Limited Company

Question 1

Define limited company

Answer 1

A limited company is a legal entity which has a separate identify from it’d share holders whose liability for the company’s debts is limited

Question 2

What is Limited liability

Answer 2

Liability of shareholder is limited to their capital contritions in the company

Question 3

AdVantages of limited companies

Answer 3

-better access to capital
-separate legal identity
-limited liability

Question 4

Disadvantages of limited companies

Answer 4

-costly setup
-public disclosure of accounts
-limited Rolfe of shareholders in management

Question 5

What’s shares

Answer 5

The capital of a company divided into units

Question 6

How are profits distributed among members

Answer 6

Profits are distributed among the members in the form of dividends

Question 7

What are the two types of limited companies

Answer 7

-private limited company
-public limited company

Question 8

LI’m uu what does a public limited company offer

Answer 8

They offer shares to the public

Question 9

What does a private limited company offer

Answer 9

A smaller company and is not allowed to the offer it’s shares to the public

Question 10

What is the main benefit of being a meme nee of a limited cocmpany from the viewpoint of an individual

Answer 10

-the lability of the debts of the company is limited to the amount the em member agreed to contribute
-separate legal entity to its shareholders so legal actions are taken against the company not the individual shareholders
-easy to buy and sell shares

Question 11

What is the main benefit of being a meme nee of a limited cocmpany from the viewpoint of a business

Answer 11

-access greater capital than is possible for a sole trader or partnership business
-loans can often be obtained more easily by a limited company than by a sole trader or a partnership business

Question 12

define issued shared capital

Answer 12

is the amount of capital issued to the shareholders

Question 13

Define called up capital

Answer 13

the part of the issued share capital for which payment has been requested from shareholders

Question 14

Define paid up capital

Answer 14

Paid up capital is that part of the called up share capital for which the company has received payment from shareholders

Question 15

What are the types of shares

Answer 15

-preference shares
-ordinary shares

Question 16

What is a preference shares

Answer 16

-they receive a fixed rate of dividend which is a payable before any dividend is payable to the ordinary shareholders.
-the dividend is the same every year
-if a company is wound up any money left after paying outside liabilities is used to pay back the preference shareholders before anything is returned to the ordinary shareholders.
-preference shareholders are not usually entitled to vote at the shareholders meeting

Question 17

What is redeemable preference shares

Answer 17

-the dividend is included as a finance cost in the profit and loss section of the income statement
-the preference shares are shown as non current liability in the statement of financial position

Question 18

What is non-redeemable preference shares

Answer 18

-the dividend paid is included in the statement of changes in equity and the preference shares are included in the equity and reserves sections of the statement of financial position

Question 19

What is a ordinary share

Answer 19

-the dividend on ordinary shares is only payable after that on the preference shares has been accounted for.
-the dividend is not a fixed amount,but can vary according to the profits of the company
-if the trading results are poor the ordinary shareholders may receive no dividend all all.
-ordinary shareholders are usually entitled to vote at shareholders meetings on the basis of one vote per share

Question 20

State differences between preferences shares and ordinary shares

Answer 20

preference shares -
-carry a fixed rate of dividend
-dividend is paid before ordinary share dividend
-do not usually carry voting rights
-capital is repaid before ordinary shares in a winding up

ordinary shares -
-carry a variable rate of dividend
-dividend depends on profit
-carry voting rights
-are last to be repaid in a winding up
-are members of the company

Question 21

Define debentures

Answer 21

a debenture is a long term loan which has a fixed rate of interest,payable irrespective of the profit of the company