Page 19 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Objectives

Example 1

Q Co is an entity that was set up by the government of Country Q to produce
electricity for the country's citizens. Five years ago it was privatised as the
government of Country Q opened up the energy market to competition. The
shares of Q co are now owned by both private investors and institutions, and
are traded on Country Q's stock market.

What kind of entity is Q Co?

A Public sector, for-profit entity

B Public sector, not-for-profit entity

C Private sector, for-profit entity

D Private sector, not-for-profit entity

Solution

The answer is (C).

When the entity was privatised, it changed from being a public sector to a
private sector entity. The fact that its shares are traded on the stock market
and that it operates in a competitive market place suggests that it is a for-profit
entity.

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