2.4 Advise businesses on the differences between own and borrowed capital. IUESTION 3 1 Elaborate the meaning of the market-environment (8) [20 2 Read the scenario below and answer the questions that follow. KHUTSO CIVILIANS ORGANIZATION (KCO) Khutso Civilians is a community based organisation that deals with a variety of sociOo-economic issues. KCO offers counselling services for people who are infected and affected by HIVIAids in the community. They also work together with the Community Police Forums in reducing high crime create in their area. 3.2.1 Qoute TWO ways in which KCO addresses socio-economic issues in the community from the scenario above. 3.2.2 Name any FOUR other socio-economic issues that KCO can deal with. Explain the relationship between the three business sectors. 18

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**2.4 Differences between Own and Borrowed Capital**

1. **Definition**  
   - **Own Capital**: Funds provided by the business owners or generated internally (e.g., retained earnings or shareholder equity).  
   - **Borrowed Capital**: Funds sourced from external lenders (e.g., bank loans, bonds, credit facilities) that must be repaid with interest.

2. **Cost and Repayment**  
   - **Own Capital**: Does not incur interest payments or repayment obligations. However, it may have an opportunity cost since it could be used elsewhere.  
   - **Borrowed Capital**: Involves interest costs and fixed repayment schedules, increasing financial pressure on the business.

3. **Risk and Control**  
   - **Own Capital**: Involves less financial risk regarding cash outflows because there is no mandatory repayment, and decisions can be made independently.  
   - **Borrowed Capital**: Increases financial risk due to the obligation to repay regardless of the business performance, and may come with covenants that limit operational flexibility.

4. **Impact on Ownership and Profit Sharing**  
   - **Own Capital**: Often linked to shared ownership; using own capital can mean diluting control if external equity is sought.  
   - **Borrowed Capital**: Does not dilute ownership since lenders do not receive a share of the profits, but failing to manage this debt could affect overall business sustainability.

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**IUESTION 3**

1. **Elaborate the Meaning of the Market Environment**

The market environment refers to the external conditions and factors that influence a business's operations and decision-making. These include:

- **Economic Factors**: Economic cycles, inflation rates, and consumer spending power.  
   - **Political and Legal Factors**: Government policies, regulations, and trade restrictions.  
   - **Sociocultural Factors**: Demographics, cultural trends, and social attitudes that affect consumer behavior.  
   - **Technological Factors**: Advancements in technology that can create new market opportunities or disrupt existing business models.  
   - **Competitive Factors**: The presence and actions of competitors, market saturation, and barriers to entry.

Together, these factors shape a business's strategies and its ability to compete in the market.

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2. **Scenario: KHUTSO CIVILIANS ORGANIZATION (KCO)**

**3.2.1 Quote TWO Ways in Which KCO Addresses Socio-Economic Issues**

- KCO offers counselling services for people who are infected and affected by HIV/AIDS.  
   - KCO works together with the Community Police Forums in reducing high crime in their area.

**3.2.2 Name FOUR Other Socio-Economic Issues That KCO Can Deal With**

- **Unemployment** – Addressing joblessness through training and community development initiatives.  
   - **Poverty** – Implementing programs to alleviate poverty and improve living standards.  
   - **Substance Abuse** – Offering rehabilitation and support services to combat drug and alcohol abuse.  
   - **Domestic Violence** – Providing support, counselling, and legal assistance to victims of violence.

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**Explain the Relationship Between the Three Business Sectors**

The three business sectors are classified as primary, secondary, and tertiary, each playing a distinct role in the economy:

1. **Primary Sector**  
   - Involves the extraction and harvesting of natural resources (e.g., agriculture, mining, fishing).  
   - Provides the raw materials required for production in the secondary sector.

2. **Secondary Sector**  
   - Focuses on manufacturing and processing raw materials into finished goods (e.g., factories, construction).  
   - Relies on the primary sector for inputs and supplies products to the tertiary sector or directly to consumers.

3. **Tertiary Sector**  
   - Provides services such as retail, banking, healthcare, and education.  
   - Supports both the primary and secondary sectors through distribution, marketing, and financial services.

**Interrelationship**:  
- The **primary sector** supplies raw materials to the **secondary sector**, which in turn produces goods that are distributed and sold by the **tertiary sector**.  
- Each sector is interdependent; a disruption in one can affect the productivity and efficiency of the others, highlighting the integrated nature of the economy.
**2.4 Differences Between Own and Borrowed Capital** - **Own Capital**: - Funds from business owners or internal earnings. - No interest or repayment required. - Less financial risk but may limit control if external equity is used. - **Borrowed Capital**: - Funds from external lenders like banks or bonds. - Involves interest payments and fixed repayment schedules. - Increases financial risk and may limit operational flexibility. **IUESTION 3** 1. **Market Environment**: - External factors influencing business operations, including economic, political, sociocultural, technological, and competitive aspects. 2. **KCO's Socio-Economic Initiatives**: - **Counselling Services** for HIV/AIDS affected individuals. - **Community Policing** to reduce crime rates. 3. **Additional Socio-Economic Issues KCO Can Address**: - Unemployment through job training. - Poverty alleviation programs. - Substance abuse rehabilitation. - Support for domestic violence victims. **Business Sectors Relationship**: - **Primary Sector** extracts raw materials. - **Secondary Sector** manufactures goods using these materials. - **Tertiary Sector** provides services to support both sectors. - Each sector depends on the others, creating an interconnected economy.

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