One of the characteristics of private enterprises is ______?

1. Analyze the question The question asks for a characteristic of private enterprises, which are businesses owned and run by individuals or groups of private persons, not by the government.

2. Explain the concept Private enterprises (sole proprietorships, partnerships, private limited companies) are typically:

• Owned by private individuals
• Funded by the owners' own capital or by private loans
• Driven by the profit motive
• Exposed to risk borne by the owners, not by the public

Public enterprises (e.g., NNPC, PHCN in the past) are owned and funded by the government and often exist to provide welfare and public services.

3. Evaluate each option

• A. Provision of welfare to the citizens: This is a goal of public (government) enterprises. Private firms are mainly profit-oriented. ❌
• B. Tax payers bear all the risks: Taxpayers' money funds public enterprises, so taxpayers bear their risks. In private enterprises, the owners bear the risk. ❌
• C. Public ownership of shares: This describes public limited companies or government ownership. Private enterprises typically restrict ownership and cannot offer shares to the general public. ❌
• D. Individual funding of business activities: Private enterprises are financed by individual owners or private investors from their own savings, partners' contributions, or private loans. ✅

4. Answer

5. Exam tip Link private to individual and profit, and link public to government, taxpayers, and welfare. When a question on enterprises mentions taxpayers, welfare, or public ownership, think "public sector". When it mentions owners' funds or profit, think "private sector".