Wk 5 Equity in Limited Companies

Question 1

What are the two types of a limited company?

Answer 1

Public (Plc) or private (Ltd)

Question 2

Who should be consulted if shares are proposed to be transferred?

Answer 2

All the shareholders

Question 3

How can plcs offer shares to the public?

Answer 3

Listed on a stock exchange

Question 4

When must plcs and ltd submit accounts?

Answer 4

Plcs: must submit accounts within 6 months of year end
Ltds: within 9 months of year end, must comply with regulations

Question 5

What are the 3 things a plc must have?

Answer 5

A minimum of 50k issued share capital
At least 2 directors
A qualified company secretary

Question 6

What must a ltd have?

Answer 6

At least one director - no min issued share capital

Question 7

What are the advantages of a plc?

Answer 7

• easier access to capital
• more possible to assess company value
• easier to make acquisitions
• can give a company a more prestigious profile

Question 8

What are examples of equity in ltds?

Answer 8

• ordinary share capital (capital invested by owners)
• share premium (issued shares sold for above nominal value, nominal value remains the same over time regardless of market value)
• retained earnings
• general capital reserves (could be used for further investments or to save for future years)

Question 9

What are sources of long term finance?

Answer 9

Share issues (equity)
Retained earnings (equity)
Long term borrowings (debt)

Question 10

How can more shares be offered to shareholders?

Answer 10

• bonus issue (free extra shares, e.g. 1 in 4)
• rights issue (right to buy extra at a lower price than market value)

Question 11

What are the two types of narrative reporting?

Answer 11

• Director’s reports
• Strategic reports

Question 12

What is a director’s report?

Answer 12

• names of directors during period
• recommended dividend
• involvement of employees in company affairs
• employment and training of disabled
• important events affecting company
• likely future developments
• r&d

Question 13

What is a strategic report?

Answer 13

Strategic management: how entity intends to generate/preserve value, strategy and objectives, business model
Business environment: internal/external environment in which the entity operates, trends and factors, risks and uncertainties, human (etc) rights matters
Business performance: how entity developed and performed also position at year end, analysis of performance and position, key performance indicators (KPIs), gender diversity