plcs

Question 1

What is public limited company?

Answer 1

an incorporated business that is able to sell shares on stock exchange
- has limited liability.

Question 2

What are 3 advantages of plc?

Answer 2

1. limited liability = added more detail once i know what it is
2. potential to raise more funds through selling shares to public= listing on stock market is a good source of finance.
3. separate legal identity = for e.g HSBC is plc. they own assets and they employ people. they are separate to their owners. HSBC can be sued and their owners would not be.

Question 3

What are 3 disadvantages of plc?

Answer 3

1. financial records are publically available= plcs have to publish their financial records in detail. it is a lot of administration because shareholder have a right to know the information and potential shareholder would like to know before investing.
2. risk of takeover = if the owners lose 51% of their shares. each share is worth a vote and therefore if someone has 51% they would have control over that company
3. pressure for short term financial results rather than long term= some shareholder may be just interested in dividend payments and that could lead to decisions that are not good for business . for e.g would it be better to retain our profit and reinvest and improve our brand.