Chapter 8 - Limited Liability Companies

Question 1

Directors

Answer 1

Are the senior managers of a limited company; they are appointed by shareholders at the AGM

Question 2

Annual General Meeting

Answer 2

Often called AGM, is the yearly company meeting that can be attended by shareholders

Question 3

Private Company

Answer 3

One in which only the founders of the company, their family, friends and employees can invest in shares

Question 4

Public Company

Answer 4

One in which any member of the public can invest as shares are floated on the open market

Question 5

Ordinary Shares

Answer 5

Shares that carry voting rights and have a variable dividend that is dependent on the amount of profits

Question 6

Par Value; Nominal Value

Answer 6

The face value of a share

Question 7

Equity Shares

Answer 7

Are ordinary shares

Question 8

Preference Shares

Answer 8

Shares that have a fixed rate of dividend and normally have no voting rights

Question 9

Shareholders

Answer 9

The owners of a limited liability company

Question 10

Authorised Capital

Answer 10

The maximum amount of capital the company can issue by way of shares

Question 11

Issued Capital

Answer 11

The amount of shares that the company had chosen to issue to date

Question 12

Retained Earnings

Answer 12

Undistributed profits arising from the normal course of business

Question 13

Revenue Reserves

Answer 13

Profits that arise from everyday trading activities and can be distributed as dividends

Question 14

Corporation Tax

Answer 14

Tax on a company’s profits

Question 15

Auditors Fees

Answer 15

The amount paid to those who check the accounting records. This item is an expense

Question 16

Directors Fees

Answer 16

The amount paid for the work done by directors. This item is an expense

Question 17

Operating Profit

Answer 17

Profit before deducting any financial charges such as interest

Question 18

Finance Charges

Answer 18

Include interest on loans and preferences share dividends paid.

Question 19

Profit before Taxation

Answer 19

Operating profit less interest charges

Question 20

Profit after Taxation

Answer 20

Profit less provision for corporation tax

Question 21

Statement of Changes in Equity

Answer 21

Forms part of the end of year financial statements of a limited company and details changes that have taken place during the financial year in the company’s issued share capital and reserves.

Question 22

Cash and Cash Equivalents

Answer 22

A company’s cash and bank balances

Question 23

Net Current Liabilities

Answer 23

The difference between current liabilities and current assets where current liabilities exceed current assets.

Question 24

Equity

Answer 24

A company’s capital made up of shares and reserves

Question 25

Debentures

Answer 25

Loans to a limited company in which a fixed rate of interest is paid. The interest is shown as an expense in the income statement