Ownership of firms

Question 1

Sole proprietorship over partnership

Answer 1

● Higher flexibility in decision-making
● Closer relationship with customers

Question 2

Partnership over sole proprietorship

Answer 2

● Wider sources of capital
● Higher degree of specialisation

Question 3

Sole proprietorship / partnership over private / public limited company

Answer 3

● Simpler set-up procedures
● Lower profits tax rate
● Higher flexibility in decision-making

Question 4

Private / public limited company over sole proprietorship / partnership

Answer 4

● Limited liability
● Lasting continuity
● Wider sources of capital

Question 5

Private limited company over public limited company

Answer 5

● Does not need to disclose accounting information to the public
● More difficult to be taken over

Question 6

Public limited company over private limited company

Answer 6

● Can issue shares and bonds freely to raise capital
● Do not need consent of shareholders to transfer shares

Question 7

Private enterprise over public enterprise

Answer 7

● More efficient
● More sensitive to price signal

Question 8

Public enterprise over private enterprise

Answer 8

● Better control of price to relieve public burden
● Easier to get loans as fully supported by government

Question 9

Shares over bonds (for investors)

Answer 9

● Have voting rights in the AGM
● May earn more dividends if the firm gains more profit

Question 10

Bonds over shares (for investors)

Answer 10

● Can still get interest return even if company does not make any profit
● Can claim repayment first if firm liquidates

Question 11

Shares over bonds (for firms)

Answer 11

● No obligation to pay dividends
● No obligation to redeem shares

Question 12

Bonds over shares (for firms)

Answer 12

● Control over company is not diluted
● Does not increase risk of being taken over

Question 13

Public corporations in Hong Kong

Answer 13

Airport Authority and Ocean Park