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Explain the process of 'flotation' in share issuance.
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Flotation is the process of a company issuing shares on the stock exchange for the first time, also known as going public.
What are two primary rewards shareholders expect from their investment?
Dividends and capital growth.
Describe the term 'market capitalization' and its importance.
Market capitalization is calculated as share price multiplied by the number of shares, indicating the company's valuation.
What is a significant disadvantage of operating as a public limited company (PLC)?
Risk of takeover due to shares being publicly traded, full financial transparency required, and it's expensive to set up.
How does the liability status change when a sole trader becomes an LTD?
The business transitions from unlimited liability to limited liability, protecting personal assets from business debts.
Explain the concept of limited liability and its advantage for shareholders.
Limited liability means shareholders are only liable for the amount they invested, protecting personal assets from business debts.
Why is financial transparency considered a con for PLCs?
Because PLCs must publish full financial reports which can expose them to competitive disadvantages and scrutiny.
What are mutuals in the context of not-for-profit organizations?
Mutuals are organizations where the benefits extend beyond shareholders to other stakeholders, like consumer and worker cooperatives.
What are the key advantages of being a sole trader?
Complete control over the business, all profits are kept by the owner, and financial information remains private.
What is the primary difference between public and private sectors?
The public sector is owned and funded by the government, while the private sector consists of profit-oriented businesses.
Differentiate between incorporated and unincorporated companies.
Incorporated companies are separate legal entities from their owners with limited liability, while unincorporated businesses (like sole traders) are the same as their owners with unlimited liability.
Why might a sole trader experience a shortage of capital?
Because they rely on personal funds and have limited ability to raise money from investors.
How can the supply and demand of shares affect share prices?
Increased demand raises share prices, while increased supply can lower them, depending on market conditions.
List the pros of a private limited company (LTD).
Limited liability, business continuity, and an ability to raise more money by selling shares.
What is a 'rights issue' in terms of share issuance?
A rights issue is a method where new shares are offered to existing shareholders, usually at a discount.
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