S4 Ownership of firms

Which of the following is / are true about public corporations? (you may choose more than 1)

• Public corporations are managed by a board of directors appointed by the government.

• Public corporations are financially independent of the government.

• Public corporations are incorporated by statute.

• Most staff of public corporations are non-civil servants.

Which of the following is NOT a common feature of sole proprietorships and partnerships?

• They have no separate legal existence from their owners.

• Their owners bear unlimited liability.

• They are required to publish their financial accounts on their websites annually.

• Their set-up procedures are simpler and cheaper than those of limited companies.

Which of the following is /are wrong about a private limited company? (you may choose more than 1)

• A private limited company has fewer owners.

• A private limited company does not have lasting continuity.

• A private limited company cannot issue shares

• A private limited company pays a lower profits tax rate.

Gloria is an owner of a business. When she wants to transfer her ownership, she has to obtain the consent of other owners. Moreover, she is not personally liable for the debts of the business. The business is

• a sole proprietorship.

• a partnership.

• a private limited company.

• a public limited company.

Which of the following statements about a shareholder and a bondholder is correct?

• The shareholder receives a higher return.

• The shareholder bears a higher risk.

• The shareholder can trade his/her shares on the stock exchange while the bondholder cannot.

• AThe shareholder bears limited liability while the bondholder bears unlimited liability.

A limited company is an independent legal entity. This implies that

• it can engage in lawsuits in its own name.

• management and ownership of the company are separated.

• its shares can be transacted on a stock exchange.

• its existence is affected by the admission, withdrawal, bankruptcy or death of its shareholders.

If a private limited company in Hong Kong is turned into a public limited company,

• the company will become a legal entity.

• there will be a restriction on the transfer of the company’s shares.

• the company will be at a higher risk of being taken over.

• the company will be a larger profit

From the viewpoint of a public limited company, which of the following is an advantage of issuing bonds over shares to raise capital?

• The company can raise more capital.

• The company’s risk of being taken over is not affected.

• This will not increase the company’s financial burden.

• It is easier to obtain more bank loans as the debt-to-equity ratio is reduced.