Theory question 103
Business Organisations(a) Define the term limited liability.
(b) Describe four differences between a public joint-stock company and a private joint-stock company.
(c) Outline three sources of finance available to sole proprietorship.
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(a) Limited liability means the owners' responsibility for the firm's debts is limited to the capital they invested; their private property cannot be taken.
(b) Any four: membership – private 2 to 50, public at least 7 with no maximum; public company sells shares to the general public (stock exchange), private cannot; shares of a public company are freely transferable, private shares are restricted; public company must publish its accounts, private need not; public company may issue debentures to the public; ownership and management are more separated in a public company; names end in 'Plc' and 'Ltd'.
(c) Any three: personal savings; loans from family and friends; bank loans and overdrafts; ploughed-back profits; trade credit; hire purchase; government grants/loans; sale of assets.
Differences should be given as matched pairs.