3.1 Identify the form of ownership which is applicable to each of the following statements below - NSC Business Studies - Question 3 - 2017 - Paper 1

The ownership form that applies is a Public Company. Public companies can raise capital by offering shares to the public, and their shares are traded on a stock exchange.

This describes a Non-profit Company. Non-profit organizations primarily focus on achieving specific objectives benefiting the community rather than generating profit.

The applicable form of ownership is a State-owned Company. Such companies are partially or wholly owned by the government and typically serve to provide public services.

Excess is defined as the payment that must be made by the insured toward the claim. It is the portion of the loss that the insured is responsible for before the insurance company covers the rest.

Premium refers to the amount paid periodically to an insurance company. It is the financial charge for the insurance coverage provided.

Insurance plays a critical role for businesses in several ways:

1. Risk Management: It helps businesses transfer risk and uncertainty by covering financial losses due to unforeseen events.
2. Business Continuity: Insurance protects businesses against significant financial setbacks, ensuring they can continue operations post-disaster.
3. Credibility: Being insured increases a business's credibility with clients and suppliers, as it indicates reliability and responsibility.
4. Legal Requirements: Certain types of insurance are legally mandated, helping businesses comply with regulations and avoid legal penalties.
5. Asset Protection: It safeguards business assets, including property and equipment, against theft, damage, and liability claims.

Insurance and assurance are terms often used interchangeably but have distinct differences:

• Insurance is based on the principle of indemnity, providing a financial payment upon the occurrence of a specific risk (e.g., fire insurance). It covers uncertain events.
• Assurance pertains to coverage against certain events, typically related to life insurance, which pays out on the occurrence of the event of death.

Example:

• Insurance: Homeowners insurance that covers damages from fire or theft.
• Assurance: Life assurance that pays a benefit upon the death of the insured.

The type of investment described is a Fixed Deposit. It's a low-risk investment where the customer agrees to lock in funds for a specified period in exchange for a fixed interest rate.

Investing in a fixed deposit is typically considered low risk, as investors are guaranteed their principal investment amount upon maturity. However, the risks include:

1. Inflation Risk: If inflation rate exceeds the interest rate, the purchasing power of the return upon maturity diminishes.
2. Opportunity Cost: Funds locked in a fixed deposit may miss other higher-return investment opportunities.

To calculate the amount using compound interest, we use the formula:

$A = P(1 + r/n)^{nt}$

Where:

• $A$ is the amount of money accumulated after n years, including interest.
• $P$ is the principal amount (R25 000).
• $r$ is the annual interest rate (10% or 0.10).
• $n$ is the number of times that interest is compounded per year (1).
• $t$ is the time the money is invested for in years (3).

Plugging in the values:

$A = 25000(1 + 0.10/1)^{1 imes 3}$ $A = 25000(1 + 0.10)^{3}$ $A = 25000(1.1)^{3}$ $A = 25000(1.331)$ $A ≈ R33,275$

Thus, Frank’s investment would be worth approximately R33,275 at the end of three years.

The differences between simple and compound interest are as follows:

• Simple Interest: Calculated on the principal amount only and does not take into account interest accrued in prior periods. The formula is:

$SI = P imes r imes t$

• Compound Interest: Calculated on the principal and also on the interest that has accrued in prior periods, leading to "interest on interest." The formula is as shared in 3.5.3.

In summary, compound interest will yield a higher total compared to simple interest over the same period due to its nature of accumulating interest.

The leadership style applicable to the scenario is Bureaucratic Leadership. This is evident as Gavin Moore, the owner, 'follows all the organisational rules and policies systematically,' ensuring strict adherence to regulations.

The bureaucratic leadership style, as identified, can have several impacts:

Advantages:

1. Clear Structure: Employees are aware of their roles, responsibilities, and the rules they must follow, which can lead to enhanced productivity.
2. Consistency: Policies are consistently applied which can lead to uniformity in handling tasks and issues, ensuring fairness.

Disadvantages:

1. Inflexibility: This style may lead to rigidity and reduce innovation as employees might feel restricted in decision-making.
2. Decreased Motivation: If over-regulated, employees may feel disengaged, which can negatively impact morale and job satisfaction.

The transactional leadership style has several advantages:

1. Clear Expectations: Leaders provide clear directions and expectations, which can enhance employee performance through structured environments.
2. Reward-based Motivation: Employees are motivated by rewards and recognition for their achievements, leading to high levels of task completion.
3. Efficiency: Focus on established processes and quick results can improve efficiency and productivity.
4. Stability: Known outcomes and standards can result in a stable work environment, allowing for consistent team performance.

Having sufficient capital is crucial for a personal-liability company as it affects its ability to expand, invest in technology, and cover operational costs. A lack of capital can lead to insufficient resources for growth, whereas well-managed capital can attract investors and facilitate long-term sustainability.

Effective management is vital for the success of a personal-liability company. A strong management team ensures that the company adheres to regulations and can respond to challenges efficiently. Conversely, poor management can lead to misallocation of resources and operational failures, driving the company towards potential failure.