

UG University of Guyana

UK United Kingdom

UN United Nations

UNDP United Nations Development Programme

UNESCO United Nations Educational, Scientific and Cultural Organization

UNIDO United Nations Industrial Development Organization

UNIFEM United Nations Development Fund for Women

USA United States of America

USAID United States Agency for International Development

UTT University of Trinidad & Tobago

UWI University of the West Indies

VAT Value-Added Tax

WB World Bank

WID Women in Development

WISCO West Indies Shipping Corporation

WTO World Trade Organization

xii

FM.indd Sec1:xiiFM.indd Sec1:xii 7/30/2005 5:23:06 PM7/30/2005 5:23:06 PM

Primitive (Indigenous) Peoples Today

Despite economic, political and social transfor-mations in most parts of the world, there are still primitive (indigenous) societies in existence. Some of these peoples still remain basically hunters of ani-mals, fishers and gatherers of food. Australia, New Zealand, Greenland, Mexico, Nicaragua, Ecuador, Brazil, Bolivia, Panama, North America, the Kalahari Desert, Nigeria, the Congo, the Philippines, Sumatra, Malaysia and Taiwan are some of the places where primitive societies can still be found. (See the map at the beginning of the text.)

Economic Man

PRE-HISTORY

Economic Man is capable, over all other ani-mals, of economic activities: production, exchange, distribution and communications. The teacher is expected to explain each of these economic activities to students. However, to fully understand the intri-cate nature of Man, it is perhaps best to begin at the beginning.

It is claimed, scientifically, that the Earth assumed its present shape some 4–6 billion years ago. Before Man came into existence, some 300 million years ago, large vertebrates dominated the Earth. Only 60 million years ago, mammals came into existence. From these early stages of human existence, Man had the ability to adapt, or adjust to any environ-ment and environmental changes – whether hot, cold or temperate, forests, grassland or swamps.

The Australopithecus lived in the continent of Africa, and as far as Java, about 3–5 million years ago. He made simple tools-chopper tools – carved from stone and used as weapons. He was capable of simple speech and showed the potential for brain development.

Some 500,000 years ago, the Java Man and Peking Man appeared. Man was now capable of more complex tool-making (the stone-hatchet) and more intricately designed. The hand-axe seemed to originate from Northern Africa and spread to Europe and Asia (including China and India). The antelopes, bison, camels, elephants, horses, monkeys, pigs, rhinos, sheep and water-buffalos that were hunted and killed showed the effectiveness of this weapon. Peking Man was not only a hunter but also a canni-bal. Man was certainly a communal animal.

The invention of fire was the climax of Man’s achievements during this era. Peking Man seemed to have been the first to use fire. Fire enabled him to expand his opportunities for providing heat against the cold, for cooking food, for protection against wild animals, for moving into more open and favour-able climes and to widen his horizon.

Homo sapiens came into existence at least 40,000 years ago. The Neanderthal Man was a Homo sapiens. The dog was his constant compan-ion. The Neanderthaloids lived in Asia, Europe and Africa. Hand-axes were now replaced by flake-tools, made from flint. Such tools were first used in the area encompassing North Africa, West Asia and Central Europe. Characteristic of this period was the use of skin clothing.

The Homo sapiens was followed by a more advanced being – Homo sapiens sapiens or modern Man. Around Asia Minor, Homo sapiens sapiens evolved from amongst the Neanderthaloids, between 35,000–10,000 B.C. This period was characterised by a change from flake tools to blade-tools and projectile

11

Chapter The Nature of Business and the Business Environment

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32 A COMPREHENSIVE COURSE IN PRINCIPLES OF BUSINESS

Natural rights are the rights and independence entitled to all members of society, as bestowed by Nature. These include the right to own and enjoy one’s property, or what exists in one’s property.

Specialty: these are goods in high demand by buyers, because of special features. There are many buyers who make extra effort to get them, by going from store to store or waiting for new shipment, if not available.

White: such durable goods as dishwashers, freezers, refrigerators and washing machines are generally painted in white enamel. Those which are painted in brown (television, furniture, etc.) are known as ‘brown’ goods.

1. (a) Define the term ‘production’. (b) Show the difference between ‘types of

production’ and ‘factors of production’. (c) What distinction is there between ‘industrial

activities’, ‘commercial activities’ and ‘direct services’.

2. (a) With the use of an appropriate map, identify the major productive activities carried out in each territory in the Caribbean Region.

(b) Identify the three types (stages) of productive activities carried out in your own country.

3. (a) Identify those Caribbean territories which have the potential to develop a strong gar-ment industry.

(b) State what factors are required for developing this industry. Identify the difference between ‘firm’ and ‘industry’.

(c) Describe the contributions the garment indus-try can make to ANY ONE of the countries named in part (a) above.

4. (a) Do you think that the Caribbean Region as a whole can be self-sufficient in terms of food?

(b) Describe the contributions agriculture can make towards self-sufficiency in food in the Caribbean Region. Describe the importance of diversification in agriculture.

(c) What factors are needed to promote agricul-tural production in the Caribbean Region?

5. Describe the contributions of each of the following to the Caribbean Region as a whole:

(i) Manufacturing (ii) Construction

(iii) Energy (iv) Mining and quarrying

6. (a) Name the territories in the Caribbean Region which have the potential for developing a strong tourist industry.

(b) Select ONE of the territories in (a) above and list the factors which would contribute to the development of tourism.

(c) What contributions can tourism make to the economy of the country chosen in (a) above? State also what linkages exist between tour-ism and other productive activities.

Revision Test OnePaper IMultiple Choice

1. Which ONE of the following characteristics of primitive Man is NOT correct?

A. He was a gatherer, hunter and fisher. B. He satisfied his needs and wants by his own

efforts. C. His tools were made of bones, flint, stone and

wood. D. He satisfied his needs and wants indirectly.

2. A money economy is characterised by (i) Exchange of goods and services involving

the principle of ‘double coincidence’. (ii) Exchange of goods and services involving

the use of money. (iii) Institutions which provide financial services

to customers. (iv) Employment of human resources in return

for wages and salaries. (v) A great variety of goods and services being

produced. A. ii, iii, iv and v B. i, ii, iii and iv C. i only D. i, ii and iii

3. Which ONE of the following responsibilities does NOT apply to business organizations?

A. To sponsor and promote cultural and cooperative efforts by the community

B. To create employment opportunities for the working population

C. To make profits for investors in the business D. To keep the production of goods and services

down, so that prices will rise



Trinidad Nitrogen Co., LimitedAmmonia Plant

PROCESS DESCRIPTION

INTRODUCTION

The Trinidad Nitrogen Co., Limited Ammonia Plant is designed to produce 1 200 tons per day of ammonia. The ammonia is transferred and stored as a liquid at atmospheric pressure and 228 °F in a 30 000 ton storage tank.

Ammonia is produced by the reaction of nitrogen and hydrogen over catalyst at high pressure according to the following reaction:

N2 1 3H2 5 2NH3

In the Tringen plant, hydrogen for this reaction is produced from hydrocarbons contained in natural gas supplied by The National Gas Company. Nitrogen is obtained from the atmosphere.

Basic Process Steps

The basic process may be summarized by the following sequential steps:

1. Desulfurization of natural gas.

2. Primary reforming of natural gas using process steam, followed by secondary reforming using process air.

3. Shift conversion.

4. Process gas drying.

5. LP synthesis gas compression.

6. CO2 removal.

7. Methanation.

8. HP synthesis gas compression.

9. Ammonia synthesis.

In order to achieve these process steps the plant has in addition:

1. A refrigeration section.

2. A demineralization and a process condensate recovery unit to provide pure water for the boilers.

3. A 1500 psig steam generation system.

4. A sea cooling water system.

5. A fresh cooling water system.

Desulfurization

Sulfur in the process gas poisons the process catalysts and must therefore be removed. This is achieved in the desulfurizers which contain zinc oxide pellets.

Reforming

The desulfurized natural gas is ‘reformed’ in two steps in the primary and secondary reformers. The hydrocarbons in the gas – mainly methane – are converted to hydrogen, carbon monoxide and carbon dioxide by the action of steam.

The primary reformer has a nickel based catalyst and heat is provided for the reaction.

The gas from the primary reformer at 1 500 °F is burnt with air in the secondary reformer. Similar reactions take place. The quantity of air fed to the secondary reformer is set by the amount of nitrogen required for design ammonia production.

Shift Conversion

The process gas leaving the secondary reformer is first cooled to recover heat as steam and then passed through the high temperature and low temperature shift converters. In the shift converters carbon monoxide is converted to carbon dioxide.

Waste heat from-the Gas is also recovered as steam between the high and low temperature shift converters.

Gas Drying and Low Pressure Compression

The gas from the shift converters consisting of hydrogen, nitrogen, carbon dioxide and carbon monoxide is dried by contact with triethylene glycol and compressed to 1 880 psig in the low pressure syngas compressor.

CO2 Removal

Carbon dioxide is then removed from the gas stream by absorption in a circulating solution of propylene carbonate. The gas leaves the CO2 removal section with a very small quantity of carbon dioxide.

Methanation

All remaining traces of carbon monoxide and carbon dioxide must be removed from the gas stream prior to synthesis of ammonia. This is essential since oxygen and oxygen bearing compounds are poisons to the synthesis converter catalyst. In the methanator, trace carbon oxides are converted to methane.

HP Syngas Compression and Ammonia Synthesis

The gas leaving the methanator with a hydro gen to nitrogen ratio of 3:1 is fed to the high pressure synthesis gas compressor where it is raised to 3 210 psig. This gas is colled, then mixed with recycle gas from the ammonia synthesis section and compressed to a final pressure of 3 430 psig and fed to the synthesis loop. The synthesis section is in reality a recycle process, hence the term synthesis loop. Gas from the compressor is cooled to release liquid ammonia at high pressure. The vapours released are heated and sent to the converter where the main synthesis reaction takes place. The effluent from the converter is cooled to release liquid ammonia at high pressure and the vapors are recycled to the high pressure synthesis gas compressor. The two liquid streams are further cooled to the required low temperature by stage-wise reduction of pressure. The vapors so released are recovered in the refrigeration section of the plant. Product ammonia at 228°F is then pumped to the 30 000 ton atmospheric storage tank from where it will be shipped for export.


Chapter 02.indd 46Chapter 02.indd 46 7/30/2005 12:55:45 AM7/30/2005 12:55:45 AM


You are required to study Table 3.1 and Fig. 3.1 together: do the same with Table 3.2 and Fig. 3.2.

120 120

100

8083

7078

97 MC

AC77

72

4446

60

40

20

01 2 3 4 5 6

Mar

gina

l and

Ave

rage

Cos

t

Output (Units)

Fig. 3.1

Table 3.1 Cost of Production

Output (units)

Q

Total Cost

TC

Average Cost

AC(TC � Q)

Marginal Cost

MC(DTC � DQ)

1

2

3

4

5

120

166

210

288

385

120

83

70

72

77

—

46

44

78

97

Table 3.2 Increasing and Decreasing Returns to Variable Factor

No. of Men

1

Total output

2

Average Output

3(2 � 1)

Marginal Output

4(D2 � D1)

1

2

3

4

5

6

7

8

60

140

240

440

650

840

910

960

60

70

80

110

130

140

130

120

—

80

100

200

210

190

70

50

225

200

175

150

125

100

7570

70

6050 50

25

01 2 3 4 5 6 7 8 9 10

8080

100

200210

190

120

130

130110

140

Mar

gina

l and

Ave

rage

Out

put

Average Output

Marginal Output

Number of Men

Fig. 3.2

Large-scale Production

ADVANTAGES

1. Internal Economies of ScaleThese are advantages which only the firm enjoys

‘directly’, due to production and operation tech-niques. Internal economies can be achieved by:

(i) Flow methods (petroleum refining, soft drinks, garments, shoes, etc.)

(ii) Assembly-type methods (motor-cars, electrical appliances, etc.)

(iii) Through lower costs (by linking and other processes)

Assembly-line production has the following features:

(i) Least handling and space(ii) Division of labour(iii) Saving on time as the least amount of work is

done(iv) Inputs are used at maximum level.

Internal economies are principally commercial, financial, managerial, risk-bearing and technical.

CommercialThe consumer benefits in the form of additional

and improved facilities and services. The firm may


75ORGANIZATION OF THE FACTORS OF PRODUCTION

DISADVANTAGES

(i) Risks and uncertainties increase with size and production.

(ii) Trade Union demands can increase labour costs which, in turn, can pose problems in times of recession.

(iii) Entrepreneurship becomes more distant and informal to both employees and customers.

(iv) Management may lack interest in the work and the business.

(v) Decision-making becomes slower and takes a longer time.

(vi) Division of labour makes the worker lose interest, become bored, lose craftsman ability, and finally face the prospect of losing his job.

For further information

http://www.tutor2u.net/business/production/production_methods.htm

Small-scale Production

ADVANTAGES

The small firm can operate at optimum level such as dentists, plumbers, shopkeepers, etc. Opti-mum size means the most efficient size or output level, at the lowest average cost.

The small firm serves local markets such as shops, stores and so on.

Some entrepreneurs have no motive; they prefer small profits and smallness of size.

New firms generally start small.The small entrepreneur has the personal touch

and an informal relationship with employees and customers. Customers benefit from such smallness.

The small firm provides opportunities for train-ing businessmen and managers who may eventually move on to larger businesses.

Small firms provide competition for larger firms. They themselves may become larger enterprises later on.

Innovations and experimenting with new ideas and techniques make the small firm most suitable.

The small firm can be of help to consumers in terms of quantity and variety of goods and services.

The small independent entrepreneur is hard- working, willing and dedicated and receives small profits. Such entrepreneurs are a source of cheap management.

Some small firms can begin on a part-time basis by employees of other firms as a measure against unemployment, to earn extra income or to establish a full-time business later on.

The small firm may be collapsing but persists in remaining in business.

Facilities such as special offers, job lots, clear-ance lines, etc. from manufacturers make the small firm more suitable. Large firms are not willing to accept these small facilities.

Small firms provide specialist services. Custom-ers become loyal and give goodwill to these firms.

Small firms can complement the larger ones.Small firms can increase their bargaining and

purchasing power by forming into cooperatives.The small firm can best serve small markets or

markets which are geographically scattered.The owner of the small firm maintains his inde-

pendence, makes his own decisions and is the sole receiver of the profits.

DISADVANTAGES

There are small enterprises that will always be small because of technical and administrative problems.

Problems in raising capital tend to keep some firms small. Since the banking and financial sectors prefer to lend to larger concerns.

Fixed capital (like plant and machinery) are indivisible assets and have limited productive capacity. Small firms cannot benefit from this limitation.

The small firm (both the one-man business and the partnership) bears unlimited liability, that is, debts must be paid up to any amount. All losses are borne by the entrepreneur.

The small-scale enterprise (as the sole trader) ends with the death of the owner. With partnerships, there is continuity but there can be disagreements between partners, thus bringing about instability in the business.

Small firms do not enjoy ‘internal’ economies of scale.

For further information

http://zebu.uoregon.edu/2001/ph162/l7.html


99INTERNAL ORGANIZATIONAL STRUCTURE OF BUSINESS

performance, together with the technical methods to be used. The structure of communications and con-trol is vertical and loyalty is to a superior. An organic structure involves constant redefining of jobs and an emphasis on overall objectives. Authority, control and communication follow a network pattern. There is very little specialisation.

Before attempting to define the formal rela-tionships which exist within an organisation, let us first take a careful look at an organizational chart (Fig. 4.1).

By using the chart above, let us now attempt to explain the different terms in formal relationships.

‘Line relationship’ represents lines of com-mand or authority; it is a vertical relationship. The line director/manager gives orders or instructions to subordinates, who may pass these further down the line. In fact, the line director/manager has author-ity over subordinates. It should be noted that for an organisation to run smoothly and efficiently, orders or instructions should be passed down the line in the order of subordination or rank. For instance, the General Manager should hand down his instruc-tions to the respective Department Manager and not directly to the supervisor or worker. Bad organisa-tional practices do have negative effects on the organ-isational structures, as well as on the relationships between employees. Line relationship is important in achieving the overall aims and objectives of the organisation.

Line relationship is represented as follows:

Managing Director

General Manager

ProductionManager

Supervisor,Research

Supervisor,Sales and

Distribution

Supervisor,Advertising and

Promotions

MarketingManager

PersonnelManager

ChiefAccountant

‘Staff relationship’ is off the direct line of com-mand or authority. It exists between a line director/manager and the specialist/assistant. The specialist/assistant has no direct authority over subordinates, that is, to give orders or instructions, unless such authority is delegated by the line director/manager. The function of the specialist/assistant is basically to

advise, assist, suggest, support and recommend. This enables the line director/manager to perform his/her duties more competently.

Staff relationship is represented as follows:

(a) Managing Director (b) General Manager

ResearchConsultant

CompanyLegalAdvisor

(c) Production Manager (d) Marketing Manager

Secretary Secretary

(e) Personnel Manager (f) Chief Accountant

Secretary Assistant

‘Functional relationship’ exists at the Depart-ment level. In this case the entire Department oper-ates as a specialised unit or group to carry out its functions. This involves coordination, cooperation and teamwork. The entire Department works as a team, yet within the aims and objectives of the organisation, so as not to develop interests which would undermine the organisation.

In many large organisations, there are several products or services, each with its own department. For instance, the Mathematics and Science Depart-ment in a school is concerned with Mathematics and Science only. Each department works as a specialised team. One point to note is that the functions are con-fined to the Department only and there is no inter-ference with the functions of another Department unless this is done through the proper channels.

Functional relationship in the above chart (4.1), exists between the marketing manager and members within his department, as shown below:

Marketing Manager

Supervisor,Research

Supervisor,Sales and

Distribution

Supervisor,Advertising and

Promotions

Secretary


235THE ROLE OF GOVERNMENT

CXC Examination Questions

Paper IIBasic Proficiency Level

Paper IIGeneral Proficiency Level

(Section II)

1. (a) State FIVE responsibilities of Governments. (b) Identify ONE responsibility that is being per-

formed adequately by your Government and explain why.

(c) Identify ONE responsibility that is NOT being performed adequately by your Govern-ment; indicate why and suggest TWO ways in which performance can be improved.

(1991–5)

2. Business activities in a country are slowing down. Many persons are being laid off and several businesses are being closed.

(a) State FIVE economic factors which could have contributed to this situation.

(b) Explain TWO measures which the Govern-ment could adopt in an attempt to halt this trend.

(c) Comment on the effects which the measures you named in part (b) could have on busi-nesses in general.

(1988–4)

3. (a) List THREE major purposes of taxation. (b) Give an example of a method used by the

Government of your country to achieve each of these purposes.

(c) State how effective ONE of these methods has been.

(1981–1)

1. (a) List SIX social services provided by the Gov-ernment of your country.

(b) Give FOUR reasons why the provision of vital social services should be the responsibil-ity of a Government.

(c) Discuss the effectiveness of any ONE of the services listed in (a).

(1983–8)

2. (a) Distinguish between government regulation and government participation in business.

(b) Illustrate, using examples from your country or any other Caribbean territory, THREE methods by which a Government can partici-pate in business.

(c) Assess the social and economic effects of the forms of participation which you named in (b).

(1986–10)

3. (a) Outline THREE reasons why a Government levies taxes.

(b) Discuss TWO of the techniques your Gov-ernment uses to encourage the payment of taxes. Comment on the effectiveness of EACH of these techniques.

(c) Identify a tax in your country and comment on how it has affected the economic or indus-trial activity in your country.

(1989–8)


A/C: Accounts

c/d: Carried Down

CR: Credit

D: Demand

DR: Debit

Fig.: Figure or Diagram

I.T.: Information Technology

M.I.S.: Management Information System

P: Price

Q: Quantity

Re.: Relating to, With Respect to

S: Supply

V.A.T.: Value Added Tax

&: And

$: Dollars

Abbreviations

SBA-vi

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Pages

Acknowledgements iv

List of Tables and Figures v

Abbreviations vi

Chapter 1 Introduction 1

Chapter 2 Profile One (Organizational Principles) 3

Chapter 3 Profile Two (Production and Marketing) 5

Chapter 4 Profile Three (Finance and Introduction to Economics) 7

Chapter 5 Problems and Recommendations (Re: Profiles One, Two, Three) 10

Glossary ix

References: i. Bibliography x ii. Other Sources

Appendices xi

Contents

SBA-vii

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(a) On Sources of CapitalInitially, the capital used to start this business

was sourced from personal savings. When the busi-ness was converted into a Company, share capital (from ordinary and preference shares) became an important part of its funding. A bank loan was taken out some years ago. Funding also comes from profits ‘ploughed back’ into the business.

Collateral security has only been required with the bank loan. This mainly comprised of: share cer-tificates, Deed for the property, life assurance poli-cies, fixed deposits in the bank and certified copies of the vehicles.

With regards to share capital, dividends are paid out at the end of the year. As to the bank loan, this has already been paid off.

(b) On Insurance ArrangementsThe main type of insurance policy taken out is

known as ‘comprehensive accident insurance’. This cov-ers all aspects of the business: stocks, building, motor vehicles, workmen compensation, money in transit and goods in transit, and public liability. As such, fire and burglary (including breakage) are also covered.

The Company pays a lot of premiums, but it will benefit in case risks (those covered) occur. Several principles are involved: insurable interest, indemnity, utmost good faith, proximate cause and average.

(c) On Accounting Procedure and Profit LevelThe Tables below represent figures calculated

for a short period of time, not for one whole year.

Table 1 Trial Balance

DR ($) CR ($)

Sales

Purchases

Stock 1 October 1997

Carriage Outwards

Return Inwards

Salaries and Wages

Return outwards

Motor Expenses

Rent

Rates

Sundry Expenses

Motor Vehicles

Fixtures and Fittings

Debtors

Creditors

Cash at bank

Cash in hand

Drawings

Capital

11 556

3 776

326

440

2 447

664

456

120

1 202

2 400

600

4 577

3 876

120

2 050

34 844

18 600

355

3 045

12 844

34 844

A trial balance may be drawn up at the end of a period. This is done to see if the two totals are equal, usually to see if the two sides of the books balance. The trial balance is taken from the ledgers so as to help in working out the final accounts.

444

Chapter Profile Three(Finance and Introduction

to Economics)

App2-SBA-App3.indd Sec2:7App2-SBA-App3.indd Sec2:7 7/6/2005 10:43:43 AM7/6/2005 10:43:43 AM

A

African-Caribbean-Pacific, 295–296Agrarian Revolution, 4Association of Caribbean States 292Automation, 76–77

B

Balance of payments, 7–8, 77, 116, 217, 260, 262–264, 267, 297, 298Balance of trade, 261Balance sheet, 58–60Banking: Central, 115–119 Commercial, 112–114 Off-Shore, 114–115Barbados Development Bank, 123–124Barter, 6–10Budget, 219–220Business Organizations: functional areas, 85–86 goals and responsibilities, 19–21 performance, 21–22

C

CBI, 293–294Capital: accumulation, 59, 60 authorised (share), 59, 92, 94, 105, 115 employed, 59 financial, 59, 89 owned, 59Caribbean Development Bank, 124–125CARIBCAN, 292–293CARICOM, 281–285Cash reserve ratio, 117Certificate of deposit, 121Collateral securities, 112, 113–114Communications, 166–167Companies: Acts, 92–93 Articles of Association, 93 Certificate of Incorporation, 93–94 Debentures, 95

Memorandum of Association, 93 Shares, 90–91, 94–95, 121, 123Comparative advantage, 70, 77, 79, 260–261Comparative costs, 20, 77Conditionality, 128Consumer behaviour, 149–150Consumer Protection, 162–163, 220–222Contracts: breach, 241 discharge, 241 essentials, 238 remedies, 241 types, 238–241Cottage industries, 68–69Credit creation, 112–113, 117Current account, 29, 263–264

D

Diminishing returns (law of), 49, 74, 76, 79, 153Discounts, 162Diseconomies of scale, 79Distribution problems, 166Documents: Air Waybill, 185, 195 Bill of Exchange, 112, 200 Bill of Lading, 182, 194 Bill of Sight, 184 Caricom Invoice, 179 Certificate of Origin, 177, 178, 194 Cheques, 197–198 Indent, 195–196 Shipping Bill, 183–184 Treasury Bill, 112, 115–121, 197Documentary Letter of Credit, 112, 201Dual economy, 68, 301

E

Economic development, 8, 16, 70, 122, 270–271, 293, 302–303Economic growth, 13, 96, 98, 118, 269–271, 293, 298, 300Economic problems: Economic Dualism, 298, 301–302 Environmental destruction, 302

Index

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