Public Limited Companies

What is a public limited company (PLC)?

• A company that sells shares privately

• A company that sells shares to the public on the stock market

• A company owned by the government

• A company that does not sell shares

Answer explanation

A public limited company (PLC) is defined as a company that sells shares to the public on the stock market, allowing anyone to buy shares and invest in the company.

Who are the people that own shares in a PLC?

• Directors

• Employees

• Shareholders

• Customers

Answer explanation

In a Public Limited Company (PLC), shares are owned by shareholders. They are individuals or entities that invest in the company by purchasing shares, unlike directors, employees, or customers who may not necessarily own shares.

What is the term used when a business sells shares on a stock market?

• Merging

• Floating on the stock exchange

• Liquidating

• Investing

Answer explanation

The term 'floating on the stock exchange' refers to the process of a business selling shares to the public for the first time, allowing it to raise capital through the stock market.

Which of the following is an advantage of being a PLC?

• Limited liability for shareholders

• No need for accounting and reporting

• No risk of takeover

• Low setup cost

Answer explanation

Limited liability for shareholders is a key advantage of being a PLC, as it protects personal assets from company debts. The other options are incorrect, as PLCs do require accounting, can be taken over, and have higher setup costs.

What is the minimum setup cost required to establish a PLC?

• £10,000

• £25,000

• £50,000

• £100,000

Answer explanation

The minimum setup cost to establish a PLC is typically around £50,000, which covers essential legal and administrative expenses, making it the correct choice among the options provided.

What is one of the disadvantages of being a PLC?

• Easy to manage

• Simple accounting requirements

• Risk of a hostile takeover

• Limited access to finance

Answer explanation

One disadvantage of being a PLC is the risk of a hostile takeover, as shares are publicly traded and can be bought by anyone, making the company vulnerable to unwanted acquisition attempts.

What is the role of the CEO and board of directors in a PLC?

• To sell shares

• To manage and oversee the business’ activities

• To work as employees

• To buy other companies

Answer explanation

The CEO and board of directors are responsible for managing and overseeing the business activities of a PLC, ensuring strategic direction and governance, rather than selling shares, working as employees, or buying other companies.

How can a PLC raise additional finance?

• Through bank loans only

• By selling more products

• Through share capital

• By reducing costs

Answer explanation

A PLC can raise additional finance through share capital by issuing new shares to investors. This method allows the company to obtain funds without incurring debt, unlike bank loans.

What is meant by 'economies of scale' in the context of a PLC?

• Reduced costs due to increased production

• Increased costs due to expansion

• Higher prices for products

• Smaller business size

Answer explanation

'Economies of scale' refer to the cost advantages that a PLC experiences as production increases, leading to reduced costs per unit. This is why the correct answer is 'Reduced costs due to increased production'.

Which of the following is a requirement for a PLC?

• No need for a board of directors

• Complex accounting and reporting

• Unlimited liability for shareholders

• No public trading of shares

Answer explanation

A PLC (Public Limited Company) requires complex accounting and reporting due to regulatory obligations and the need for transparency to shareholders. The other options do not accurately reflect PLC requirements.