Lecture 9

Question 1

What are the main features of limited companies?

Answer 1

• Legal nature
• perpetual life
• limited liability
• legal safeguards

Question 2

What are the two main forms of limited companies?

Answer 2

Public limited company (Plc)
Private limited company (Ltd)

Question 3

Ordinary shares = ?

Answer 3

Represent the basic units of ownership of a business

Ordinary shareholders are the primary risk takers as their shares are distributed only after all other claims are settled

They have voting rights

Question 4

Preference shares = ?

Answer 4

Units of ownership in a business

where if a dividend is paid, the preference shareholders will be entitled to the first part of it up to a maximum value

Maximum is usually defined as a fixed percentage of the nominal value of the preference shares

Question 5

What are the types of reserves?

Answer 5

Revenue reserves
Capital reserves

Question 6

What are the sources of long-term finance?

Answer 6

Share issues
Retained earnings
Long-term borrowings

Question 7

What various parts of shareholder’s equity are available for withdrawal?

Answer 7

Share capital & capital reserves = not available for withdrawal

Revenue reserves = available for withdrawal

Question 8

What are the sources of external accounting rules for a UK Plc listed on the LSE

Answer 8

Company law
IFRS
Stock exchange rules imposed by FCA