1.2 Types of Organization 2

Which of the following is not a feature of a private limited company? 

• • Shares cannot be traded on a stock exchange

• Transfer of ownership has to be agreed upon by all shareholders

• • Shares are usually sold to friends and family 

• • An initial public off has to be made after formally registering the business

Answer explanation

Private limited companies are not required to make an initial public offering (IPO) after formally registering the business. An IPO refers to the process of offering shares to the public for the first time and listing them on a stock exchange. Private limited companies, by definition, are not publicly traded, and their shares are not available for trading on a stock exchange. Instead, ownership of the company is typically limited to a small group of shareholders.

Which of the following is not a feature of public limited company? 

• They have undergone an initial public offering (IPO) 

• Shares are sold and traded through a stock exchange

• It can have up to 20 shareholders

• Financial Statements must be released to the public

• • They have undergone an initial public offering (IPO) 

• • Shares are sold and traded through a stock exchange

• • It can have up to 20 shareholders

• • Financial Statements must be released to the public

Which of the following is not a disadvantage of private limited companies? 

• • Disclosure of financial statements may be required 

• • Shares cannot be sold publicly on a stock exchange 

• • There are more legal formalities compared up to an incorporated business 

• • Certain shareholders have unlimited liability

Which of the following is not an advantage of private limited companies?

• • Lenders will be more willing to lend them funds compared to unincorporated businesses

• • The separation of ownership and control provides limited liability to shareholders

• • It is easy to raise large amounts of additional share capital 

• • Since the firm and the owners are separate legal entities, there is greater continuity

Which of the following are advantages of a public limited company?

i. Large amounts of share capital can be raised to fund expansion

ii. Raising external finance is easier as being a listed company attracts investors 

1. iii. There is greater continuity than in unincorporated firms

2. iv . They have a high degree of privacy

• i+ii

• ii+iii

• i+ii+iii

• ii+iii+iv

 Which of the following is/are disadvantage(s) of the public limited companies? 

• • Disclosure of financial statements to the general public 

• • High costs of compliance to stock exchange requirements

• • Heightened threat of a takeover 

• • All of the mentioned are correct

Which of the following is not an example of a for-profit social enterprise? 

• • Micro-financiers

• • Non-governmental organizations

• • Cooperatives

• • Public private partnerships

Which of the following is not a characteristic of a cooperative? 

• • They are non profit social enterprises

• • They can be consumer, worker, or producer cooperatives

• • They aim to create value for their members in a sustainable manner 

• • They are democratically controlled

Answer explanation

Cooperatives can indeed be for-profit entities. While many cooperatives have a social mission and prioritize the well-being of their members and communities, they can also engage in profit-generating activities. The primary objective of cooperatives is to create value for their members, but this value creation can include financial returns and profitability.

Small, low-interest loans may be provided to low-income individuals who would not otherwise have access to funds from traditional lenders like banks to improve their standards of living. What is it called?

• • Grants

• • Microfinance

• • Cooperative Financing

• • Subsidies

What is it called when an organization is owned and controlled by both the government and a private sector firm simultaneously? 

• • Cooperative

• • Non-profit social enterprise

• • Limited Liability company 

• • Public Private Partnership