Nature of business

Section 1
1.​ Enterprise - an enterprise is a business that is started by an entrepreneur with the aim of
making a profit and the business produces services or products.
2.​ Entrepreneurship - the activity of setting up a business, taking on financial risks in the hope
of profit.
3.​ Barter - is the exchange of goods and services for needed items without the exchange of
money.
4.​ Profit- is when a business earns more money than they spend.
5.​ Loss - is when a business makes less money than they spend.
6.​ Trade - involves the buying and selling of goods and services.
7.​ Economy - is the process or system by which goods and services are produced, sold, and
brought in a country or region.
8.​ Producer/ Manufacturer - facilitates the transfer and transformation of raw materials into
finished products and then they either transport the finished goods to consumers, retailers or
wholesalers.
9.​ Consumer - purchases goods and services from sellers.
10.​Market - is a place either physical or virtual where buyers and sellers meet to facilitate the
exchange of goods and services.
11.​ Commodity - a substance or product that can be traded, bought, or sold.

Section 2

●​ Sole Trader/ Sole proprietorship

-​ Is run by one individual
-​ Has unlimited liability
-​ Decision making is quicker
-​ Owner receives all the profits
-​ Less access to capital
-​ Owner makes all decisions
-​ Name of the business must be registered
●​ Partnership
-​ Formed by 2 - 20 persons
-​ Atleast 1 partner should have unlimited liability
-​ Longer Decision making process
-​ Profits are shared between all partners
-​ More access to capital
-​ Better decision making since there are more ideas

●​ Cooperatives
-​ Formed by cooperators
-​ Run by the management board who are elected by the members
-​ Some cooperatives have limited liability
-​ Members work together to achieve the objective of the business
-​ Each cooperator gets a share of the profit
-​ Members may lack technical and managerial skills.
-​ Decision-making can be slow

●​ Companies (Private and Public Limited)

-​ Registered companies must have a memorandum of association and Articles of
association
-​ Public companies must also have a prospectus in addition to the stuff named
above
-​ A board of directors oversee the daily operations of the company, the
shareholders vote for the members of the board.
-​ Private company shares can only be bought with permission from the board
-​ Public company shares are sold to the stock market.
-​ Shareholders have limited liability
-​ Increased access to capital
-​ Decision making can be slow
NB: Articles of association - is a document that states the purpose of a company and the
regulations for its operations.
Memorandum of association - is a legal statement signed by all shareholders when they agree
to form the company.
Prospectus - is a formal legal document designed to provide information about an investment
offering for sale to the public.

●​ Franchise
-​ Is a form of business which involves a franchisor and franchisee and the
franchisee purchases the right to use a franchisor’s business trademarks or
brands and the franchisor receives royalties from the franchisee.
-​ Each franchise is managed by a different owner but the operations of each
franchise must be in tandem with the original brand.
-​ Reduces the risk of start up for entrepreneurs
-​ The franchisee gains exclusive rights to a market within a specified period of
time.
-​ If the franchisor doesnt conduct proper market research a loss can be incurred.
-​ If the franchisor goes out of business this will have a negative effect on the
franchisee

●​ Non-Profit organizations
-​ Serves the general public and specifically provides benefits to their members.
-​ Limited liability protection
-​ Tax exemption
-​ Access to grants
-​ Lack of funds
-​ Loss of tax status
-​ Public scrutiny
-​ Paperwork and admin costs

●​ A conglomerate is a corporation made up of several different, independent businesses.

●​ Multinational corporations is any corporation that is registered and operates in more than
one country at a time.
●​ Reasons for starting a business - Grow Wealth, Create employment, Financial
Independence, Improve the economy, Pursue a passion

●​ Types of economic systems

-​ Traditional/ Subsistence economy - in this economy people produce enough to
attain the basic necessities to survive.
-​ Command/ Controlled economy (Cuba, China) - in this economy all decisions
are made by the government.
-​ Mixed economy/ Dual economy (Caribbean Countries) - in this economy,
production is shared by both public and private sectors.
-​ Free/Pure Market economy - is an economic system based on supply and
demand with little government control. The businesses in this economy are
owned by private individuals.

●​ Functional Areas of a Business

-​ Production ( They convert raw materials into finished goods)
-​ Marketing ( They seek to find out what goods and services consumers want to
buy)
-​ Human resources (HR) ( They are responsible for areas such as recruitment,
training, managing wage payments,etc.)
-​ Research and Development ( They are responsible for new product development
and identifying ways to improve an existing product)
-​ Finance (They are responsible for securing funds for the business, recording the
sales and costs of the business, etc.)

●​ Stakeholders of a business
 -​ Stakeholder - is any person or group that has an interest in a business and its
activities.
-​ Owner ( They provide resources that are needed to thee business and employ
suitable workers and in return they get a reward in the form of dividends or
profits)
-​ Employee ( They are dependent on the business for their jobs and income and
when they spend their wages employees contribute to the economy)
-​ Government (The business pays both local and central taxes, which contribute to
the economic growth of the country. The business alos reduces unemployment
rates by providing employment opportunities.)
-​ Suppliers (They want the business to be successful and continue buying from
them so that they can make a profit)
-​ School ( Business’ sometimes make generous donations of gifts or money to
schools, Schools may send students to business for work experience or sb
research)
-​ Local Communities ( They see the business as a local employer and the
community hopes that the business will protect and not pollute the environment)
-​ Pressure Groups (trade unions) ( They have an interest in what a business does
and may want to influence the business in some way)
-​ Consumer ( They are dependent on the business for good and services and they
rely on the business to provide them with good quality and safe good and
services)

●​ Functions of Management Planning (This involves mapping out how to achieve particular
goals of the organisation)
-​ Organizing ( This involves structuring teams or departments and resources
according to the plan)
-​ Directing ( This involves managers ensuring that teams or departments are
aware of their targets and the deadlines that apply. The manager must provide
guidance to ensure all tasks are completed)
-​ Controlling ( This involves managers evaluating and measuring the work of all
staff to ensure that everyone is on target to meet the goals set and doing their
work efficiently.)
-​ Co-ordinating ( This involves managers ensuring that all teams are working
together to achieve the overall goal of the business and this can happen by
 managers setting up meetings containing representatives from each department
so all are kept aware of the progress of each department)
-​ Delegating ( This involves managers assigning tasks to subordinates)
-​ Motivating ( This involves managers motivating employees by financial or non
financial means.
-​ Financial motivation entails wages, bonuses, retirement benefits, etc.
Non-financial motivation entails Job enrichment, Job enlargement, Job
satisfaction, etc. )

NB: Job enlargement gives more tasks to employees to enable them to experience different
activities. Job enrichment offers fewer tasks but the tasks are harder and they pose a larger
challenge.

●​ Responsibilities of Management
-​ To Owners and Shareholders
-​ To Employees
-​ To Society
-​ To Customers
-​ To Government

●​ Simple Organisational Charts

-​ Line organisational charts ( Shows how authority flows from top to bottom in a
department)
 -​ Line and Staff ( Shows how specialist staff support line management)

​
​
​

NB: Line Manager/

Direct Manager - manager
with direct personal
responsibility for an
employee.
Staff Manager - manager who supports other managers in a specialist area.

-​ Functional ( Shows the managers for each functional area of the business and the
employees they are responsible for)
​
Chain of command vs Span of control​

Chain of command - shows the levels of responsibility in an organization.

Span of control - is the number of persons an individual manages or supervises directly.
​
​
Characteristics of a good leader

-​ Honest, Flexible, Trustworthy, Focused, Good communication skills

Leadership Styles
-​ Autocratic - The leader commands and tells others what to do. The leader makes the final
decision.
-​ Democratic - The leader facilitates shared decision-making with the employees.
-​ Laissez-faire - The leader gives the employees the freedom to make decisions. So the leader
hardly has any input in this leadership style.
-​ Charismatic - The leader has a strong personality that motivates others to follow his/her
vision.

Sources of conflict within an organization

 -​ Pay, Quality of output, Inter-personal relationship, Working conditions, Harassment, Poor
communication, Internal changes

Strategies used by employer and employees in conflict

-​ Employer Strategies
-​ Lockout ( Employer locks all employees out of the business until the situation is resolved)
-​ Scab Labour ( Employer uses non-union labour, this would replace the existing workforce)

-​ Employee Strategies
-​ Strike ( Employees refuse to work)
-​ Work to rule ( Employees do exactly what is stated in their contracts, and nothing more, in
order to slow down production)
-​ Go slow (Employees intentionally work slower than normal)

Strategies to resolve conflict

-​ Mediation ( The 2 parties in a dispute sit down with a third party to try to reach an
agreement.)
-​ Arbitration ( involves 2 or more parties that agree to present their case to an arbitrator and
this person finds a legally binding solution to the dispute.)
-​ Grievance Procedures ( Is used by employees who have a complaint about their work,
workplace, or their co-worker)
-​ Trade union representation (Trade unions help their members with problems like fair wages,
better working conditions, protection against discrimination, and unfair treatment at work.)

Guidelines to establish Good employee-employer relations

-​ Good communication
-​ Improving working conditions
-​ Motivating employees (Financial or Non-Financial)
-​ Good leadership
-​ Teamwork
NB: Teawork - is a group of people working together towards the same goal.
Reasons for establishing a business
-​ Financial Independence, Self Gratification, Increased income, Pursuing passions, Increased
control of working life

Functions of an entrepreneur
-​ Conceptualizing
-​ Planning
-​ Accessing funds
-​ Organizing
-​ Operating
-​ Evaluating Business Performance
-​ Conceptualizing: Entrepreneurs generate ideas for products,services, target audience, and
many other things for their business.
-​ Planning: This includes creating a business plan, setting goals, outlining strategies,etc.
-​ Accessing funds: Entrepreneurs need capital to start their business and this is called venture
capital.
-​ Organizing: Entrepreneurs are responsible for organizing the resources needed to operate
their businesses effectively. This includes hiring and managing employees, establishing
organizational structures, etc.
-​ Operating: Entrepreneurs are hands-on in running their businesses, overseeing day-to-day
operations to ensure everything runs smoothly.
-​ Evaluating Business Performance: Entrepreneurs assess the performance of their
businesses to determine their success and identify areas for improvement.

Characteristics of an Entrepreneur
 -​ Creative, Innovative, Flexible, Persistent, Goal Oriented, Persevering

Business Plan
-​ Executive Summary ( This gives an overview of the business) (Name and Location of the
business, Goods/Services provided, purpose of the business plan)
-​ Operational Plan ( This lays out the day-to-day tasks that are required to run a business)
-​ ( Business Name, address, legal structure, personnel, equipment)
-​ Business Opportunity ( This states the product/service being provided and the target
market.)
-​ Marketing Plan ( This states how the entrepreneur plans to get the product into the market,
potential customers, and competitors in the market)
-​ Financial Forecast ( This includes a cash flow statement, Profit and loss forecast, a sales
forecast)
-​ Feasibility Study ( This is a research carried out to find out whether the business will be
successful in the market. This is conducted before the business plan)
NB: Primary research - When researchers collect data directly themselves.
Secondary research - When researchers use existing published information as a source of data.

Reasons for creating a business plan

-​ A business plan is created to give a clear view of how the business will operate and develop.

Factors affecting the location of a business

-​ Geographical factors
-​ Availability of raw materials
-​ Quality of Infastructure
-​ Telecommunications
-​ Transport
-​ Government regulations
-​ Labour supply

Types of Collateral
-​ Collateral - is an asset that a borrower uses to secure a loan.
-​ Property - Land or Buildings
-​ Stocks - The shares an entrepreneur has in different companies can be used as collateral.
-​ Bonds - where an investor lends money to a company or a government for a set period of
time, in exchange for regular interest payments.
-​ Money
 -​ Life Insurance
-​ Motor Vechiles
-​ Appliances (Machinery, equipment, etc.)

Value of Collateral
-​ The value of the collateral is the value the asset will be able to command in a fair market.

Contracts

Business Finance
(Financial Institutions)
-​ Central Bank - is established by the government and its main role is to help the government
run the financial system in a country. They have many responsibilities like: Issuing notes and
coins, setting interest rates, managing national debt, managing government borrowing,
advising the government on monetary policy, etc.
 -​ Commercial Banks - is a privately owned bank that provides services to business and
individuals. These services include: accepting deposits of funds for safe keeping, offer a
range of short and long term loans (on which the bank charges interest) and managing
consumer accounts so they can make withdrawals and payments. Commercial banks
normally make a profit by charging a higher interest rate on their loans than the interest they
pay to depositors.

(Non bank financial institutions)

-​ Credit Unions - is a type of cooperative run by its members and they offer savings accounts,
current accounts and loans to their members.
-​ Insurance Companies - They offer financial protection against potential risks and losses.
Insurance companies evaluate risks, gather premiums, and draft policies that specify the
details of coverage.
-​ Building Societies - provide banking and other financial services to their members especially
savings and mortgage lending.
-​ Micro lending agencies - offer credit on a very small scale to individuals who find it hard to
borrow from larger institutions. The rate of interest may be higher than a commercial bank
but the sums are much smaller.
-​ Government agencies - provide low interest loans and grants, usually to entrepreneurs.
Government agencies also play a role in providing insurance to exporters.

(Functions of financial institutions)

-​ Provide loans and credit
-​ Helping customers to make investments (Such as purchasing stocks and shares in
companies and investing in government bonds.)
-​ Making payments on behalf of customers (Cheques, credit card or debit card)
-​ Hold the customer’s depositis and savings

(Services offered by financial institutions)

-​ Night safe deposits
-​ Online banking
-​ Advisory services
-​ Credit and Debit Cards
-​ Trustee Work
-​ Deposit Boxes (is a locked container located in a bank’s vault, that stores the customer’s
valuables)
 -​ ATM/ABM services ( allows the customer to withdraw money from their account by inserting
their card into the Automated teller machine)
-​ E-Trade (refers to buying and selling online.)
-​ Settlement Services (services that enable payments to be made between one customer and
another)
-​ Remittance Services (Remmittance is a sum of money sent by someone overseas to their
own country, to their own or another account)

Opening a bank account

-​ Customer needs to prove their identity with a passport/ID and provide evidence of their
address. They will need to make an initial deposit of a sum of money stipulated by the
financial institution.
-​ Opening a current account allows the customer to make payments to others by cheque,
credit or debit card.
-​ Opening a savings account allows the customer to save money for future use, with interest
added to the money they deposit.

Financial Regulatory Bodies

NB: Financial regulations - are rules that govern what financial institutions that receive
deposits and make loans can do.
NB: Financial Regulatory bodies - are government organizations that establish rules and
supervise the way in which financial institutions run.
-​ Central Bank (ex.BOJ) - It is responsible for overseeing the monetary system for a country
and this includes regulating banks and other financial institutions as well as managing the
economy.
-​ Deposit Insurance body (ex.JDIC) - The main aim of the JDIC is to provide insurance against
loss of depositors’ funds through management of the deposit insurance fund.This ensures
that the policyholders are safeguarded.
-​ Financial Services Commission (FSC) - They supervise and regulate the financial sector to
make sure the public’s money is looked after in a safe way.
Functions of regulatory bodies
-​ Regulate the supply and availability of money
-​ Enforce financial regulations from the government
-​ Registering financial institutions
-​ Enforcing licences for various financial activities ex. Lending
-​ Advising the government on monetary and fiscal matters
-​ Supervising the operations of all financial institutions
Relationship between financial institustions and regulatory bodies
-​ Regulatory bodies are established to oversee and regulate various financial activities carried
out by financial institutions. If a regulatory body finds a financial institution to be in breach of
any of the financial regulations then the body will implement an investigation. Based on the
investigation, the appropriate sanctions will be applied.

Regulatory role of Central Bank

-​ Changing the liquid assets rate (Commercial banks are required to hold a percentage of
theur highly liquid assets in the central bank. These assets should be able to be converted
into cash in a short period of time, at short notice. This ensures that the commercial banks
can meat their anticipated expenses.)
-​ Adjusting the bank rate (Minimum lending rate) -is the interest rate at which a nation’s central
bank lends money to commercial banks, often in a very short term loan.
-​ Changing the minimum reserve arrangements ( All banks are required to hold minimum
reserves in the central bank to ensure they always have sufficient funds to meet significant
withdrawals)

Regulatory Role of FSC

-​ The Securities Act and regulations
-​ The Pensions Act and regulations
-​ The Insurance Act and regulations
-​ The Unit Trust Act and regulations
-​ The Financial Services Commissions Act and regulations

Regulatory Role of the supervisor of insurance

-​ Is responsible for ensuring that businesses in the insurance industry comply with all
legislation that applies to insurance.
-​ This entails: licensing companies and intermediaries, ensuring all licensed insurance entities
comply with the requirements of the Insurance Act and all related regulations, ensuring
payment of annual fees, etc.

Forms of Saving
-​ Sou-Sou (also known as rotating savings and credit associations (ROSCAs), is a traditional
form of saving found in many cultures around the world. In a Sou-Sou, a group of people
contribute a fixed amount of money regularly into a pool. Sou-Sou serves as a social and
financial support system, particularly for those without access to formal banking services.)
 -​ Short-term fixed deposits (Fixed deposits (FDs) are savings instruments offered by banks
and financial institutions. With short-term fixed deposits, individuals deposit a sum of money
for a predetermined period and the interest rate is fixed for the duration of the deposit.
Short-term fixed deposits provide a better rate of return (interest) than savings accounts.)
-​ Deposits in financial institutions (This includes savings accounts, checking accounts, money
market accounts, and other similar deposit products offered by banks and credit unions.
Deposits in financial institutions are liquid and accessible, allowing individuals to deposit and
withdraw funds as needed.)

Forms of Investments
-​ Stock Market shares (Investing in the stock market involves buying shares or ownership
stakes in publicly traded companies. Investors purchase stocks with the expectation that the
value of the shares will increase over time, allowing them to sell at a profit. Additionally,
some companies pay dividends to shareholders, providing a source of income. Investing in
stocks carries risks, including market volatility and the potential for loss of capital, but it also
offers the potential for significant returns over the long term.)
-​ Government Securities (including bonds and debentures) -
-​ Bonds (Bonds are investment securities where an investor lends money to a company or a
government for a set period of time, in exchange for regular interest payments. Once the
bond reaches maturity, the bond issuer returns the investor’s money.) Debenture (A
debenture is a type of bond that is unsecured by collateral.)
-​ Mutual funds (Mutual funds pool money from multiple investors to invest in a diversified
portfolio of securities, such as stocks, bonds, or a combination of both.)

Short Term Financing

NB: This financing is obtained for one year or less. Some businesses use short-term
financing as working capital.
-​ Trade Credit - is extended from a seller to a buyer allowing the buyer to purchase goods or
services on account and defer payment to a later date.
-​ Commercial bank loans - Commercial bank loans are loans provided by banks to
businesses and individuals. These loans can be used for various purposes, such as
financing expansion, purchasing equipment,etc.
-​ Promissory notes - A promissory note is a written promise to repay a specified amount of
money to a lender at a predetermined future date.
-​ Installment Credit - Installment credit allows borrowers to make purchases and repay the
amount borrowed, plus interest, in fixed installments over a specified period.
 -​ Indigenous Credit/Private money lenders - Indigenous credit refers to informal lending
practices within communities or cultural groups. Private money lenders are individuals or
entities that provide loans outside of traditional financial institutions, often to borrowers who
may not qualify for bank loans.
-​ Advances from customers - Advances from customers occur when a business receives
payment from customers before delivering goods or providing services.
-​ Factoring - Factoring involves selling accounts receivable to a third-party financial institution
at a discount.
-​ Venture capitalists - These are investors who provide capital to startups and small
businesses that have the potential for high growth. In exchange, investors take equity stakes
in the company they invest in.
-​ Crowd Funding - involves raising capital from a large number of individuals through online
platforms.
-​ Angel Investors - Angel investors are affluent individuals who invest their own money into
startup ventures.
-​ Overdraft - An overdraft is a form of short-term borrowing provided by banks that allows
account holders to withdraw more money than they have in their accounts, up to a
predetermined limit.
-​ Credit Card - is issued by financial institutions that allow cardholders to make purchases up
to a predetermined credit limit. Cardholders are required to repay the borrowed amount, plus
interest, within a specified period.

Long term financing

-​ Loans from government agencies - Government agencies often provide loans to businesses,
and other entities for specific purposes such as infrastructure development or research and
development, among other things.
-​ Mortgages - Mortgages are long-term loans used to finance the purchase of real estate, such
as homes, commercial properties, or land. Also borrowers pledge the property as collateral
for the loan.
-​ Debentures - A debenture is a type of bond that is unsecured by collateral.
-​ Shares - also known as stocks or equities, represent ownership stakes in a corporation.
When investors purchase shares of a company, they become shareholders and may receive
dividends (if the company distributes profits) and have voting rights.
-​ Insurance - is a contract in which a policyholder receives financial protection or
reimbursement against losses from an insurance company.
-​ Investment and unit trusts - Investment trusts and unit trusts are both types of pooled
investment vehicles that allow investors to collectively invest in a diversified portfolio of
assets managed by professional fund managers.
-​ Long-term loans - a loan that is to be paid back over a period of time longer than 3 years.
Section 4

Contract - is an agreement between 2 or more parties that is legally binding.

Simple contract Speciality contract

Characteristics Characteristics
- Offer and Acceptance -Written
- Consideration - Signed
- Capacity - Sealed
-Legality - Delivered
-Good Faith

NB: Consideration - is when both parties in a contract agree to give up

something in order to gain a benefit.
Capacity - The parties in a contract must be competent.
Good Faith - The parties in the contract must honestly implement the
agreement as intended.
Invitation to treat - is when an offeror invites other parties to make an offer.
Counter offer - an offer made in response to a previous offer by the other party
during negotiations for a final contract

Ways in which a contract can be terminated or discharged

●​ Performance, Breach, Agreement, Impossibility, Death, Lapse of time
Breach - occurs when one party fails to carry out their part of the contract
lawfully.
Impossibility - A contract can be discharged because it is impossible to
complete.
Lapse of time - The period of limitation sets out the period of time in which a
contract should be completed, so if a contract is not enforced within this time it
can be discharged.
Agreement - Both parties can agree to discharge a contract.

Business documentation and business transactions

-​ Importance of record keeping in business

●​ Records help a business to keep track of its dealings with other

businesses.
●​ Records display the details of taxes charged and owed to the
government
●​ Records are kept for audit purposes
●​ Records give details of when goods will be delivered, how much money
has to be paid for those goods

-​ Documents that act as records for business transactions

●​ Inquiry - An inquiry into the goods offered.

 ●​ Quotation/ price list/ catalogue - Details of the goods offered and their
prices
●​ Order form - an order for the goods
●​ Advice note - Advises when the goods will be sent and how
●​ Delivery Note - Sent with the goods in the form of a pro forma invoice
and signed by the recipient of the goods.
●​ Invoice - Displays the details of the goods ( quantity, price and total
amount due)
●​ Credit note/ Debit note - Displays details of overpayment or
underpayment
●​ Statement - Sent at the end of the month giving details of documents
sent by the seller and balances owing or any payments made.
●​ Payment - Part payment or full payment to settle amounts owing on the
statement

NB: Pro forma invoice or sales invoice is a list of goods and services provided
and details about them such as quantities, prices and payment terms.
Purchase requisition form - is used by a department within a business to make
an order for supplies such as paper. So it is an official order form.
Statement of account - It will show the starting balance and closing balance.
Starting balance - the number of goods in stock or the financial state of an
accountant at the start of a trading period.
Closing balance - the number of goods in stock or the financial state of an
accountant at the end of a trading period.
Stock Card - is used by a business to check how much stock there is in the
stores at any one time. (It shows the date, balance, purchases, and sales)
-​ Instruments of exchange

●​ Barter - the exchange of goods and services for other goods and
services without the use of money.
●​ Bills of exchange - a written order by the drawer to the drawee to pay a
given sum of money on a set date.
●​ Electronic transfer - a way of transferring funds from one bank account
to another without the intervention of bank staff.
●​ Tele-banking - enables the transfer of money from one account to
another using telephone communications.
●​ E-commerce - is the buying and selling of goods and services online.
●​ Cheque - is a written instruction to a bank to make payment on behalf of
the drawer and the cheque is made payable to the payee.
Crossed cheque - has 2 parallel vertical or diagonal lines drawn across
it, which indicates that the cheque must be deposited into an account.
Open cheque - has no crossing. It can be signed over to a third party by
the drawer signing the back of it.
A/C payee-only cheque can only be paid into the account of the payee
named on the cheque.

●​ Money order - is a form of payment for a pre-specified sum of money.

●​ Debit cards - These allow bank account holders to make payments from
their bank account to payees via electronic transfer.
●​ Credit cards - The card enables the drawer to payments to a payee via
electronic transfer but the account holder is charged interest and given
a period of time to pay back the bank the money they used.
●​ Bank draft - is used for larger payments such as the purchase of a car.
●​ Telegraphic money transfer - is used to transfer money overseas.
●​ Bank transfers - is used to send funds from one bank account to
another anywhere in the world.
●​ M-Money - involves the use of a cellphone to transfer money between
bank accounts, make deposits in a bank, and withdraw funds from an
account.
●​ Standing order is an automated payment method set up by a customer
through their bank. Standing orders automatically send a fixed amount
of money regularly to businesses or other individuals.
●​ Documentary credits are a payment method that ensures that the
exporter receives payment immediately after the goods have been sent.

-​ Insurance

●​ Insurance involves businesses and individuals paying a premium into an

insurance pool managed by an insurance company. Premiums are paid
regularly (monthly or annually). In the event of a loss the insured can
make a claim for compensation to cover the losses incurred.

-​ Principles of Insurance

●​ Pooling of risks
●​ Subrogation - When an individual makes an insurance claim they will be
asked to hand over ownership of the item to the insurance company.
●​ Proximate cause - This is the initial event that results in an accident or
loss occurring. This helps to establish liability.
●​ Indemnity - the act of placing someone who has suffered a loss back in
the position they were in before the accident occurred. Ex. Providing
compensation
●​ Utmost good faith - parties involved in insurance must be honest in their
dealings.
●​ Contribution - two or more insurers each liable for a covered loss should
both participate in the payment of that loss.
●​ Insurable Interest - means that you can only insure something where
you stand to make a personal loss.
-​ Types of Insurance policies

●​ Premises Insurance - to cover buildings that may be structurally

damaged.
●​ Fire insurance - to cover fire damage
●​ Employer’s liability - taken out by an employer to cover work-related
accidents to employees.
●​ Product liability - to cover damage to users of the product
●​ Public liability - to cover damage to members of the public caused by
business activity
●​ Motor vehicle insurance - to cover accidents and other damage to a
vehicle.
●​ Home-based business insurance - to cover employers who work from
home.
●​ Marine insurance - to cover loss or damage to a ship or its cargo.
●​ Fidelity insurance - to cover an employer against losses resulting from
the dishonesty of employees.

-​ How Insurance Facilitates Trade

 ●​ Insurance lowers the risks of carrying out business and thus gives
businesses more confidence to take part in trade because if any losses
are incurred the business can be compensated for any losses.
●​ Trade Credit insurance encourages traders to be bolder and to export
more goods.

Section 10

-​ Impact of Major Economic Institutions on the Caribbean

●​ Caribbean Community (CARICOM) - promotes integration and

cooperation between its members and seeks to ensure that the benefits
of integration are shared fairly between members. They also seek to
coordinate foreign policy.
●​ Caribbean Single Market and Economy (CSME) - promotes regional
cooperation, in relation to free trade and the establishment of a common
external tariff with non-CARICOM countries. Operating in a single
 market enables CARICOM businesses to operate on a larger scale
because they have a larger home market facilitating economic growth.
●​ Caribbean Development Bank (CDB) - provides funding for Caribbean
countries that need funds to enable sustainable long-term economic
growth. The funds help countries use their resources more effectively.
●​ The International Bank for Reconstruction and Development (IDRB) -
Provides funding for reconstruction projects and it also provides funding
for development projects.
●​ World Bank - Contributes to development projects in the Caribbean and
projects designed to reduce poverty. Ex. Projects to strengthen a
healthcare system or to build dams and highways.
●​ International Monetary Fund (IMF) - provides short-term finance to help
countries manage debt. However, the IMF typically demands changes to
a country’s economic policies.
●​ World Trade Organization (WTO) - works with Caribbean and overseas
governments to enable tariff-free entry of Caribbean products to
overseas markets.
●​ Organization of American States (OAS) - they develop policies focusing
on democracy and human rights issues. (Whereas Caribbean
governments would like to see more emphasis on security and
development).

-​ Economic Problems in the Caribbean

●​ Economic dualism
 ●​ Importing raw materials
●​ Capital flows from overseas
●​ Increasing debt burden
●​ Net emigration
●​ High population density
●​ Unemployment

-​ Solutions to economic problems

●​ Access to foreign direct investment (FDI)

●​ Development of human resources
●​ Development of manufacturing, distribution, and export sectors.
●​ Development of technology to generate economic activity

Foreign direct investment and indirect investment - involve foreign companies

setting up in the Caribbean, whereas indirect investment involves foreigners
investing in Caribbean companies.
Foreign investment has a negative impact - that profits will flow overseas from
efforts in the Caribbean and that means that foreigners have more control
over Caribbean business decisions.
Unemployment

●​ Seasonal unemployment - arises due to seasonal patterns in consumer

demand in various markets.
●​ Frictional unemployment - short term unemployment
●​ Structural unemployment - ecoomic growth leads to change in the main
sector. Ppl who are employed in a previous industry find it hard to get a
job in the newly booming industry.
●​ Cyclical unemployment - comes about with natural changes in the
economy (rise and fall)