CIE Business-Studies Paper-1: Specimen Questions 14 - 14 of 14
Priya has been General Manager of a business for a number of years. She has recently identified a business opportunity that would require a lot more capital. Her financial advisers recommend that she converts the business into a Public Limited Company.
Question number: 14 (1 of 1 Based on Passage) Show Passage
Write in Short
Discuss the consequences to this business of the possible change to a Public Limited Company.
Changing a company from private limited to public limited has both merits and demerits:
- Shares can be advertised.
- Shares can be sold through the stock exchange.
- Large places may find it easier to borrow from banks. · Cheaper borrowing and bulk purchasing.
- Shareholders have limited liability.
- The business has separate legal entity. There is continuity even if any of the shareholders die.
- Going public can be expensive.
- Some places can grow so large that they may become difficult to manage effectively.
- Risk of takeover by rival companies who have bought shares in the company.
- In order to protect the interest of the ordinary investor there are strict controls and regulations to comply. These companies have to publish their accounts.