The diagram shows two leisure businesses in the same town. Riverside Active is controlled by the elected city council and receives a grant funded by local t...
Question 1 Report
The diagram shows two leisure businesses in the same town. Riverside Active is controlled by the elected city council and receives a grant funded by local taxes. Peak Fitness plc is owned by shareholders, who can buy and sell shares. Both businesses are near a Premier Inn and want to attract hotel guests as well as local customers. The council is deciding whether to keep Riverside Active in public-sector ownership or sell it to Peak Fitness.
In one year, Riverside Active receives £240 000 from the council and £360 000 from membership fees. Use this information to answer the following questions.
(a) State the classification of Riverside Active. [2]
(b) Define the term public limited company. [3]
(c) Calculate membership fees as a percentage of Riverside Active's total income. [3]
(d) Analyse one reason why the council may choose to keep Riverside Active in the public sector. [6]
Answer Details
(a) Riverside Active is a public-sector business. It is owned or controlled by local government, here the elected city council. [2]
(b) A public limited company is a business owned by shareholders. Its shares can be sold to the public, commonly through a stock exchange, and shareholders have limited liability. Limited liability means they normally risk only the money invested in shares. [3]
(c) Membership fees as a percentage of total income
\[\text{Total income}=£240\,000+£360\,000=£600\,000\]
\[\frac{£360\,000}{£600\,000}\times100=60\%\]
Membership fees are 60% of total income. [3]
(d) Why the council may keep Riverside Active public: public ownership allows the council to prioritise residents' access and community objectives rather than maximum profit. It may keep membership prices affordable for lower-income residents. Council funding can also support a leisure facility that a private owner might close if it was insufficiently profitable. Retaining ownership lets the council promote health and community participation; visitors staying at the nearby hotel may also spend money more widely in the town. A valid counterpoint is that the £240 000 grant could be used for other public services, or a private owner may operate more efficiently. Developed analysis earns up to [6].
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