1.2 Business Ownership

Which of the following is true for a public limited company? 

• It can issue shares.

• It does not have profit as an objective.

• It is owned by the government.

• Its owner(s) have unlimited liability.

Answer explanation

A public limited company can issue shares to the public, allowing it to raise capital. The other options are incorrect as they misrepresent the nature of public limited companies.

Which of the following types of business ownership has shareholders, but cannot advertise its shares to the general public?

• Partnership

• Private Limited Company

• Public Limited Company

• Sole Trader

Answer explanation

A Private Limited Company has shareholders but cannot publicly advertise its shares. In contrast, a Public Limited Company can do so, while Partnerships and Sole Traders do not have shareholders.

Which of the following types of business have no restrictions on who shares can be sold to?

• Partnership

• Private Limited Company

• Public Limited Company

• Sole Trader

Answer explanation

A Public Limited Company can sell shares to the general public without restrictions, unlike Partnerships, Private Limited Companies, and Sole Traders, which have limitations on share distribution.

Why might a sole trader choose to take a partner into the business?

• So that he can give a job to a friend

• So that shares can be sold

• So that the profits will be shared with someone else

• So that there will be additional skills and expertise

Answer explanation

A sole trader may choose to take a partner to benefit from additional skills and expertise, which can enhance the business's operations and decision-making, leading to better overall performance.

Which of the following is most likely to be an objective of shareholders?

• Having a decrease in share price

• Having an increase in the cash outflows of the business

• Increasing the dividends

• Increasing the risks facing the business

Answer explanation

Increasing the dividends is most likely an objective of shareholders as it directly enhances their returns on investment, contrasting with the other options that would negatively impact shareholder value.

Which of the following is a characteristic of a sole trader?

• Limited liability

• Unlimited liability

• Can issue shares

• Owned by shareholders

Answer explanation

A sole trader has unlimited liability, meaning they are personally responsible for all debts of the business. This contrasts with limited liability entities, where owners' personal assets are protected.

What is one advantage of forming a partnership?

• Limited liability

• Access to more capital

• Ability to sell shares to the public

• Owned by the government

Answer explanation

One advantage of forming a partnership is access to more capital. Partners can pool their resources, allowing the business to have more funds for operations and growth compared to a sole proprietorship.

What type of liability does a sole trader have?

• Limited

• Unlimited

• Provate

Answer explanation

A sole trader has unlimited liability, meaning they are personally responsible for all debts and obligations of the business. This contrasts with limited liability, where personal assets are protected.

What is a private limited company often abbreviated as?

• Ltd

• ARR

• Plc

Answer explanation

A private limited company is commonly abbreviated as 'Ltd'. This abbreviation signifies that the company's liability is limited to its shareholders, distinguishing it from public limited companies, which are abbreviated as 'Plc'.

Which two businesses have limited liability?

• Public limited companies & private limited companies

• Private Limited Companies & partnerships

• Public limited companies & sole traders

Answer explanation

Public limited companies and private limited companies both have limited liability, meaning the owners' personal assets are protected from business debts. Partnerships and sole traders do not offer this protection.