Business Organizations

(a) Define the term limited liability
(b) Describe four differences between a public joint-stock company and a private joint-stock company
(c) Outline three sources of finance available to sole proprietorship

Answer Details

(a) Limited liability is a legal concept that protects the personal assets of business owners from being used to pay off business debts or legal claims. It means that the owners of a business, such as shareholders in a company, are only liable for the debts of the business up to the amount of their investment or shareholding. They are not personally responsible for any debts or liabilities that exceed their investment.

(b) Public joint-stock companies and private joint-stock companies have several differences, including:

1. Ownership: A public joint-stock company can have an unlimited number of shareholders, while a private joint-stock company has a limited number of shareholders.
2. Share transferability: Shares in a public joint-stock company can be freely traded on a stock exchange, while shares in a private joint-stock company cannot be traded on a stock exchange.
3. Disclosure requirements: Public joint-stock companies are required to disclose more information to the public than private joint-stock companies, such as financial statements and ownership details.
4. Access to capital: Public joint-stock companies can raise capital more easily through issuing shares to the public, while private joint-stock companies have limited options for raising capital.

(c) Sole proprietorships can access several sources of finance, including:

1. Personal savings: The owner of a sole proprietorship can use their own savings to finance the business.
2. Loans: Sole proprietors can apply for loans from banks or other financial institutions to finance their business operations.
3. Credit cards: Some sole proprietors may use credit cards to cover business expenses, although this can be risky due to high interest rates.

In summary, limited liability protects business owners from personal liability for business debts, public and private joint-stock companies differ in terms of ownership, share transferability, disclosure requirements, and access to capital, and sole proprietors can access finance from personal savings, loans, and credit cards.

Suppose the public expenditure as a percentage of GDP of four countries is shown in the table below

Which type of economy exists in these countries?

Answer Details

The type of economy that exists in these countries is Mixed economy.

A mixed economy is an economic system that combines elements of both market and planned economies. It includes both private and public sectors, and the government plays a significant role in regulating and defining the structure of the economy.

In the given scenario, the fact that the countries have different levels of public expenditure as a percentage of GDP indicates that the government plays a role in the economy and is involved in spending a portion of the national income.

While the exact percentage of public expenditure varies between the countries, the presence of any public expenditure suggests government intervention and regulation in the economy. This means that these countries have a mixed economy, where both public and private sectors coexist and contribute to economic activities.

The government's involvement can take various forms, such as funding public goods and services, implementing social programs, and regulating industries. The level of government intervention may vary, but the presence of public expenditure indicates that the government has an active role in shaping the economy.

Therefore, based on the information provided, it can be concluded that the countries mentioned in the table have a mixed economy.