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GCE Economics 1990 Question 15

Question 15

Business Organisations

Limited liability in Economics means that

  1. A.a shareholder's liability in the event of debt or bankruptcy is limited to the amount he has invested
  2. B.a shareholder's liability for the debt company is dependent on how much he is owing
  3. C.shareholders cannot be asked to pay for the debts of the company
  4. D.shareholders try to ensure that only a small proportion of the debt comes to them
  5. E.shareholders want all debts paid equally.
Show the answer and explanation

Answer: A (a shareholder's liability in the event of debt or bankruptcy is limited to the amount he has invested)

Explanation

With limited liability a shareholder can lose only what he put into the company, not his private property.