ch.6 ownership of firms 2

 Fanny and Estella are the only owners of a firm. They must obtain the other’s consent

before they can transfer their ownership to other people. Besides, their liability to

the firm is confined to their individual investment in the firm.

Based on this information, the firm is a _______

• limited partnership

• partnership     

• private limited company

• public limited company

A firm has an independent legal entity but the owners cannot transfer

their ownership without the consent of the other owners.                                  

When the owners want to expand the firm’s business, they can ________.    

(1) Use the retained profit of the firm

(2) Issue shares to the public to raise capital

(3) Borrow from friends to raise capital

• (1) and (2) only

•  (1) and (3) only

• (2) and (3) only

• (1), (2) and (3)

 If a listed company is converted into a private limited company,

•  it can avoid being controlled by the government.

• its scale of production will be reduced.

• it can reduce the risk of being taken over.

• it will lose the status of legal entity.

Which of the following is regarded as an advantage for a private limited company

to go public?

• Shareholders enjoy limited liability.

•  There is separation of ownership and management.

• There is a wider scope for raising capital.

• Shares become transferable.

If a partnership is turned into a private limited company,               

(1) The company will become an independent legal entity.

(2) The company will be at a higher risk of being taken over.

(3) The company will pay a higher profits tax rate.

(4) The number of ownership will increase.

• (1) and (3) only

• (1) and (4) only

• (2) and (3) only

•  (2) and (4) only

Tommy and David have turned their firm from a partnership into

a private limited company. Which of the following statements is correct?

• They have a higher incentive to work as the profits tax rate is lower.

• The firm can still exist even if one of the owners goes bankrupt.

• The size of the firm will increase.

•  The financial conditions of the firm have to be disclosed to the public.

Compared with a limited company, a partnership

•  has a lasting continuity.

• has to pay at a higher profits tax rate.

•  has a wider source of capital.

• has a simpler legal set-up procedure.

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