Public Limited vs Government Companies

Questions and Answers

What is the main aim of government-owned companies?

To provide public and merit goods (correct)

To maximize shareholder profit

To raise capital through stock sales

To minimize operational costs

How do public limited companies primarily raise funds?

By obtaining government grants

Via internal savings

Through selling shares at the stock exchange (correct)

By taking bank loans

Which of the following is a feature of public limited companies?

Focus on providing public goods

Limited to government ownership

Management appointed by the minister

Shareholders are members of the public (correct)

What is a potential drawback of a centralized business structure?

Limited personal growth for branch managers Signup and view all the answers

Which of the following describes a potential consequence of prolonged hierarchies in management?

Greater distance between senior managers and employees Signup and view all the answers

What characterizes businesses in the informal sector?

They do not pay taxes and remain unregistered Signup and view all the answers

Which of the following best describes the ownership structure of government-owned companies?

The government is the sole shareholder Signup and view all the answers

What is a disadvantage of administrative diseconomies in a business?

Higher operational costs due to complexity Signup and view all the answers

What does 'limited liability' signify for shareholders in a company?

Shareholders can only lose the amount they invested in the company. Signup and view all the answers

Which of the following is a characteristic of a public limited company?

Shares can be traded publicly through a stock exchange. Signup and view all the answers

What is a primary function of the stock exchange?

To facilitate the buying and selling of shares in public companies. Signup and view all the answers

In a public limited company, who typically elects the board of directors?

The shareholders. Signup and view all the answers

What does having a legal personality mean for a company?

The company can sue and be sued in its own name. Signup and view all the answers

Which statement is true about shareholders in a company?

They receive dividends based on the number of shares they own. Signup and view all the answers

What is one way in which private companies differ from public companies?

Private companies generally have fewer shareholders. Signup and view all the answers

When shareholders invest in a company, what do they acquire?

A share, which represents a portion of ownership in the company. Signup and view all the answers

What is the maximum number of shareholders allowed in a private limited company?

50 Signup and view all the answers

Which feature distinguishes private limited companies from public limited companies regarding share transfer?

Owners can decide who can buy shares Signup and view all the answers

Which of the following statements about ordinary shares is correct?

Dividends depend on the company's profits Signup and view all the answers

Which of the following is a mandatory requirement for a private limited company?

A minimum of one director Signup and view all the answers

What typically characterizes the ownership structure of private limited companies?

They are mostly owned by family members or friends Signup and view all the answers

During which event are shareholders elected to the board of directors in a company?

Annual General Meeting (AGM) Signup and view all the answers

How did preference shares differ from ordinary shares in terms of dividends?

Preference shares usually earn fixed dividends before ordinary shares Signup and view all the answers

What does the (PTY) Ltd suffix in the name of a company signify?

Private ownership limited to a specific number of shares Signup and view all the answers

Study Notes

Government Owned Companies

Sole shareholder is the government.
Minister appoints the board of directors, who then appoint managing directors.
Examples include TransNamib, Telecom, and Nampost.
Primary objective is to provide public and merit goods.

Public Limited Companies

Shareholders are typically members of the public.
Main aim is profit generation.
Funds are raised by selling shares on the stock exchange.

Informal Sector

Comprises businesses unregistered with the ministry of trade and industry.
Do not pay taxes; examples include hawkers and traders/producers.

Effects of Business Structure Changes

Communication issues may arise from a complex management hierarchy.
Senior managers might become disconnected from employees, impacting morale.
Centralized structures restrict the autonomy and decision-making of branch managers.
Potential for diseconomies of scale can occur due to excessive administration and management layers.
Increased costs from internal communication processes and varied management structures can hinder efficiency.

Limited Companies / Joint Stock Companies

Defined as a group of individuals joining to generate profit.
All limited companies offer limited liability, protecting individual owners from company debts.
Companies possess a legal personality distinct from their owners.
Capable of owning assets, entering contracts, sustaining continuity, and engaging in legal actions.
Ownership is represented through shares, providing rights to profits.
Shareholders elect a board of directors to manage the company.

Public Limited Company Features

Comprises a minimum of 7 shareholders; no upper limit.
Company name concludes with "Ltd".
Shares can be sold publicly through stock exchanges.
Requires a minimum of two directors.
Shareholders convene at annual general meetings to appoint the board of directors.
No restrictions on share transfers, promoting liquidity.
Ownership and management are distinct; shareholders are usually not the managers.

Private Limited Company Features

Typically smaller, often owned by family and friends.
Maximum of 50 shareholders permitted.
Requires at least one director.
Name ends with "(PTY) Ltd," indicating proprietary limited ownership.
Shares cannot be sold publicly; transfer is restricted.
Owners typically actively participate in management roles.

Differences Between Public and Private Limited Companies

Public companies sell shares; private companies do not.
Public companies must publish financial accounts; private companies have no such requirement.
Public companies can have unlimited shareholders; private companies are capped at 50.
Public companies use "Ltd" in their name; private companies use "(PTY) Ltd".

Types of Shares

Shareholders receive dividends from profits earned.
Main types of shares are ordinary and preference shares.

Ordinary Shares

Holders have voting rights during the Annual General Meeting (AGM).
Dividend payouts are variable and depend on the company's profits.
No dividends are given if the company incurs a loss.

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Description

This quiz explores the differences between public limited companies and government-owned companies. It highlights key characteristics like ownership, governance, and main objectives, providing examples of each type. Test your understanding of these business structures!