Week 12 - Share Capital and Reserves

Question 1

Describe the equity of a sole proprietor, partnership and company

Answer 1

• Sole Proprietorship:
  single owner: no need to distinguish between capital invested and profits.
• Partnership:
  more than one owner: can be useful to distinguish between capital invested and profit.
• Company:
  multiple owners: formation governed by legislation which requires distinction between contributed equity and other sources of equity.

Question 2

True or False: Shares represent company ownership rights and the ownership is normally transferable.

Answer 2

True

Question 3

What are the 3 rights of shareholders?

Answer 3

• the right to vote for directors of the company
• the right to share in assets on the winding-up/liquidation of the company
• the right to share in new share issues.

Question 4

Do shareholders have limited liability?

Answer 4

slide 4

Question 5

What are the two different types of shares?

Answer 5

Ordinary shares
Preference shares